A Brooklyn jury on Friday found Martin Shkreli, the former hedge fund manager notorious for brazenly raising the price of a critical drug, guilty of defrauding his investors.
Shkreli shook his head in apparent disbelief as the first of three guilty verdicts was read. His father, who attended every day of the more than four-week trial, put his head in hands. Shkreli, who was acquitted on five other charges, faces up to 20 years in prison, though legal experts say he is likely to be sentenced to much less.
The jury’s decision, following five days of deliberations, did not give either side the clear victory they wanted, but was certainly humbling for Shkreli who had boasted that prosecutors would have to apologize to him when the case was over.
Yet with the audacity that has become his trademark, Shkreli met a scrum of reporters outside the courthouse and said he was “delighted in many ways,” noting that he had been exonerated on charges he considered more serious.
“This was a witch hunt of epic proportions,” he said. “Maybe they found one or two broomsticks, but at the end of the day we were acquitted of the most important charges in this case.”
Prosecutors convinced the jury of five men and seven women that Shkreli, 34, misled investors in two of his hedge funds, MSMB Capital and MSMB Healthcare. Shkreli lied in order to get their money and then to cover up massive losses after he made a bad stock bet, according prosecutors.
“Justice was served,” said Bridget M. Rohde, acting U.S. Attorney for the Eastern District of New York.
But the jurors did not find him guilty of one serious charge: That Shkreli had looted a pharmaceutical he founded, Retrophin, of $10 million, to repay investors.
Shkreli’s infamy hung over the more than month-long case, beginning with jury selection when the judge struggled to find potential jurors who didn’t already dislike the man known as “pharma bro.” He is best known for raising the price of Daraprim — a 62-year-old drug primarily used to treat newborns and HIV patients — from $13.50 to $750 a pill. When critics pounced, Shkreli didn’t shrink from the attention but instead relished in it by battling naysayers on Twitter. He repeatedly flashed his famous smirk while refusing to answer questions at a congressional hearing on rising drug prices.
Boosting drug prices was not why he was on trial, though the defense questioned whether prosecutors would have brought the case if not for Shkreli’s reputation.
“Rarely has a white-collar criminal defendant evoked hatred and scorn from public in the way Shkreli has. Shkreli’s willingness to lie, step on people, flaunt his wealth and look down on others made him a villain that many wanted to see go down in flames,” said James Goodnow, an attorney with Fennemore Craig, a corporate defense firm.
Shkreli didn’t do himself any favor during the trial as he struggled to repress his quirky instincts. As his attorneys argued his case, he squirmed in his seat and sometimes appeared bored. He reportedly read organic chemistry books and medical journals to stay occupied during some of the testimony. Shkreli once walked by where reporters were seated in the courtroom during a break and whispered “fake news.”
Early in the trial, U.S. District Judge Kiyo Matsumoto chastised Shkreli for speaking with reporters where jurors might hear him after he strolled into a room full of media and called the prosecutors “junior varsity.” He stopped speaking to reporters after that but still popped up on Twitter, which banned him earlier this year, to tease them under an pseudonym.
A more nuanced image of Shkreli emerged during the trial. To the wealthy elite he courted, Shkreli was a savvy if eccentric Wall Street insider. Investors testified that they forked over money after hearing from others that Shkreli was a “rising star” in the hedge fund world, and were willing to dismiss his quirks, even when he greeted one investor in fluffy slippers and a stethoscope. What prosecutors characterized as the cunning of a chronic liar, the defense called the oddities of a genius.
Prosecutors were focused on Shkreli’s leadership of two hedge funds, MSMB Capital and MSMB Healthcare, and a pharmaceutical company, Retrophin. Shkreli raised millions for MSMB Capital, but not as much as he told investors. When he made a bad bet that doomed the hedge fund, he launched a scheme to cover it up, prosecutors said. He raised more money for another hedge fund, MSMB Heathcare, which he largely used to fund the start up of Retrophin.
When disgruntled investors attempted to claim their profits, Shkreli used money from other investors and Retrophin cash and stock to pay them off, according to prosecutors.
“Shkreli misled investors in his self-indulgent scheme,” FBI Assistant Director-in-Charge William F. Sweeney, Jr. said in a statement. The conviction “shows that those who corrupt the market will ultimately be brought to justice.”
Brafman, Shkreli’s defense attorney, disputed all of the charges and attempted to sway the jury with a simple rebuttal: His investors were wealthy and sophisticated and he ultimately made them richer.
“My investors made three to five times their money,” Shkreli said during the press scrum after the verdict. And Retrophin wouldn’t exist without him, he said, boasting that he had taken it from an “idea in my head to a half-a-billion-dollar company.”
That is a compelling argument, but not good enough, Goodnow said. “Shkreli’s lack of contrition and the way he cut people to the bone with his words no doubt evinced anger in the jurors that Shkreli’s defense team simply could not overcome,” he said.
Shkreli still faces civil charges from the Securities and Exchange and a $65 million lawsuit filed by Retrophin, which ousted him.
“It is a hollow victory if you want to call it a victory,” said David Chase, a former SEC prosecutor. Matsumoto, the judge, still has the discretion to send Shkreli to prison for several years, he said. She has not set a date for sentencing.
Still, an hour after leaving the courtroom, Shkreli was back where he feels comfortable: At home in a room full of music equipment where he livestreams his life.
“I think I can get probation. I think there’s a decent chance,” he said with a beer in his hand and still wearing the polo shirt and glasses he wore to court. “I think we’re going to end up appealing this. I’m going to talk about this with my lawyers.” His cat, named Trashy, made regular appearances in the background.
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