Five Defendants Arrested for Engaging in Sophisticated ATM Skimming Schemes Involving Theft of Account Information and PIN Numbers from Unsuspecting Bank Customers
Earlier today, in federal court in Brooklyn, Martin Shkreli was sentenced by United States District Judge Kiyo A. Matsumoto of the Eastern District of New York to seven years’ imprisonment for committing securities fraud and securities fraud conspiracy, to be followed by three years’ supervised release. The Court also ordered Shkreli to pay a $75,000 fine and $7.3 million in forfeiture. Earlier this week, the Court signed a Preliminary Order of Forfeiture, which will allow the government to seize substitute assets to satisfy the forfeiture judgment if necessary, including $5 million held in an account that had been used to secure Shkreli’s bail, the “Once Upon A Time in Shaolin” album by the Wu Tang Clan, the “Tha Carter V” album by Lil Wayne, and a Picasso painting.
Shkreli was the founder and managing member of hedge funds MSMB Capital Management LP (MSMB Capital) and MSMB Healthcare Management LP (MSMB Healthcare) and the former Chief Executive Officer of Retrophin Inc. (Retrophin), a biopharmaceutical company that trades under the ticker symbol RTRX. He was convicted by a federal jury in August 2017, following a six-week trial, of two counts of securities fraud and one count of securities fraud conspiracy. In September 2017, the Court found that Shkreli had violated his bail conditions by making online threats against former U.S. Secretary of State Hillary Clinton, and remanded him into custody at the Metropolitan Detention Center, where he is currently incarcerated.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), announced the sentence.
“For years, Shkreli told lie after lie in order to steal his investors’ money, manipulate the stock market and enrich himself,” stated United States Attorney Donoghue. “He will now pay the price for repeatedly violating the trust placed in him by his investors, his employees and the public. It remains a priority of this Office, together with our law enforcement partners, to identify, investigate and bring to justice criminals like Shkreli.” Mr. Donoghue thanked the Securities and Exchange Commission, New York Regional Office (SEC), and the Financial Industry Regulatory Authority, Inc., Criminal Prosecution Assistance Group (FINRA CPAG), for their significant cooperation and assistance in this case.
“Martin Shkreli was notoriously ambitious, seeking to enrich himself at the expense of those who unwittingly invested in his lies,” stated FBI Assistant Director-in-Charge Sweeney. “His crimes have been laid bare for all to see, and his intentions, which have been proven true beyond a reasonable doubt, resulted in this sentencing today. While we can now close this chapter of our investigation, our efforts continue to uncover and expose all crimes of this nature that claim innocent victims and defraud our financial markets.”
The evidence at trial established that Shkreli, who was convicted on three counts of the superseding indictment, alleging securities fraud (Counts Three and Six) and securities fraud conspiracy (Count Eight), executed three schemes to defraud investors:
As charged in Count Three, between 2009 and 2014, Shkreli used false representations and omissions to induce investors to invest more than $3 million in MSMB Capital, a hedge fund he founded in 2009. Subsequently, following trading losses, Shkreli sent fabricated performance updates to investors, boasting that the fund had made big profits when, in fact, it had sustained substantial losses. In addition, Shkreli withdrew more than $200,000 from MSMB Capital, far more than the one percent management fee and the 20 percent net profit incentive allocation permitted by the fund’s partnership agreement.
As charged in Count Six, between 2011 and 2014, Shkreli used false representations and omissions to induce investors to invest more than $5 million in MSMB Healthcare, a hedge fund founded by Shkreli after the implosion of MSMB Capital. Additionally, Shkreli used MSMB Healthcare assets to pay obligations that were not MSMB Healthcare’s responsibility. As with the MSMB Capital scheme, Shkreli withdrew more from MSMB Healthcare than the one percent management fee and the 20 percent net profit incentive allocation permitted by the fund’s partnership agreement.
As charged in Count Eight, between 2012 and 2014, Shkreli and his co-defendant Evan Greebel, an attorney who served as outside counsel to Retrophin, engaged in a scheme to defraud investors and potential investors in Retrophin by attempting to illegally control the price and trading volume of Retrophin’s stock. Greebel and Shkreli executed this scheme by, among other things, concealing Shkreli’s beneficial ownership and control of the majority of Retrophin’s free-trading shares. Greebel and Shkreli recruited associates of Shkreli to be nominee shareholders for the majority of Retrophin’s free-trading shares, and they also filed a false document with government regulators to hide the fact that Shkreli controlled those shares. Greebel and Shkreli prevented the nominee shareholders from selling these shares, and also directed that some of the shares be used to settle liabilities owed by the MSMB hedge funds and Shkreli.
In addition, Judge Matsumoto ruled in a decision issued on February 26, 2018 in connection with the sentencing, that the government had also proven by a preponderance of the evidence that Shkreli had engaged in a fourth fraud scheme, the wire fraud conspiracy charged in Count Seven of the superseding indictment. Specifically, the evidence at trial established by a preponderance that between 2011 and 2014, Shkreli conspired with Greebel and others in a scheme to misappropriate Retrophin’s assets in order to pay off defrauded investors in MSMB Capital and MSMB Healthcare. As part of this scheme, Shkreli and Greebel caused Retrophin to enter into so-called “settlement” agreements with certain defrauded MSMB Capital and MSMB Healthcare investors, which caused Retrophin to reimburse those investors more than $2 million in cash and stock for their lost investments in Shkreli’s hedge funds even though Retrophin was not responsible for those losses. Shkreli and Greebel also arranged for certain other defrauded investors to enter into sham consulting agreements with Retrophin as a means to settle liabilities owed by Shkreli and the hedge funds. In total, the settlement and sham consulting agreements caused losses to Retrophin of over $10 million.
In a separate trial in December 2017, Greebel was convicted of wire fraud conspiracy (Count Seven) and securities fraud conspiracy (Count Eight), following an 11-week trial. He is awaiting sentencing.
The government’s case is being handled by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys Jacquelyn M. Kasulis, Alixandra E. Smith and G. Karthik Srinivasan are in charge of the prosecution, with assistance from Assistant United States Attorneys Laura Mantell and Claire Kedeshian of the Office’s Asset Forfeiture Section.
Manhattan, New York
Scarsdale, New York
E.D.N.Y. Docket No. 15-CR-637 (KAM)
United States Attorney’s Office