Thursday, December 17, 2015

[U] Bad Boy Pharma CEO Flames Out: The FBI Has Taken Martin Shkreli Into Custody, In Manhattan -- On 2011 to 2014 Era Felony Securities And Wire Fraud Charges

UDPATED: The US Attorneys' office has indicated that this will likely be just the beginning of the charges they ultimately expect to file against Mr. Shkreli. The current felony charges would allow imprisonment, if he were convicted, for up to 20 years. The DoJ additionally seeks here to debar him from serving as a public company officer, for life -- and the FBI agent-in-charge has coyly said the Bureau is "looking into" where he got the funds to purportedly buy the Wu Tang album. Upshot: if I currently owned shares of KaloBios, I'd be concerned that the recent run up was. . . illusory. Without the near-term ability to execute on any of the various purported Shkreli proposals, KaloBios may be right back where it was -- teetering on a delisting initiative at NASDAQ, and soon. As it is, KaloBios is well overdue for filing its SEC Form 10-Q for the third quater of 2015 -- causing NASDAQ to halt trading in the stock, pending more current information. End, update.

Back when he was chief investment officer, in 2011, at MSMB Capital, he made headlines -- and enemies. Same was true at Retrophin, shortly thereafter.

This morning the FBI arrested him, apparently related to alleged crimes at the two earlier companies. KaloBios just lost half its value on the NASDAQ -- in pre-market trading, on the news. More as the details emerge later today obviously including a better graphic, but apparently his stints at Turing and KaloBios are not part of these current charges. [Of course, an FBI arrest does not, of itself, imply guilt.] From the New York Times, then:

. . . .The federal charges are believed to parallel a civil lawsuit filed against Mr. Shkreli in August by Retrophin, whose board ousted Mr. Shkreli as chief executive in September 2014. In its lawsuit, Retrophin accused Mr. Shkreli of having used the company as a kind of personal piggy bank to help pay off upset investors who lost money at the hedge fund MSMB. Among the ways he did this, the lawsuit says, was by hiring some of these investors as sham consultants to Retrophin.

“Shkreli was the paradigm faithless servant,” Retrophin’s complaint, filed in in Manhattan, said. “Starting sometime in early 2012, and continuing until he left the company, Shkreli used his control over Retrophin to enrich himself and to pay off claims of MSMB investors (who he had defrauded). . . .”

Evan L. Greebel, a corporate lawyer at Kaye Scholer who has worked with Mr. Shkreli, was also arrested on Thursday morning. A spokesman for the firm declined to comment. . . .

That his outside lawyer, while he was at Retrophin, was also arrested this morning, almost certainly points to securities fraud as the central gravamen of the charges.

UPDATED: Here is a much more comprehensive story on it all, from the Gray Lady, filed late in the day today, on his alleged two man crime spree. It is now likely that he will not hold on to that Wu Tang album, if he in fact ever owned it. It is also unlikely that he will get to abuse the priority review voucher system at FDA, via his questionable efforts on a Chagas disease treatment, through his purported control of KaloBios. Should the DoJ prevail, all of his own personal assets will be forefeit, to pay the defrauded victims of his crimes (at this point, only alleged crimes). So the worm turns. Onward -- and couldn't happen to a nicer guy. . . . More -- late in the day.

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