Drug-Price Gouging Hedge Fund Guy May Be Even Worse Than You Thought, SEC Documents Show

Martin Shkreli is part of a federal probe involving a biotech company that fired him last year.

Martin Shkreli, the pharmaceutical executive who jacked up the price of a drug mainly used by cancer and HIV-AIDS patients by about 8 gazillion percent, is part of a criminal investigation involving a company he founded, according to documents on file with the Securities and Exchange Commission.

A federal prosecutor this year subpoenaed Retrophin Inc., looking for information on the company's dealings with Shkreli, who founded the biotechnology company in 2011 and ran it until he was fired last year. Shkreli, 32, currently is CEO of Turing Pharmaceuticals.

"In January 2015, the Company received a subpoena relating to a criminal investigation by the U.S. Attorney for the Eastern District of New York. The subpoena requests information regarding, among other things, the Company’s relationship with the MS MB Entities and Mr. Shkreli," according to the company filing. MSMB Capital Management is the name of the hedge fund Shkreli started in his 20s.

Neither Shkreli nor Turing Pharmaceuticals returned requests for comment. The U.S. Attorney for the Eastern District of New York declined to comment through a spokesman.

The same SEC filing says that Shkreli confessed he owed his former employer more than a half-million dollars for "short-swing profits" he accrued -- which means he bought and sold stock with inside information within a six-month window.

Doing so is not necessarily illegal, but profits must be turned over to the company. "In December 2014, Mr. Shkreli filed an answer to the operative complaint, in which he, among other things, admitted to owing the Company over $600,000 in short-swing profits," the filing notes.

Shkreli also faces accusations he sold off Retrophin stock while urging others to buy more of it, and that he anonymously criticized companies online in order to drive down their share prices, according to SEC documents.

Shkreli and Turing Pharmaceuticals attracted widespread negative attention this week after The New York Times reported the firm hiked the price of Daraprim from $13.50 per pill to $750 in a single day. The medicine is more than 60 years old, but has no generic competition, mostly because so few patients need it. Those who do must take the drug to fend off a deadly infection called toxoplasmosis, which afflicts people with AIDS, babies born with HIV, and those with some kinds of cancers. According to Slate, Retrophin implemented a similar price increase for a kidney medicine when Shkreli ran the company.

The leading Democratic presidential candidates, Sen. Bernie Sanders (I-Vt.) and former Secretary of State Hillary Clinton, both condemned the drug price hike. Clinton dubbed it "price gouging" and cited it as a justification for a slate of proposals to reduce drug costs that she unveiled Tuesday.

Shkreli responded to criticisms in a series of television appearances Tuesday, saying the price increase is "altruistic" because it would enable his company to research new drugs. The day before, he responded to similar questions from John Carroll, editor of the newsletter Fierce Biotech, by calling the journalist a "moron."

The Pharmaceutical Research and Manufacturers of America, an industry trade group, on Tuesday sought to distance itself from Shkreli, Turing Pharmaceuticals and the price backlash. The organization said on Twitter that Shkreli's firm "does not represent the values" of its members.

UPDATE: 7:35 p.m. -- Shkreli said Tuesday that Turing would lower the price of the drug an unspecified amount "in response to the anger that was felt by people."

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