Former Hedge Fund Manager Gets Split Jury Verdict
Former hedge fund manager and pharmaceutical executive Martin Shkreli was acquitted on five counts and convicted on three others under an indictment centered on conspiracy and securities fraud charges tied to three firms. U.S. v. Shkreli, No. 15-cr-637 (E.D.N.Y.). The verdict came after a six week jury trial.
In 2015 the U.S. Attorney’s Office and the SEC filed parallel actions against Mr. Shkreli. Also named in the SEC case were attorney Evan Greebel, MSMB Capital Management LLC and MSMB Healthcare Management LLC. SEC v. Shkreli, Civil Action No. 15-cv-07175 (S.D.N.Y. Filed December 17, 2015)
Mr. Shkreli was the managing partner and portfolio manager for MSMB and MSBM Healthcare and the managing member of MSB Adviser and MSB Healthcare Adviser, according to the SEC. He is also the founder of Retrophin LLC, a publically traded pharmaceuticals company. Mr. Greebel was outside counsel to Retrophin. Mr. Shkreli, through, MSMB Adviser or MSMB Healthcare Adviser, was alleged to have misappropriated investor funds from MSMB, made material misrepresentations to investors, sold short over 32 million shares of a company in MSMB’s account and represented to the executing broker that MSMB had located sources from which to borrow the shares. He was also alleged to have misappropriated about $900,000 from MSMB Healthcare to fund the settlement of an arbitration with a broker.
Mr. Greebel was alleged to have assisted Mr. Shkreli, according to the SEC, with fraudulently inducing Retrophin to issue stock and make cash payments to disgruntled investors of the hedge funds. The criminal indictment contained eight counts, three for conspiracy to commit securities fraud, three for conspiracy to commit wire fraud and two for securities fraud. The SEC complaint alleges violations of Securities Act Sections 17(a)(1) and (2), Exchange Act Section 10(b) and Advisers Act Sections 206(1), 206(2) and 206(4).
The jury returned verdicts of not guilty on: count 1, conspiracy to commit securities fraud in connection with MSMB Capital; count 2, conspiracy to commit wire fraud in connection with MSMB capital; count 4, conspiracy to commit securities fraud in connection with MSMB Healthcare; count 5, conspiracy to commit wire fraud in connection with MSMB Healthcare; and count 7, conspiracy to commit wire fraud in connection with Retrophin. Mr. Shkreli was found guilty on count 3, securities fraud in connection with MSMB Capital; count 6, securities fraud in connection with MSMB Healthcare; and count 8, conspiracy to commit securities fraud in connection with Retrophin. He was thus found not guilty on counts related to each of the three firms – MSMB Capital, MSMB Healthcare and Retrophin and guilty on counts related to each. The case will proceed to post trial motions.