Martin Shkreli, 34, has confidently courted controversy in recent years, bulldozing his way into Wall Street and the drug industry, raising the price of a lifesaving drug by 5,000 percent overnight, boasting that he would outwit prosecutors in his federal fraud case, and live-streaming and tweeting throughout his five-week trial.
But on Friday, after five days of deliberations, jurors convicted him on three counts of fraud in federal court, and he now faces up to 20 years in prison on each of the first two counts, and up to five years on the final count.
Mr. Shkreli looked shaken as the judge read the verdict. But not long after, he appeared outside of court and returned to form, saying that he was “delighted, in many ways,” with the verdict. “This was a witch hunt of epic proportions, and maybe they found one or two broomsticks,” he said.
Later in the afternoon, he was live-streaming once more, sipping beer and joking about prison life from his Manhattan apartment.
At the trial in the Federal District Court in Brooklyn, Mr. Shkreli was accused of securities and wire fraud related to two hedge funds he ran, MSMB Capital and MSMB Healthcare. Prosecutors charged he illegally used a pharmaceutical company he founded, Retrophin, to repay defrauded MSMB investors. And they said he secretly controlled a huge number of Retrophin shares.
He never seemed to take his case seriously, meeting with federal authorities without a lawyer, making faces during testimony, calling the prosecution “junior varsity” and reading a book during final statements.
Jurors convicted Mr. Shkreli of three of the eight counts: securities fraud in connection with his hedge fund MSMB Capital; securities fraud in connection with MSMB Healthcare; and conspiracy to commit securities fraud related to the Retrophin stock scheme, in which he tried to quietly control a huge portion of Retrophin stock.
He was acquitted of counts one and two, conspiracy to commit securities fraud and conspiracy to commit wire fraud regarding MSMB Capital; counts four and five, the same charges with MSMB Healthcare; and count seven, conspiracy to commit wire fraud with regard to defrauding Retrophin by using funds from it to pay MSMB investors.
Count seven carried the most weight for sentencing, charging Mr. Shkreli with defrauding Retrophin by creating sham consulting agreements and unauthorized settlement agreements to pay back MSMB investors. It was associated with the biggest loss, which judges take into account when deciding sentences in fraud cases, said Benjamin Brafman, Mr. Shkreli’s lawyer.
As Judge Kiyo A. Matsumoto read the verdict, Mr. Shkreli, wearing a black polo shirt and khakis, sat with his arms crossed. He showed outward relief when Judge Matsumoto said he was not guilty on count seven, mouthing “Yes” and patting Mr. Brafman on the back. When she said he was guilty of count eight, the Retrophin securities-fraud conspiracy, he hung his head.
After the verdict was read, he gathered in a circle with his lawyers, looking a little shaken, then pulled on a hoodie. By the time he got outside court, where he gave his statements, he was smiling and speaking smoothly.
Bridget M. Rohde, the acting United States attorney for the Eastern District of New York, the federal prosecutors’ office in Brooklyn, said she was gratified by the verdict. “Our work is not done: Mr. Shkreli remains to be sentenced, and there’s a co-defendant in the case,” she said, referring to Evan Greebel, Mr. Shkreli’s onetime lawyer, who is scheduled to be tried in the fall.
A sentencing date was not set; Judge Matsumoto said she would wait for submissions from both sides on how much money was lost. She set a fall date for those submissions. Mr. Brafman said the defense might ask for no prison time.
Jurors, who deliberated for five days and sent only one substantive note in that time, were never deadlocked, according to one juror, who spoke after the verdict on condition of anonymity because he said he did not want to be associated by name with the case.
He described the deliberations as methodical and logical and said the jurors had focused on whether Mr. Shkreli had intended to harm investors who gave him money.
The jury voted to convict on counts in which they saw fraudulent intent to take money, the juror said.
At Mr. Shkreli’s trial, prosecutors, defense lawyers and witnesses provided sharply different takes on the defendant as they described how he rose from an ambitious young hedge fund manager to a notorious pharmaceutical executive.
The prosecution brought forth an “avalanche” of evidence, as the prosecutor Jacquelyn Kasulis put it in her rebuttal argument, that Mr. Shkreli illegally used Retrophin to repay the defrauded MSMB investors. The evidence included a threatening letter he sent to the wife of a former employee; statements he sent to MSMB investors showing great returns at the same time he had no money in fund accounts; three versions of a backdated agreement to make it look as if MSMB Capital had invested in Retrophin when it had not; and claims about assets under management that were wildly out of line with his actual fund size.
“It’s time for Martin Shkreli to be held accountable,” she said.
His lawyers focused on the fact that his investors ultimately made back much more than their initial investments. They said that was proof that Mr. Shkreli had never intended to commit fraud. Instead, they said, he worked hard to get Retrophin off the ground so he could reimburse MSMB investors.
“He did it, and it worked, and they got paid,” Mr. Brafman said in his closing statement. “When they got the financing, they started to pay these people, not to loot Retrophin.”
However, prosecutors said that paying Mr. Shkreli’s old investors was not the responsibility of Retrophin, a public company, and that Mr. Shkreli had misled his MSMB investors. “Lying to people to get them to invest with you is fraud,” Ms. Kasulis said in her final statement.
Mr. Shkreli is the child of Albanian immigrants. He was raised in Brooklyn and attended Hunter College High School, one of the city’s elite public schools. He went to Baruch, one of New York’s city colleges, and landed an internship at Cramer Berkowitz, going on to other money-management jobs.
As he recruited investors for his own funds, MSMB Capital and MSMB Healthcare, he was cunning at times, almost a shape-shifter. He told an investor who had not graduated from college that he had not finished college either, according to testimony. To an established Texas investor, he said he had graduated young from Columbia. He told another investor, in an email chain about Steve Jobs, a college dropout, that he had dropped out of Columbia.
His lawyers painted him as an oddball who did not brush his teeth and slept in a sleeping bag at his office.
Before the trial, Mr. Shkreli was perhaps best known for increasing the price on the drug Daraprim, which treats a parasitic infection, to $750 a tablet from $13.50, when he was the chief executive of Turing Pharmaceuticals in 2015. The public and politicians vilified him for the price increase, and Mr. Shkreli responded by buying another drug and saying he would raise the price on that one, too.
Documents entered into evidence throughout the trial showed Mr. Shkreli as devil-may-care. At one point, Mr. Greebel, Mr. Shkreli’s co-defendant and former lawyer, wanted to have a phone call with him about an issue involving lawyer-client privilege, and Mr. Shkreli responded, “Not available by phone ever Sorry.”
During his postverdict live-stream, Mr. Shkreli, sipping from a bottle of India pale ale, speculated that his sentence would be “close to nil” and said that he was not anticipating spending time in a maximum security facility, adding “this is not ‘Oz’ or ‘The Wire.’”
Rather, he said, he imagined serving in what he termed “Club Fed,” playing basketball, tennis and Xbox, and resurfacing “back out on these streets very quickly.”
475 COMMENTS
Correction: August 4, 2017 An earlier version of this article misstated Martin Shkreli’s position as the verdict was read. He was sitting, not standing.
(NEW YORK) — Martin Shkreli, the eccentric former pharmaceutical CEO notorious for a price-gouging scandal and for his snide "Pharma Bro" persona on social media, was convicted Friday on federal charges he deceived investors in a pair of failed hedge funds.
A Brooklyn jury deliberated five days before finding Shkreli guilty on three of eight counts. He had been charged with securities fraud, conspiracy to commit securities fraud and conspiracy to commit wire fraud.
Shkreli, upbeat and defiant outside the Brooklyn courthouse afterward, called his prosecution "a witch hunt of epic proportions" but conceded that maybe the government had found "one or two broomsticks."
Asked about his client's social-media antics, attorney Ben Brafman said it was something they would be working on.
"There is an image issue that Martin and I are going to be discussing in the next few days," he said, adding that while Shkreli was a brilliant mind, sometimes his "people skills" need work. As he spoke, Shkreli smiled and cocked his head quizzically in mock confusion.
Brafman predicted that Shkreli would someday go on to develop cures to terrible diseases that afflict children.
Within an hour of leaving the court, Shkreli was at home live-streaming on YouTube and calling the split verdict a victory, despite his conviction on two of the most serious counts. Prosecutors had a different take.
"There's one statement that's most important and that's the jury's statement: guilty on those counts," said Acting U.S. Attorney Bridget Rohde.
Prosecutors had accused Shkreli of repeatedly misleading investors about what he was doing with their money. Mostly, he was blowing it with horrible stock picks, forcing him to cook up a scheme to recover millions in losses, they said.
Shkreli, 34, told "lies upon lies," including claiming he had $40 million in one of his funds at a time when it only had about $300 in the bank, Assistant U.S. Attorney Alixandra Smith said in closing arguments. The trial "has exposed Martin Shkreli for who he really is — a con man who stole millions," added another prosecutor, Jacquelyn Kasulis.
But the case was tricky for the government because investors who testified said Shkreli's scheme actually succeeded in making them richer, in some cases doubling or even tripling their money on his company's stock when it went public.
"Who lost anything? Nobody," Brafman said in his closing argument. Some investors had to admit on the witness stand that partnering with Shkreli was "the greatest investment I've ever made," he added.
While the convictions carry maximum penalties of years in prison, Brafman said that the lack of financial harm meant that Shkreli could get no jail time when he is sentenced. A sentencing date has yet to be set.
For the boyish-looking Shkreli, one of the biggest problems was not part of the case — his purchase in 2014 of rights to a life-saving drug that he promptly raised the price from $13.50 to $750 per pill. Several potential jurors were kept off the panel after expressing disdain for the defendant, with one calling him a "snake" and another "the face of corporate greed."
The defendant also came into the trial with a reputation for trolling his critics on social media to a degree that got him kicked off Twitter and for live-streaming himself giving math lessons or doing nothing more than petting his cat, named Trashy. Among his other antics: boasting about buying a one-of-a-kind Wu-Tang Clan album for $2 million.
Shkreli, who comes from an Albanian family in Brooklyn, was arrested in 2015 on charges he looted another drug company he founded, Retrophin, of $11 million in stock and cash to pay back the hedge fund investors. Investors took the witness stand to accuse Shkreli of keeping them in the dark as his scheme unfolded.
"I don't think it mattered to him — it was just what he thought he could get away with," said Richard Kocher, a New Jersey construction company owner who invested $200,000 with Shkreli in 2012.
Shkreli's lawyer agreed his client could be annoying but said his hedge fund investors knew what they were getting.
"They found him strange. They found him weird. And they gave him money. Why? Because they recognized genius," Brafman said, adding that they had signed agreements that his client wasn't liable if they lost their money.
Jurors also heard odd vignettes befitting the quirky defendant: how Shkreli slept on the floor of his office in a sleeping bag for two years; how a drug company board member and former American Express executive wrote an email saying he'd meet with Shkreli "only if I can touch your soft skin"; how Shkreli wrote a letter to the wife of an employee threatening to make the family homeless if the man didn't settle a debt.
Shkreli didn't testify. But rather than lay low like his lawyers wanted, he got into the act by using Facebook to bash prosecutors and news organizations covering his case. In one recent post, he wrote, "My case is a silly witch hunt perpetrated by self-serving prosecutors. ... Drain the swamp. Drain the sewer that is the (Department of Justice.)"
The judge ordered Shkreli to keep his mouth shut in and around the courtroom after another rant to new reporters covering the trial.
Prosecutors "blame me for everything," he said. "They blame me for capitalism."After agreeing to continue Shkreli's $5 million bail, the judge told him: "I wish you well, Mr. Shkreli. See you soon."
News 
Market Data 
Discover 
