Controversial drug executive Martin Shkreli engaged in activities similar to a “ponzi scheme” to defraud investors in a hedge fund and used assets from one of his companies as a “personal piggy bank,” according to federal law-enforcement officials.
The FBI arrested Shkreli, the 32-year-old CEO of Turing Pharmaceuticals, on Thursday morning for seven counts of wire and securities fraud.
Shkreli pleaded not guilty to the charges and was given a $5 million bond, according to ABC News.
The charges aren’t related to Shkreli’s 5,000 percent price hike of the anti-parasite drug Daraprim, which caused outrage in Congress and prompted him to be named the “most hated man in healthcare.”
Instead, the indictment focuses on Shkreli’s time at MSMB Capital, a New York hedge fund, and his time as the CEO of another biotechnology firm called Retrophin.
The indictment says that from September 2009-September 2014, Shkreli and his former lawyer and co-defendant, Evan Greebel, concocted three fraud schemes.
The first was misrepresenting the performance of MSMB Capital and another was to defraud healthcare investors in MSMB, according to the indictment.
“Because Shkreli lied to MSMB healthcare investors, he found himself at a crossroads,” said Robert Capers, U.S. attorney for Brooklyn.
Shkreli could come clean and admit to investors “he lied or continue his lies and somehow pay them the returns on their investments and the investments they put in. He lied, but this time he did it on the back of Retrophin.”
The indictment said Shkreli misappropriated Retrophin’s assets. Specifically, Shkreli and Greebel transferred Retrophin shares to MSMB Capital even though the hedge fund never invested in the biotech company, the indictment said.
Shkreli also entered into sham “consulting agreements” with other defrauded investors to settle liabilities owed by the MSMB funds and himself, the indictment said.
The CEO’s lawyer did not return a request for comment.
Shkreli became a controversial figure in the debate over high drug prices when news of the Daraprim price increase from $13.50 a pill to $750 leaked. Shkreli wasn’t deterred by the public outcry against the hike, saying at a recent investors conference that he would have raised the price even more.
He also reneged on a promise he made in the fall to lower the price of Daraprim, which is used to treat the parasite condition toxoplasmosis that often afflicts AIDS patients due to their weak immune systems.
Rep. Elijah Cummings, D-Md., has been trying to get Shkreli to fork over documents related to the price hike for months.
“Mr. Shkreli has lined his own pockets at the expense of patients who desperately need their medications, and he should be ashamed of himself,” he told the Washington Examiner.
? This article was originally published at 1:49 p.m. and has been updated.
