June 30, 2017

Fraudster of the Week — “Pharma Bro” Martin Shkreli

By the C|C Whistleblower Lawyer Team

On Wednesday, opening statements were delivered in the trial of Martin Shkreli, the “pharma bro” who is best known for his fiftyfold price increase of the lifesaving HIV/AIDS drug Daraprim while CEO of Turing Pharmaceuticals.  Shkreli is being tried, however, on several counts of securities and wire fraud dating from his time running the hedge funds MSMB Capital and MSMB Healthcare, as well as the pharmaceutical company Retrophin.

According to prosecutors, Mr. Shkreli told “lies on top of lies,” backdating documents, falsifying investor statements, misleading investors about his record as a fund manager, and misstating how much money was in the funds under his management.  Specifically, the government contends that Shkreli incurred significant trading losses while managing MSMB Capital and then stole money from MSMB Healthcare to settle his MSMB Capital debt.  Around the same time, Shkreli founded Retrophin, telling investors he was shutting down the two MSMB funds and that they could have Retrophin stock or cash for their MSMB shares.  When investors who opted for cash were stiffed by Shkreli and threatened to sue, Shkreli allegedly arranged for Retrophin to “pay off” the MSMB investors—even though Retrophin owed MSMB investors nothing.

During opening statements, Shkreli’s attorney, Benjamin Brafman, characterized his client as an “odd duck” who shuffled around his office in bunny slippers with a stethoscope around his neck, rather than a morally bankrupt villain who price-gauged HIV/AIDS patients and allegedly defrauded Retrophin.  Mr. Brafman argued that no one was harmed by Shkreli’s Retrophin dealings, painting Shkreli as a victim who was “bullied” by Retrophin’s board over his perceived sexuality.  For its part, the government contended that Shkreli “was just a con man.”

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