The investigation, in which Shkreli, 32, has been charged with securities fraud, is related to his time as a hedge fund manager and running the biopharmaceutical company Retrophin – not the current price-gouging controversy at Turing. If convicted, he could face a maximum of 20 years of jail time.
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AIDS activists and others, carrying an image of Turing Pharmaceuticals CEO Martin Shkreli in a makeshift cat litter pan, are asked to leave the lobby of a building in NY, during a protest highlighting pharmaceutical drug pricing on Thursday, Oct. 1, 2015.
Federal agents took the Grinch into custody Thursday morning in his Manhattan home on accusations that he engaged in a shell game when his defunct hedge fund lost millions of dollars. Bernie Sanders’s campaign subsequently called him a “poster boy for drug company greed”. Investigators allege that the Shkreli operated each of his businesses as a “Ponzi-like scheme”, where every subsequent venture was used to pay off defrauded investors from the prior one.
Dubbed “the most hated man in America”, Mr Shkreli was also recently revealed to be the US$2m buyer of a one-of-a-kind album by rap group Wu-Tang Clan.
Asked if Shkreli raised drug prices to pay back investors, Capers said that was not part of the investigation.
His arrest was not linked to the 5,500-per cent increase in the price of Daraprim, a drug used to treat malaria and infections suffered by HIV-positive people.
The indictment said Shkreli and others orchestrated three interrelated fraud schemes from 2009 to 2014. FBI Assistant Director-in- Charge Diego Rodriguez said, “Shkreli targeted investors and retained their business by making several misrepresentations and omissions about key facts of the funds he managed”.
Craig Stevens, a lawyer representing Shkreli released a statement on Thursday saying, “Mr. Shkreli is confident that he will be cleared of all charges”.
Turing said last month that it would not change the list price of Daraprim, but would offer the drug to hospitals at a discount of up to 50 percent.
While most patients’ copayments will be $10 or less a month, insurance companies will be stuck with the bulk of the tab, potentially driving up future treatment and insurance costs.
Earlier this year, Shkreli became headline fodder with the drug price hike at Turing.
Capers, the chief federal prosecutor, sidestepped a question about whether authorities had seized Shkreli’s album, and said: “We’re not aware of how he raised the funds to buy the Wu-Tang album”.
Shares of KaloBios fell about 50 percent to $US11.75 ($A16.30) in premarket trading after today’s arrest.
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Shkreli used $5 million given by 13 investors to set up MSMB Healthcare, another hedge fund. He allegedly used this money to settle his debts from MSMB Capital and paid high management fees to himself.
