Newspaper article International New York Times

Financier Behind Drug Price Surge Is Arrested ; Securities Fraud Charges Tied to Shkreli's Work as a Hedge Fund Manager

Newspaper article International New York Times

Financier Behind Drug Price Surge Is Arrested ; Securities Fraud Charges Tied to Shkreli's Work as a Hedge Fund Manager

Article excerpt

The entrepreneur, Martin Shkreli, who has been criticized for price gouging on drugs, faces securities fraud charges related to his work at MSMB Capital Management and Retrophin.

Martin Shkreli, a pharmaceutical entrepreneur and former hedge fund manager who has been widely criticized as drug price gouging, was arrested Thursday morning by the federal authorities.

The investigation, in which Mr. Shkreli has been charged with securities fraud, is related to his time as a hedge fund manager and running the biopharmaceutical company Retrophin, not the price- gouging controversy that has swirled around him.

Mr. Shkreli, 32, is now chief executive and founder of Turing Pharmaceuticals, which has drawn scrutiny for acquiring a decades- old drug and raising the price of it overnight to $750 a pill, from $13.50. In a recent interview with The New York Times, he acknowledged the regulatory and criminal investigations into claims of wrongdoing at hedge funds he once controlled as well as at Retrophin, but was dismissive of the inquiries' importance.

He was arrested in his Manhattan apartment, according to a law enforcement source who declined to be identified because the indictment had not been unsealed. Federal prosecutors in Brooklyn were expected to hold a news conference on the charges later Thursday.

Evan L. Greebel, a corporate lawyer who joined Kaye Scholer last summer and had worked with Mr. Shkreli, was also arrested on Thursday morning. Andrea Orzehoski, a spokeswoman for Kaye Scholer, said in an email that "the transactions in question predate his arrival to the firm."

In addition to the indictment filed on Thursday, the Securities and Exchange Commission filed a lawsuit contending that Mr. Shkreli's empire was built on lies to his investors from the start. He told investors in his hedge fund he had hired a prominent industry auditing firm, which he did not. In a 2010 email he told investors his MSMB Capital fund had returned 37.77 percent since its founding when in fact it had generated losses of 18 percent. He also told investors the firm had assets of $35 million when in fact it had less than $1,000 in the bank and its brokerage accounts.

In 2011, while running the hedge fund MSMB Capital Management, Mr. Shkreli started Retrophin, which adopted a controversial business strategy that has come under scrutiny. It acquired old, neglected drugs often used for rare diseases and substantially raised their prices. Retrophin, for example, raised the price of Thiola, used to treat a disease that causes kidney stones, to $30 a pill from $1.50. In 2012, he took Retrophin public through a merger with a publicly traded shell company.

The federal charges partially parallel a lawsuit filed against Mr. Shkreli in August by Retrophin, whose board ousted him as chief executive in September 2014. …

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