Legal Ruling Means Pharma Bro Could Spend A Decade in Prison

Published: Feb 27, 2018 By

Pharma Bro Greed

Martin Shkreli will be responsible for $10.4 million in financial losses when he faces sentencing for defrauding hedge fund investors on March 9.

Shkreli and his attorneys had been hoping that the federal judge would not hold him responsible for the losses since he ultimately returned more to his investors. In August Shkreli, infamously known as “Pharma Bro,” was found guilty on two charges of securities fraud and one charge of conspiracy to commit conspiracy fraud. On Monday U.S. District Judge Kiyo Matsumoto ruled that Shkreli was ultimately responsible for the losses, which could mean the brash Shkreli will face more prison time than he and his lawyers had hoped for. Late Monday CNBC noted that “as a rule” the higher the financial loss amount in a crime affects federal sentencing guidelines. Matsumoto’s ruling on Monday will only relate to sentencing guidelines and not how much Shkreli could be ordered to pay back. Shkreli could potentially serve 10 years or more in prison.

During Shkreli’s trial, the prosecution argued that Shkreli lied to the investors of the two hedge funds he ran, MSMB Capital and MSMB Healthcare. He ran the funds into the ground but was able to pay them back with stock from Retrophin, a pharma company he founded, which ultimately became more valuable than the initial investments from the investors. Shkreli’s attorneys maintained that the disgraced biotech executive made his investors rich by paying them back with shares of Retrophin, Inc.. Retrophin later fired Shkreli and filed a lawsuit against him as well.

Despite the arguments from Shkreli’s lawyers, Matsumoto said all of the money investors gave to Shkreli must be considered loss, Reuters reported. Additionally, Matsumoto shot down Shkreli’s arguments when she said he only paid back those hedge fund investors after they became suspicious about the state of their finances, Reuters added. In all Matsumoto said Shkreli is responsible for $6.4 million of loss for the investors and an additional $4 million in intended loss for investors due to his attempts to “prop up the price of Retrophin shares” when he attempted to block investors from selling them, Reuters said.

“By the time Mr. Shkreli began to funnel money from Retrophin to his MSMB Capital investors, many of those investors, as well as the Securities and Exchange Commission, had detected the fraud,” Matsumoto said, according to the CNBC report.

In December 2015 the federal government charged him with eight counts of securities fraud, securities fraud conspiracy and wire fraud conspiracy. According to the indictment against Shkreli, he and his partners, including attorney Evan Greebel, orchestrated three interrelated fraudulent schemes -- a scheme to defraud investors and potential investors in MSMB Capital; a scheme to defraud investors and potential investors in MSMB Healthcare; and a scheme to defraud Retrophin, the company Shkreli founded. The indictment said Shkreli’s scheme, which caused his investors to suffer a loss of more than $11 million, was carried out over a five-year period, from 2009 to 2014.

Back to news