On August 10, 2015, in accordance with Shkreli's business plan, Turing acquired Daraprim (pyrimethamine), a medication approved by the FDA in 1953, from Impax Laboratories for US$55 million. The drug's most prominent use as of late 2015 was as an anti-malarial and an antiparasitic, in conjunction with leucovorin and sulfadiazine, to treat patients with both AIDS-related and AIDS-unrelated toxoplasmosis.
Martin Shkreli (/ˈʃkrɛli/; born March 17, 1983) is an American former hedge fund manager and convicted felon. Shkreli is the co-founder of the hedge funds Elea Capital, MSMB Capital Management, and MSMB Healthcare; the co-founder and former chief executive officer (CEO) of the pharmaceutical firms Retrophin and Turing Pharmaceuticals (now Vyera Pharmaceuticals); and the former CEO of start-up software company Gödel Systems, which he founded in August 2016. Shkreli is currently at the low-security federal prison in Allenwood, Pennsylvania, with an expected release date in late 2023.
Shkreli was born in Coney Island Hospital in the New York City borough of Brooklyn on March 17, 1983, to Albanian and Croatian immigrant parents. His parents were Roman Catholic, and he said his religion has been "a guiding post" for him, although he does not believe in God. His parents immigrated to the United States and worked as janitors. He, his two sisters, and his brother grew up in a working-class community in Sheepshead Bay, Brooklyn. By most accounts, Shkreli was raised Catholic and attended Sunday school as a child. Shkreli attended Hunter College High School. Sources differ on whether Shkreli graduated from Hunter or whether he was expelled before his senior year and received the credits necessary for his high school diploma through City-As-School High School. He ended up in a program that placed him in an internship at Wall Street hedge fund Cramer, Berkowitz and Company when he was 17. Shkreli received a bachelor's degree in business administration from Baruch College in 2004.
After four years as an associate at Cramer Berkowitz, Shkreli worked as a financial analyst for Intrepid Capital Management and UBS Wealth Management. He then started his first hedge fund, Elea Capital Management, in 2006. In 2007, Lehman Brothers sued Elea in New York state court for failing to cover a 'put option transaction' in which Shkreli bet the wrong way on a broad market decline. When stocks rose, Shkreli did not have the money to make the bank whole . In October 2007, Lehman Brothers won a $2.3 million default judgment against Shkreli and Elea, but Lehman collapsed before it could collect on the ruling.
In September 2009, Shkreli started MSMB Capital Management, which took its name from the initials of the two founding portfolio managers, Shkreli and his childhood friend, Marek Biestek. Shkreli and Biestek shorted biotech companies, then described flaws in the companies on stock trading chat rooms.
In 2011, MSMB made an unsolicited cash bid for AMAG Pharmaceuticals at a price of US$378,000,000. Matthew Herper of Forbes wrote that the attempted hostile takeover was "done for the specific purpose of firing the company's management and stopping a proposed merger with Allos Therapeutics. When the merger plans stopped, so did Shkreli."
In 2011, Shkreli filed requests with the FDA to reject a new cancer diagnostic device from Navidea Biopharmaceuticals and an inhalable insulin therapy from MannKind Corporation while publicly short-selling both companies' stocks, the values of which dropped after Shkreli's interventions. The companies had difficulty launching the products as a result, although the FDA ultimately approved both.
Shkreli founded Retrophin (a portmanteau of "Recombinant dystrophin") in 2011 under the MSMB umbrella and ran it as a portfolio company with an emphasis on biotechnology, to create treatments for rare diseases.
On February 1, 2011, in a naked short sale on an account it held with Merrill Lynch, MSMB Capital sold short 32 million shares of Orexigen Therapeutics stock at about $2.50 per share the day after its price plunged from $9.09, when the Food and Drug Administration (FDA) declined to approve the drug naltrexone/bupropion (Contrave). The stock price rebounded; MSMB could not cover the position, although it had told Merrill Lynch that it could. Merrill Lynch lost $7 million on the trade and MSMB Capital was virtually wiped out. Retrophin's 2015 SEC Complaint contended Shkreli had created MSMB Healthcare and Retrophin "so that he could continue trading after MSMB Capital became insolvent and to create an asset that he might be able to use to placate his MSMB Capital investors."
Columnist Adam Feuerstein said Shkreli was intelligent but too immature and unfocused for the job of CEO. In July 2017, at Shkreli's criminal trial, Stephen Aselage, who was hired by Shkreli in October 2012, testified "He's a brilliant intellect, visionary."
Retrophin's board decided to replace Shkreli in September 2014, and he resigned from the company the following month. He was replaced by Stephen Aselage. During Shkreli's tenure as CEO, the company's employees used alias Twitter accounts to make gangster rap jokes and encourage short selling of other biotech stocks.
In December 2020, it was reported that Shkreli was in a relationship with Christie Smythe, a former reporter for Bloomberg News who broke the news of Shkreli's arrest in 2015. Smythe described their relationship as being "life partners". In October 2021, Smythe said the two had broken up but remained friends.
In June 2017, Reuters reported that Shkreli had reported his net worth at $70 million after being arrested in 2015 and that his attorney Benjamin Brafman, in a hearing before Judge Kiyo Matsumoto, had conceded that his client still owned shares of Turing Pharmaceuticals worth between $30 and $50 million.
On March 5, 2018, Shkreli was ordered to forfeit nearly $7.4 million in assets. The court ordered that if Shkreli had insufficient cash to fulfill the forfeiture order, his assets, including a piece of art by Pablo Picasso, would be sold to do so. Shkreli purchased the 31-track Wu-Tang Clan album Once Upon a Time in Shaolin at an auction in 2015 for around $2 million, as well as the then-unreleased Lil Wayne album Tha Carter V. In April 2018, he was ordered to pay $388,000 in restitution.
Shkreli and some of his business associates have been under criminal investigation by the U.S. Attorney for the Eastern District of New York since January 2015. Shkreli invoked his Fifth Amendment right against self-incrimination in order to avoid testifying during civil depositions.
In March 2015, Hunter College High School announced that Shkreli had donated $1 million, which was the largest donation in the school's history.
After Shkreli's departure, Retrophin filed a US$65 million lawsuit against him in August 2015, claiming that he had breached his duty of loyalty to the biopharmaceutical company in a long-running dispute over his use of company funds and "committed stock-trading irregularities and other violations of securities rules." The lawsuit alleged that Shkreli had threatened and harassed a former MSMB employee and his family.
Following a request by Senator Bernie Sanders and Representative Elijah Cummings for details of Turing Pharmaceuticals' finances and price-setting practices in September 2015, the company hired four lobbyists from Buchanan, Ingersoll & Rooney with backgrounds in health care legislation and pharmaceutical pricing. In addition to lobbyists, Shkreli hired a crisis public relations firm to help explain the pricing decision.
In September 2015, Shkreli was widely criticized when Turing obtained the manufacturing license for the antiparasitic drug Daraprim and raised its price by a factor of 56 (from US$13.50 to $750 per pill). In 2017, Shkreli was charged and convicted in federal court on two counts of securities fraud and one count of conspiring to commit securities fraud, unrelated to the Daraprim controversy. He was sentenced to seven years in federal prison and up to $7.4 million in fines. In the civil case he was fined a further $64.6 million to be given to victims nationwide.
On September 17, 2015, Dave Muoio of Healio, an in-depth clinical information website for health care specialists, reported on a letter from the Infectious Diseases Society of America and the HIV Medicine Association to executives at Turing, questioning a new pricing for Daraprim. The price of a dose of the drug in the U.S. market increased by a factor of 56 (from US$13.50 to US$750 per pill) overnight.
On October 22, 2015, Mark L. Baum, CEO of Imprimis Pharmaceuticals, announced that his company would provide a combination product containing pyrimethamine (the active ingredient in Daraprim) and leucovorin at "$1-a-pill" as a cheaper and more efficient alternative to Daraprim. This product was intended to be used alongside sulfadiazine in the standard protocol to treat toxoplasmosis typically seen in AIDS patients.
In November 2015, an investor group led by Shkreli acquired a majority stake in KaloBios Pharmaceuticals (OTC Pink Limited: KBIOQ), a biopharmaceutical company based in South San Francisco, CA. Shkreli was named CEO of the company and also planned to continue in the role of CEO of Turing Pharmaceuticals. After his December 2015 arrest, KaloBios Pharmaceuticals terminated him as CEO. On December 29, 2015, KaloBios filed for Chapter 11 bankruptcy. This followed NASDAQ delisting its shares, and the resignation of two directors.
On November 23, 2015, Turing announced that the company would not reduce the list price of Daraprim, but said it planned instead to negotiate volume discounts of up to 50% for hospitals. Turing issued a statement that it was not as important to cut the list price as to reduce the cost to hospitals, where most patients get their initial treatment. The company pledged that no patient needing Daraprim would ever be denied access.
Shkreli won an auction for the Wu-Tang Clan album Once Upon a Time in Shaolin after the single copy of the album was sold via Paddle8 on November 24, 2015, for US$2 million. In October 2016, Shkreli said on his Twitter account that he would release the album for free download if Donald Trump won the 2016 US presidential election and would destroy the album if Hillary Clinton won. He shared the intro and one track, the day after Trump became the president-elect.
A subsequent organized effort called on Turing to return pricing to pre-September levels and to address several matters relating to the needs of patients, an effort that garnered endorsements from more than 160 medical‑specialty and patient‑related organizations (as of December 2015 , 164 organizations from 31 states, the District of Columbia, and Puerto Rico).
On December 17, 2015, Shkreli was arrested by the FBI after a federal indictment in the U.S. District Court for the Eastern District of New York was filed, charging him with securities fraud. The charges were filed after an investigation into his tenure at MSMB Capital Management and Retrophin. U.S. Attorney Robert Capers said, "Shkreli essentially ran his company like a Ponzi scheme where he used each subsequent company to pay off defrauded investors from the prior company."
In 2016, Imprimis Pharmaceuticals introduced a lower cost version of Thiola marketed as a compounded drug.
In January 2016, Fortune estimated the then-32-year-old Shkreli's net worth was at least $45 million but later updated its profile to reflect that "[S]ince this article was published the value of Shkreli's E*Trade account had dropped by more than $40 million." Shkreli leveraged a $4 million E-Trade account for his bail.
On February 4, 2016, Shkreli appeared before the House committee, along with Nancy Retzlaff, the Chief Commercial Officer of Turing, and Howard B. Schiller, the interim CEO of Valeant.
In February 2016, he announced in an offer letter $10 million to become the sole owner of Kanye West's album The Life of Pablo. On February 12, 2016, Shkreli increased his offer for West's The Life of Pablo from $10 million to $15 million.
Shkreli founded Gödel Systems in August 2016 as "a professional software company that aims to be the leading information provider of data, workflow, and communications solutions for financial, law, and scientific professionals." By February 2017, Gödel Systems was looking to raise $1 million through a debt offering, and had raised $50,000 out of the $1 million in debt it began issuing in mid-January 2017, according to regulatory filings. Ralph Holzmann, a former senior engineer at Twitter, is the firm's chief technology officer.
In December 2016, the New York State Department of Taxation and Finance issued a tax warrant for $1.26 million for unpaid taxes owed by Shkreli. After Shkreli made partial payments, the state recouped another $134,500 from Shkreli by seizing and auctioning off an Enigma machine for $65,000, a manuscript signed by Isaac Newton, a letter from Charles Darwin, and another letter written by English mathematician and writer Ada Lovelace.
After Shkreli was imprisoned, Turing changed its name to Vyera in 2017 to avoid negative publicity, and is presently named Phoenixus. In March 2019, The Wall Street Journal reported that Shkreli "steers his old company from prison." Using a contraband cellphone from his prison ward in Fort Dix, New Jersey, Shkreli was effectively directing the renamed firm, and was reported to have terminated the employment of executive Kevin P. Mulleady. After this news was reported in various news outlets, Shkreli was moved to the Metropolitan Detention Center in Brooklyn in advance of a subsequent move to a federal prison in Pennsylvania. He was also facing a Bureau of Prisons investigation into his breaking federal prison rules, since federal inmates are prohibited both from running a business from prison and from possessing cell phones.
On August 4, 2017, the trial jury found Shkreli guilty on two counts of securities fraud and one count of conspiracy to commit securities fraud, and not guilty on five other counts. Shkreli said he was delighted with the outcome and described his prosecution as "a witch hunt of epic proportions".
On September 13, 2017, his bail was revoked following a Facebook post offering $5,000 for a strand of Hillary Clinton's hair which the judge perceived as solicitation to assault, which is not protected under the First Amendment. Shkreli's post was preceded by others that suggested he might have plans to clone Hillary Clinton. Shkreli said that his post was satire, and his lawyer described it as tasteless but not a threat. Shkreli edited the post to add a disclaimer that it was satire, and later said he did this minutes after publication. Shkreli apologized for the post. He was sent to the Metropolitan Detention Center, Brooklyn while awaiting sentencing.
In September 2017, Shkreli attempted to sell Once Upon a Time in Shaolin on eBay, with the winning bid passing US$1 million. He was incarcerated on unrelated fraud counts before the sale could be completed. In March 2018, following Shkreli's conviction for fraud, a federal court seized assets belonging to him worth $7.36 million, including Once Upon a Time in Shaolin.
On March 9, 2018, Shkreli was sentenced to seven years in federal prison. Shkreli appealed the conviction, but in 2019, an appeals court unanimously upheld the jury verdict. The original judgment remained in effect: Shkreli must continue to serve his 7-year sentence and forfeit more than $7.3 million in assets. The panel of judges issued the ruling just three weeks after hearing arguments in the appeal, rather than the normal period of months. The ruling was also unusually short, spanning only seven pages.
Shkreli is federal inmate number 87850-053 and was first held at the Metropolitan Detention Center, Brooklyn, prior to being transferred to federal prison. On March 27, 2018, it was reported that Judge Kiyo Matsumoto agreed to recommend Shkreli serve his prison sentence at the minimum security federal camp at USP Canaan, which he had previously requested. On April 18, 2018, Shkreli was transferred from Metropolitan Detention Center, Brooklyn, to FCI Fort Dix after his request to serve at USP Canaan was denied. As of July 2020, Shkreli is serving his sentence at FCC Allenwood.
On April 23, 2018, it was reported that in court filings New York's attorney general had asked Judge Matsumoto for priority on more than $480,000 in court-ordered forfeitures, to recover additional unpaid taxes and penalties owed to the state, over the federal government's claims for Shkreli's forfeited assets. Prior to Shkreli's conviction, the state of New York had been aggressively attempting to collect the tax debts from Shkreli and had already seized and auctioned off several items including the rare Nazi Enigma code machine.
On September 6, 2019, several media outlets reported that Shkreli had leveled a lawsuit in a Brooklyn court claiming he had been fraudulently persuaded by a former investor in his Elea Capital fund to sign a promissory note that "left him owing $420,000 to the man’s father." Also in 2019, he was transferred to solitary confinement for a time, after prison authorities discovered he was using a contraband smartphone to conduct business from prison.
In January 2020 the FTC filed a case against Vyera "alleging an elaborate anticompetitive scheme to preserve a monopoly for the life-saving drug, Daraprim". A settlement was reached in December 2021. According to AP News, the settlement "requires Vyera and Phoenixus to provide up to $40 million in relief over 10 years to consumers who allegedly were fleeced by their actions and requires them to make Daraprim available to any potential generic competitor at the cost of producing the drug." According to Law360, Kevin Mulleady "agreed to a seven-year ban on working for or holding more than an 8% share in most pharmaceutical companies."
Shkreli made a request for compassionate release on April 22, 2020. In his request, he said he should be allowed to live at his then fiancée's apartment in New York City. Her name was redacted from the copies released to the press but she later identified herself as former Bloomberg reporter Christie Smythe. His request also stated his firm needed him to develop a remedy for COVID-19. In denying the request, Judge Matsumoto characterized Shkreli's request as an instance of "delusional self-aggrandizing behavior." He remains scheduled for release in late 2023.
In November 2020, Eric Dube, Retrophin's new Chief Executive, announced the company would be rebranded as Travere Therapeutics Inc. in an effort to further distance the company from Shkreli, and said the company is no longer working on treatments for the disease from which the company takes its name.
In July 2021, the United States government auctioned off the Wu-Tang Clan album bought by Shkreli for an undisclosed amount to an undisclosed buyer. Jacquelyn M. Kasulis, the acting United States Attorney for the Eastern District of New York, said "Shkreli has been held accountable and paid the price for lying and stealing from investors to enrich himself", and "With today's sale of this one-of-a-kind album, his payment of the forfeiture is now complete."
The Federal Trade Commission and seven states—California, Illinois, New York, North Carolina, Ohio, Pennsylvania, and Virginia—filed a civil lawsuit against Shkreli. In the lawsuit, Judge Denise Cote of the U.S. District Court for the Southern District of New York issued an order on January 14, 2022, that directed Shkreli to return $64.6 million in wrongfully obtained profits (disgorgement); the money is to be distributed to victims nationwide (via the states that were plaintiffs in the case). The court found that Shkreli had violated federal and state law through an anticompetitive scheme to delay "the entry of generic competition for at least eighteen months" and banned Shkreli from the pharmaceutical industry for life.
In early 2016, Shkreli retained criminal defense attorney Benjamin Brafman to defend him. Due to Shkreli's notoriety and overwhelmingly negative public opinion, it was difficult to select an unbiased jury, with potential jurors stating "I'm aware of the defendant and I hate him", "he kind of looks like a dick", and "he disrespected the Wu-Tang Clan". At his 2017 trial, Shkreli said that none of his investors actually lost money (some actually turned a profit) and thus his actions did not constitute a crime. Shkreli's frequent criticisms of the federal prosecutors in New York's Eastern District, whom he called "junior varsity" compared to their counterparts in the Southern District across the East River, both on his Facebook streaming video feed and in the hallways of the courthouse, led those prosecutors to request that judge Kiyo A. Matsumoto issue a gag order to prevent what they called a "campaign of disruption". Brafman said in response that his client was responding to baiting from the media and was also suffering from extreme anxiety because of his situation. Matsumoto ordered Shkreli not to speak with reporters, either in the courthouse or its immediate vicinity.