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United States

Disgraced ‘Pharma Bro’ Martin Shkreli responsible for US$10.5m in securities fraud losses, judge rules

When he was convicted of fraud last year, Shkreli said he was ‘delighted’ and predicted he would not be jailed – but a new ruling may put that hope to rest

PUBLISHED : Tuesday, 27 February, 2018, 12:07pm
UPDATED : Tuesday, 27 February, 2018, 12:07pm

In a significant blow to the fortunes of disgraced “Pharma Bro” Martin Shkreli a judge ruled Monday that he was responsible for nearly US$10.5m in losses in a securities fraud scheme.

The decision could result in a harsher sentence for the eccentric former pharmaceutical company CEO who faces up to 20 years in prison after being convicted last August.

Shkreli’s defence had hoped the 34-year-old would get little or even no prison time and had argued that investors in two failed hedge funds did not suffer actual losses because they were compensated with drug company stock that more than covered their initial investments. Shkreli even declared himself “delighted” with the verdict last year, as he predicted he would not be imprisoned.

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But US district judge Kiyo Matsumoto rejected their arguments in a written decision in federal court in Brooklyn, finding that Shkreli should be penalised for the losses because he made risky transactions with investors’ millions without their permission.

Matsumoto concluded that after dipping into investor money from one of the hedge funds to keep his drug company start-up afloat, Shkreli “used some the funds to satisfy both personal and unrelated professional obligations”, including a US$900,000 debt for a bad stock market trade, she wrote.

The ruling could allow for a 10-year or longer sentence – although Matsumoto is not bound by the guidelines on sentencing.

Shkreli is perhaps best known for boosting the price of a life-saving drug Daraprim by 5,000 per cent and for his aggressive attacks on critics on social media, where he became known as “Pharma Bro”.

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At a hearing last week, prosecutors asked the judge to order Shkreli to forfeit about US$7.3m in assets, including a one-of-a-kind Wu-Tang Clan Once Upon a Time in Shaolin album that he has boasted he bought for US$2million, as part of the punishment. The judge hasn’t ruled on that request but she rejected a bid by Shkreli’s lawyers to reverse his criminal conviction.

One of Shkreli’s attorneys, Ben Brafman, said in a statement that he was “disappointed by the ruling but still hopeful that the court will find it in her heart to impose a reasonably lenient sentence”.

Shkreli’s bail was revoked last year after he posted a veiled threat against Hillary Clinton on Twitter.