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Martin Shkreli, the pharma exec who has been vilified for jacking up the price of a life-saving medicine by 5,000 percent, was arrested early this morning at his Manhattan home for securities fraud.

The arrest, however, was unrelated to pharmaceutical pricing.


Federal prosecutors charged him in this indictment with illegally using stock from Retrophin, a drug company that he launched in 2011, to pay debts to investors in a financially troubled hedge fund that he had run. Last year, Retrophin ousted him as chief executive and, several months later, filed a lawsuit alleging the “self-dealing” stock scheme defrauded company shareholders. The Securities and Exchange Commission also filed a civil lawsuit.

The federal case largely mirrors the lawsuit, which describes how Shkreli allegedly used Retrophin stock to “enrich himself” and “resolve claims” made by investors in MSMB Capital Management. The suit also contends that Shkreli prompted Retrophin to sign “sham consulting agreements” with other aggrieved investors in the fund, which reportedly lost millions of dollars.

A spokesman for Shkreli and Turing Pharmaceuticals, where he is chief executive, did not respond to repeated requests for comment.


The arrest caps a tumultuous year for Shkreli, who was largely unknown beyond Wall Street and the pharmaceutical industry before he gained control of Turing Pharmaceuticals several months ago.

He then landed on the national radar screen by acquiring Daraprim, a decades-old medicine used by HIV patients, and raising the price of a tablet from $13.50 to $750. He also took steps to thwart generic rivals, which prompted the New York State attorney general to investigate. His moves were widely derided, and Shkreli gained infamy by mocking his critics repeatedly on social media.

The episode quickly became a focal point of the escalating controversy over prescription drug prices. And Shkreli, in particular, became a national symbol of unrestrained greed. He was dubbed the “most hated man in America” in media reports, and presidential aspirant Bernie Sanders rejected his $2,700 campaign donation.

Meanwhile, the heads of many other large drug makers, who were frightened by the public reaction to the pricing debate, scrambled to distance themselves. “We are not like him,” said Merck chief executive Ken Frazier at a recent industry conference, shortly after Shkreli appeared in a hooded sweatshirt and sneakers to argue that high drug prices are best for shareholders.

Asked what he would have done differently in light of the sustained criticism, Shkreli was unrepentant. “I would probably have raised the price higher,” he said. “I’m here to make profits for my shareholders. That’s my priority.”

Earlier this month, Shkreli generated still more uproar when he bought a majority stake in a drug maker called KaloBios, which was developing cancer drugs. But KaloBios quickly purchased rights to a half-century-old medicine for treating Chagas disease, a parasitic infection that can cause life-threatening heart problems, and plans to raise the price 100-fold.

To many, though, Shkreli appeared to be just another fast-moving character darting around the edges of Wall Street. The son of immigrants from Albania and Croatia, his parents worked as janitors and raised him in Sheepshead Bay, Brooklyn, a largely working-class community nearly an hour’s subway ride from Manhattan. At 17, he interned with a Wall Street brokerage firm.

In 2006, he opened his own hedge fund, which closed within a year. In 2008, he launched MSMB and, three years afterward, created Retrophin as a portfolio company that focused on biotech companies and assets. Sources say that Shkreli was able to focus on biopharma opportunities, in part, because he had the ability to “memorize medical books” and decipher trends in science.

But his stock maneuvers were starting to draw attention. In 2012, Citizens for Responsibility and Ethics in Washington, a consumer advocacy group, urged federal prosecutors to investigate him for allegedly manipulating stock prices. The organization claimed Shkreli had shorted stocks in drug makers while simultaneously urging the Food and Drug Administration not to approve their medicines.

Last year, Shkreli gained still more attention when Retrophin filed a lawsuit against a former employee, who later filed a police report claiming that Shkreli hacked his email and Twitter accounts and also harassed his family. “I hope to see you and your four children homeless and will do whatever I can to assure this,” Shkreli allegedly wrote to the former employee’s wife, according to court documents.