Martin Shkreli, Phamaceutical CEO and Hedge Fund Manager, Arrested for Securities Fraud

Martin Shkreli is an American entrepreneur that has been the subject of headline news throughout 2015. Shkreli is also a financial executive as well as a pharmaceutical executive. He is the founder and co-founder of a hedge fund company, founder of one biotechnology firm, and the former CEO of a major pharmaceutical company.

Under Fire

Shkreli came under fire when his company obtained the manufacturing license for a drug that has been used to treat a variety of illnesses, including malaria, toxoplasma gondii infections in patients with HIV, and Tay-Sachs disease. The medication was evaluated as a treatment for ALS (Lou Gehrig’s disease). The drug became a single-source specialty pharmacy item when Shkreli’s company obtained the manufacturing rights, and the price of the medication soared from $13.50 per pill to $750 per pill. These costs remained high only within the United States, as other companies throughout the world continued to produce the tablets, ranging from the U.S. equivalent of just ten cents per pill up to a single dollar per pill.

Shkreli attempted to save face by hiring a public relations team to explain his reason for the astonishing price hike. An outcry from the public prompted Shkreli to act. The company began negotiating with hospitals, in November 2015, reducing the cost facilities pay by up to fifty-percent. Outpatients would not be able to receive a discount reflected in the cost of the prescriptions. Shkreli was quite unapologetic about the dramatic price increase, telling major news outlets that the price increase “should have been more.”
The pharmacy mogul, who was in charge of addition investment groups, acquired the majority stake in another pharmaceutical company within the same month.

Arrest

Martin Shkreli was arrested on December 17, 2015, on a federal indictment for securities fraud and conspiracy. The charges were not related to the price-hike controversy, but instead to allegations of operating a Ponzi scheme during his tenure at multiple companies. Evan Greeble, an attorney, was also charged. Shkreli and Greeble have both pleaded “not guilty” to the charges.

Shkreli has since resigned from his CEO position with the drug manufacturer.

The two could receive twenty years in prison if convicted.

Past Allegations

Shkreli was investigated early in his career. Shkreli was investigated in 2003 after he suggested that the unrelated company short a biotech stock. The company followed his advice and their hedge fund profited. A short time later, Shkreli predicted that the stock for another company would fall. When it did, Shkreli was scrutinized by the Securities and Exchange Commission. He was cleared of wrongdoing following the investigation.

Shkreli from 2009 – 2014

The Ponzi scheme allegations against Shkreli stem from activities that reportedly took place from 2009 through 2014. Shkreli worked with two companies during this time. IShkreli allegedly made bad trades using the investments of his hedge fund clients. He stands accused of having used cash and stocks from a different company to pay back the lost investments.

What is Securities Fraud?

Securities fraud, more commonly known as investment or stock fraud, can involve the practice of getting investors to make their decisions based on false information, embezzlement, insider trading, or front running.

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