Former Drug Company Executive Martin Shkreli Is Convicted of Fraud

August 04, 2017

NEW YORK (Reuters) - Martin Shkreli was convicted of fraud by jurors in a U.S. court in Brooklyn on Friday, in a blow for the controversial former drug company and hedge fund executive, who had forcefully and repeatedly proclaimed his innocence.

Jurors found Shkreli guilty of two counts of securities fraud and one count of conspiracy, but acquitted him of five other conspiracy counts he had faced.

Federal prosecutors had accused the 34-year-old of defrauding investors in his hedge funds and stealing from his old drug company, Retrophin Inc ( RTRX.O ), to pay them back.

The verdict in U.S. District Court in Brooklyn came on the fifth day of deliberations, which followed a monthlong trial.

Shkreli showed little emotion as the verdict was read, but outside the courthouse portrayed it as a victory, though he could face up to 20 years in prison for securities fraud.

"This was a witch hunt of epic proportions, and maybe they found one or two broomsticks, but at the end of the day, we've been acquitted of the most important charges," Shkreli told reporters.

Before going on trial, Shkreli had been best known for raising the price of anti-infection drug Daraprim by 5,000 percent in 2015 as chief executive of Turing Pharmaceuticals.

That increase sparked outrage from U.S. lawmakers and patients, and earned Shkreli the nickname "Pharma bro."

The charges stemmed from his career before Turing, as chief executive of Retrophin and manager of hedge funds MSMB Capital and MSMB Healthcare.

Prosecutors claimed that between 2009 and 2014, he lied to MSMB investors, lost their money and paid them back with cash and stock misappropriated from Retrophin.

Jurors heard testimony from several MSMB investors who said Shkreli falsely claimed to have an outside auditor and tens of millions of dollars in assets, sent them fabricated account statements after losing their money and became evasive when they asked for their investments back.

Prosecutors said Shkreli eventually paid investors back with stock or cash from Retrophin by having them sign settlement or consulting agreements with the company. Retrophin directors testified that they did not approve those agreements in advance.

Shkreli's lawyer, Benjamin Brafman, had urged jurors to see his client not as a fraudster but as an eccentric genius determined to find cures for rare diseases.

Brafman said that while Shkreli's statements to investors were not always true, he made them in good faith. He also emphasized that none of Shkreli's investors lost money, a rarity in a securities fraud case.

 

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