BUSINESS

Martin Shkreli Found Guilty On Several Counts Of Fraud

The trial of the so-called "Pharma Bro" centered around his stewardship of two hedge funds.

08/04/2017 14:46 EDT | Updated 08/04/2017 16:56 EDT

After five days of deliberations, jurors have found Martin Shkreli guilty on three charges of fraud and not guilty on five charges.

Shkreli faces jail time, though legal experts say he’ll likely receive far less than the maximum 20-year sentence he would have faced had he been found guilty of all eight counts of securities fraud, conspiracy to commit securities fraud and conspiracy to commit wire fraud. He will be sentenced at a later date.

Shkreli spoke after receiving the verdict from the U.S. District Court in Brooklyn, saying, “We have some work to do” on the three guilty verdicts.

“This was a witch hunt of epic proportions and maybe they found one or two broomsticks,” Shkreli told reporters.

Prosecutors maintained the 34-year-old defrauded investors at two hedge funds he used to run, MSMB Capital Management and MSMB Healthcare, from October 2009 to March 2014. After lying to them about the state of their investments, prosecutors say, Shkreli siphoned off millions of dollars from a pharmaceutical company named Retrophin, where he was CEO, to cover his debts.

In the case of MSMB Capital Management, for instance, Shkreli claimed to have made returns of 35.77 percent since its inception, when in reality the fund was actually down 18 percent. According to the U.S. Securities and Exchange Commission (SEC), Shkreli falsely claimed the fund had $35 million in assets when in reality it had less than $1,000.

In another example, the SEC says Shkreli lied to one of MSMB Capital Management’s executing brokers about the fund’s ability to cover a possible loss on a trade he wanted to make. When the deal lost money, Shkreli was unable to pay. Instead, the broker was forced to cover Shkreli’s position and took on losses of more than $7 million. 

“When you lie to people knowingly and intentionally to get their money, it’s a crime,” federal prosecutor Jacquelyn Kasulis told jurors in closing arguments last Friday. “And that is exactly what Martin Shkreli did. He knowingly lied over and over again to his investors.”

“Mr. Shkreli is a smart man ... He knew exactly what he was doing,” she added, having previously described him as “a con man who stole millions.” 

Defense attorney Benjamin Brafman dismissed that portrayal, instead describing his client as a fundamentally “good kid” who scrambled to cover investors’ losses, ultimately earning a profit.

“Who lost anything?” Brafman asked rhetorically during closing arguments, before answering himself: “Nobody.”

Given the moniker “Pharma Bro” by members of the media, Shkreli rose to infamy in 2015, when, as CEO of Turing Pharmaceuticals, he raised the price of an anti-parasite drug often prescribed to HIV/AIDS patients by 5,000 percent. The move sparked widespread outrage, earning Shkreli the tag of “the most hated man in America.”

Given his reputation, lawyers had a difficult time seating a jury, as potential jurors described him as “a snake” and, in one instance, pretended to wring Shkreli’s neck as he sat several feet away.

Paige Lavender contributed reporting.