Shkreli Arrested on Securities Fraud Charge

AP photo by Craig Ruttle)

The bad-boy pharma executive Martin Shkreli ( has been arrested—not for raising the prices of rare disease drugs like Daraprim—but for allegations he defrauded investors at another pharma company, Retrophin, Inc.

Shkreli is chief executive of Turing Pharmaceuticals, the company he founded and then sparked outrage after he raised the price of its newly acquired drug for toxoplasmosis, a parasitic illness that can be fatal for people with AIDS and babies whose mothers contracted it during pregnancy. At Shkreli's direction, the cost of a Daraprim pill jumped to $750 from $13.50.

The security fraud charges, due to be spelled out in US Federal Court in Brooklyn later today, involve allegations that he raided the assets of Retrophin to recoup millions of dollars in losses his hedge fund MSMB Capital Management had incurred.

The investigation dates back to January.

Shkreli closed the 3-year-old MSMB hedge fund in 2012 and formed Retrophin, where he used his controversial strategy of buying up the rights to older cheap drugs for orphan diseases then jacking up their prices. Daraprim has been available for 62 years.

The board of Retrophin fired him, not for using that strategy but for allegedly using company assets to repay MSMB investors. Several individuals who lost money have filed a civil suit against Shkreli, one which preceded the federal charges and arrest.

Shkreli has denied any wrong-doing.