Martin Shkreli was recently sentenced to seven years in prison after being found guilty of securities fraud, a white collar crime, after he swindled more than $10 million away from investors by mismanaging assets in hedge funds he controlled. He’ll get credit for six months’ time served in a New York prison.
Shkreli, gained the infamous nickname “pharma bro” when he first made headlines back in 2015 after inflating the prices on Daraprim, a drug used to treat HIV patients. At the time, the cost per pill was $13.50 each; he inflated it to $750. However, while the backlash saw him testifying about price gouging on Capitol Hill and become the face of “big pharmaceutical” greed taking advantage of the financial plight of the sick, this action was in no way connected to the crime he was convicted of.
According to prosecutors, between the years 2009 and 2014, Shkreli continually lied to investors and financial backers at MSMB Capital and MSMB Healthcare about the condition of funds he was managing. He also used the pharmaceutical company Retrophin’s assets to pay off MSMB investors and cover his own personal expenses. He was convicted of securities fraud and conspiracy back on August 5th of last year, with prosecutors calling his actions a “Ponzi scheme.”
Shkreli’s trial was highly public, and often saw him smirking at the judge and prosecutors, only furthering his reputation as the villainous face of the pharmaceutical industry. Against the advice of his attorneys, he regularly commented on the trial proceedings on social media, at one point even taunting his prosecutors, calling them ‘junior varsity.’
Going into his sentencing, Shkreli faced up to 45 years behind bars based on the maximum penalties for the counts of charges that he was found guilty of. Prosecutors were seeking roughly 20 years behind bars, while Shkreli’s attorney sought less than two. The ultimate decision, seven years, seems to have been a compromise on both regards.
In addition to the prison sentence, Shkreli has also been forced to forfeit $7.4 million in assets, including a number of rare and valuable possessions such as an original Picasso painting, a Lil Wayne album called “Tha Carter V,” and an infamous Wu-Tang Clan album entitled “Once Upon a Time in Shaolin.” Shkreli purchased the only copy of the album ever produced, a double-sided CD, in 2015 for $2 million.
Securities Fraud Explained
Investments are a lucrative business, and as such there are many different restrictions in place in order to prevent fraud and immense theft. Because those who are placed in charge of managing things like investment funds, hedge funds, and other major investment opportunities are held in such high regard, securities fraud is one of the textbook white collar crimes.
Those who manage investments are given a duty and responsibility to act in the best interest of those who entrust them with their assets, including regular, honest reporting on the condition of their investments and making regular payments on returns based on agreed-upon terms. Failing to do so can qualify as securities fraud.
Shkreli’s case also highlights another aspect of this crime: those who manage investment funds as well as the financial dealings of corporations are forbidden from using those assets for their own personal affairs. Shkreli not only did so, but he used the funds from one business to pay off the investors in another while also lying about the conditions of the investments.
Because securities fraud can be so difficult to prove and fight back against, it’s highly advised you retain the services of a qualified and experienced attorney who has the knowledge needed to effectively combat white collar crime accusations. In many cases, those accused stand to lose a substantial amount if they are convicted.If you have been accused of securities fraud or any other white collar crime, call Hager & Schwartz, P.A. at (954) 840-8713 to request a case evaluation.