By Pratik Krishnan (PK) Manoj
Martin Shkreli is, as of now, one of the most hated men in the United States. “Morally bankrupt sociopath”, “scumbag”, “garbage monster” and “everything that is wrong with capitalism” are some of the nicer comments that have been used to describe him. So who exactly is Martin Shkreli and what exactly happened for him to earn the ire of the entire country?
Beginnings and early controversies
He was the son of Albanian and Croatian immigrants and grew up in a working-class community in Brooklyn, New York. Being a prodigy, he was allowed to skip several grades in school and went on to get a degree in business from New York’s Baruch College in 2004. He got his first internship at the age of 17 at the hedge fund Cramer Berkowitz & Co. Mr. Shkreli started his own hedge fund in 2006, Elea Capital Management, which closed a year later after a $2.3million lawsuit from Lehman Brothers.
After Elea shut down, he went to start MSMB Capital Management in 2008. This was the stepping-stone he used for starting his biotech firms that included Turing. This, however, was not his first venture into the pharmaceutical industry. In 2011, he had found Retrophin, a biotech firm, with the aim of creating medicines for rare diseases. In 2014, Martin was removed from his position as head of the company amidst claims of improperly handled legal settlements.The following year, Retrophin filed a $65 million lawsuit claiming that he created Retrophin and took it public simply to gain enough money to pay off investors in his old hedge fund MSMB. Shkreli has strongly denied these allegations and told the New York Times that, “They are sort of concocting this wild and crazy and unlikely story to swindle me out of the money.”
The medicine that took Shkreli down
Turing Pharmaceuticals was launched in 2015 after Mr. Shkreli was booted out of Retrophin. It claims its objective is to focus on finding treatments for serious diseases with limited cures. Turing has only had two products: Daraprim and Vecamyl, which treats hypertension. Daraprim was developed in the 1950s and is one of the best treatments for toxoplasmosis, which is a rare parasitic infection. People with weakened immune systems, rely on this drug extensively, which until recently cost about $13.50 (£8.80) a dose. Mr. Shkreli announced he was pricing it at $750 a pill. The 5,000% increase in price and his brash defense of the same made him a pariah among patients-rights groups, politicians and hundreds of Twitter users.
While many drug companies had increased prices of their niche products, none increased it so much so publicly and so unapologetically. The uproar finally reached a stage where Martin Shkreli agreed to lower the price of Daraprim to an “affordable level”.
Fraud, accusation and trial
Shkreli was accused of lying to investors about two hedge funds, MSMB Capital and MSMB Healthcare, which he used to run. The prosecutors alleged that he ran something of a Ponzi scheme by using investors’ money to start a drug company, Retrophin Inc., and then covertly using $11 million of Retrophin assets to pay them off.
He was declared guilty on two counts of securities fraud and one of conspiracy to commit securities fraud, connected with the functioning of the MSMB Healthcare fund. Mr. Shkreli had, however, been acquitted of the fraud charges leveled against him.
Evidence presented in court proved that he lied about a variety of subjects, from the value of the funds he ran to their performance. Martin claimed that the value of his funds was around $100 million, whereas in reality, the net value of his assets had fallen to negative 33 cents. The investors did not lose a single penny. After Shkreli repaid them with Retrophin stock, several witnesses confessed to the jury that they ended up with multimillion-dollar profits. One even claimed that she wound up with a $2.7 million profit from a $300,000 initial investment. He was, however, found guilty of financial fraud.
Notorious for one; guilty for the other
Shkreli, 34, is most likely to go to prison and could receive a sentence of up to 20 years behind bars. The judge allowed him to return home and while she told him that she’d see him soon, she did not set a date for sentencing.
Martin Shkreli achieved notoriety by unapologetically raising the price of a potentially life-saving drug by over 5,000 percent. His criminal fraud trial in Brooklyn, New York however, had nothing to do with any of that. It was about whether laws were broken when he got in trouble with his investors and lied about it. Martin managed to make up the losses before getting caught, but that didn’t keep him from being convicted on allegations of fraud on Aug. 4.
Featured Source of image: Flickr