Martin Shkreli is found guilty of fraud

Jon Howard
August 6, 2017

Briefly a pharmaceutical magnate, Martin Shkreli was convicted of two counts of security fraud and one count of conspiracy to commit security fraud on Friday for deceiving investors during his time as a hedge fund manager.

When the verdict came in Friday afternoon, an outpouring of commentary ensued.

Prosecutors were focused on Shkreli's leadership of two hedge funds, MSMB Capital and MSMB Healthcare, and a pharmaceutical company, Retrophin. Brafman encouraged the jurors to be "proud" to say "I gave Martin Shkreli a fair trial even though he is Martin Shkreli".

Christopher LaVigne, a former federal prosecutor who is now a defense lawyer at the law firm of Shearman & Sterling, said it was notable that prosecutors secured a conviction without investor losses, and said it could encourage more such cases in the future.

"They found him odd".

You may remember Martin Shkreli as the pharmaceutical CEO who acquired the drug Daraprim and immediately raised the price of a single dose from $13.50 to $750.

Despite Shkreli's lawyers' fleeting attempts to paint their client as a "brilliant man who could pioneer new cures for diseases", the jury was not convinced. When he made bad trades and lost money put into MSMB, he simply attracted more investors by claiming to be making money. He was acquitted of five charges - conspiracy to commit securities fraud and conspiracy to commit wire fraud.

On his YouTube stream, Shkreli vowed to appeal the decision and said he thought the eighth charge will likely be dropped eventually. The 34-year-old "Pharma Bro" is best known for raising the price of a life-saving drug by 5,000 percent.

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Federal prosecutors accused Shkreli of cheating investors out of more than $11 million between 2009 and 2014. It was much, much smaller in scale but eerily familiar in technique to anyone familiar with the business playbook of Bernie Madoff (now in prison for fraud after getting a 150-year sentence).

Shkreli was convicted of only three out of eight counts.

Securities fraud carries a maximum sentence of 20 years in prison, though defendants in such cases rarely receive the maximum sentence.

When challenged about his refusal to cooperate, he told a lawmaker: "I intend to follow the advice of my counsel, not yours".

About the outcome, Shkreli said, "I think we are delighted in many ways".

Shkreli was dressed in a short-sleeve polo shirt and shook his head in apparent disbelief when the first guilty verdict was read. "Martin Shkreli was a visionary".

In other words, Shkreli's case does not represent a takedown of systemic fraud and corruption in the financial system; his were the schemes of an eccentric solo operator who is potentially a danger to others in the market, but who has little significance to the broader financial system. But hey, you've gotta take the wins where you can get them.

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