Martin Shkreli, CEO Reviled For Drug Price Gouging, Arrested By FBI On Securities Fraud Charges

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Martin Shkreli, the reviled CEO who made national headlines after he raised the price of a life-saving pill used to treat AIDS and cancer patients from $13.50 to $750, was arrested by federal agents at his Manhattan home early Thursday morning on securities fraud related to a firm he founded.

The federal case against him today is not related to his ‘price gouging’ activities, however. Prosecutors charged Shkreli with illegally taking stock from Retrophin Inc., a biotechnology firm he started in 2011, and using the funds to pay off debts from unrelated business dealings. Shkreli was later ousted from the company, where he’d been the CEO, and was later sued by its board.

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Bloomberg Business adds:

In the case that closely tracks that suit, federal prosecutors accused Shkreli of engaging in a complicated shell game after his defunct hedge fund, MSMB Capital Management, lost millions. He is alleged to have made secret payoffs and set up sham consulting arrangements. A New York lawyer, Evan Greebel, was also arrested early Thursday. He’s accused of conspiring with Shkreli in part of the scheme.

Retrophin replaced Shkreli as CEO “because of serious concerns about his conduct,” the company said in a statement. The company, which hasn’t been accused of any wrongdoing, has “fully cooperated with the government investigations into Mr. Shkreli.”

Authorities outlined years of investment losses and lies Shkreli allegedly told his investors almost from the moment he began managing money. By age 26, they said, he got nine investors to place $3 million with him, began losing their money and covering it up. Within a year, his fund’s account was down to $331.

Shkreli attracted another $2.35 million investment in 2010 and lost about half of that in two months, the authorities said. As the hole grew, he covered it up with scheme after scheme, telling investors that his returns were as high as 35.8 percent when he was down 18 percent. He used client money to pay for his clothing, food and medical expenses and lied to the broker handling his fund’s accounts, authorities said.

“Shkreli was the paradigm faithless servant,” Retrophin’s complaint against Shkreli reads. “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, who denies any wrongdoing in the matter, responded to the lawsuit earlier this year, he said: “The $65 million Retrophin wants from me would not dent me. I feel great. I’m licking my chops over the suits I’m going to file against them.”

Shkreli Indictment by CNBCDigital