Shkreli, Drug Firm Chief, Arrested in Securities Case
Matthew Goldstein contributed reporting. Martin Shkreli, a pharmaceutical entrepreneur and former hedge fund manager who has been widely criticized for drug price gouging, was arrested Thursday by federal authorities.
The investigation, in which 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.
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.
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 at Kaye Scholer who has worked with Shkreli, was also arrested Thursday. A spokesman for the firm declined to comment.
In 2011, while running the hedge fund MSMB Capital Management, 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 are believed to parallel a civil lawsuit filed against Shkreli in August by Retrophin, whose board ousted Shkreli as chief executive in September 2014. In its lawsuit, Retrophin accused Shkreli of having used the company as a kind of personal piggy bank to help pay off upset investors who lost money at the hedge fund MSMB. Among the ways he did this, the lawsuit says, was by hiring some of these investors as sham consultants to Retrophin.
“Shkreli was the paradigm faithless servant,’’ Retrophin’s complaint, filed in in Manhattan, said. “Starting sometime in early 2012, and continuing until he left the company, Shkreli used his control over Retrophin to enrich himself and to pay off claims of MSMB investors (who he had defrauded).’’
Shkreli has said in earlier interviews that the Retrophin lawsuit was false and merely a way for the company to escape from paying him severance payments he was owed.
News of the arrest was reported earlier by Bloomberg.
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