Published: Sat, August 05, 2017
Money | By Oscar Reynolds

Ex-drug CEO Shkreli convicted on 3 counts in fraud case

Ex-drug CEO Shkreli convicted on 3 counts in fraud case

Prosecutors argued that his previous companies were part of a Ponzi scheme to pay off lost millions to investors of two failed hedge funds (MSMB Capital and MSMB Healthcare), using stock from a different pharmaceutical company, Retrophin.

"The SEC's complaint alleges "widespread fraudulent conduct" by Shkreli - a series of misrepresentations and omissions, and of taking money from one fund to cover claims against the other".

"As the jury found today, Martin Shkreli violated the law by deceiving investors into entrusting their money with his hedge funds and lying to them about the funds' performance, as well as by engaging in a multi-million dollar fraud scheme involving publicly traded Retrophin", Rohde 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 US Attorney, Alixandra Smith said in closing arguments, reported AP.

Brafman said that while Shkreli's statements to investors were not always true, he made them in good faith.

Outside court, Shkreli called his prosecution "a witch hunt of epic proportions".

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 even though investors did not lose money, and said it could encourage more such cases in the future. He also emphasized that none of Shkreli's investors lost money, a rarity in a securities fraud case. "He's not charged with aggravation", referring to Shkreli's 2011 imploded short trade that cost him $7 million and his infamous reputation as provocative online troll.

Asked about his client's social-media antics, attorney Ben Brafman conceded it was something they would be working on.

That mission was the start-up pharmaceutical company Retrophin, reportedly founded to find a cure for rare disease called myotubular myopathy.

The most serious count, securities fraud, carries a maximum prison term of 20 years.

He is now free on bail.

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