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Notorious pharmaceutical price manipulator Martin Shkreli and co-conspiring corporate attorney Even Greebel were arrested in New York this morning on federal securities fraud charges.
Shkreli gained worldwide infamy when his current pharmaceutical company jacked up the prices of life-saving AIDS medication by some 5,000 percent. The grand jury indictment, which you can read below, accuses Shkreli of using a former company he owned as a personal piggy bank to repay debts from other business ventures.
Shkreli founded Retrophin, a biotechnology firm in 2011, and quickly began raiding company stock to pay off debts incurred by his failing hedge fund, MSMB Capital Management. According to the indictment, Shkreli was using client money to pay for his clothing, food, and medical expenses, all the while lying to the broker handling his fund's accounts.
Retrophin fired Shkreli as CEO in 2014 "because of serious concerns about his conduct," and the board filed a civil suit against him which caught the attention of federal investigators. Greebel, an attorney for Katten Muchin Rosenman LLP, served as lead outside counsel to Retrophin from 2012 to 2014 and allegedly helped Shkreli in several schemes.
Shkreli and Greebel are facing seven securities fraud-related counts regarding investment and loan schemes between MSMB and Retrophin: two counts each of conspiracy to commit securities fraud and securities fraud, and three counts of conspiracy to commit wire fraud.
You can read the entire indictment, along with detailed breakdowns of each scheme and offense, but here's a taste of how money illegally flowed in between Shkreli's two companies:
"For example, MSMB made a $900,000 investment in Retrophin. Afterward, on February 1, 2012, the investment was reclassified as a loan. That would be as if an investor purchased a share in Microsoft and then later demanded full repayment of the purchase price plus interest, regardless of the market price for the stock.
"The $900,000 plus interest was returned to MSMB on March 31, 2013. That same day, another $575,000 was paid to Shkreli as a purported performance bonus; all of that money, in fact, allegedly went directly to pay for settlement of arbitration against MSMB and Shkreli. Then, according to the data obtained by the government, the company paid or forgave another $1.2 million of obligations primarily for the benefit of MSMB, none of which was disclosed."
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