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Pharmaceutical CEO Martin Shkreli Arrested On Securities Fraud Charges

AUDIE CORNISH, HOST:

The drug company executive who was at the center of a price-gouging controversy this fall is under arrest today. Martin Shkreli is charged with securities and wire fraud. The 32-year-old pleaded not guilty and was released after meeting a $5 million bail requirement. NPR's Jim Zarroli reports.

JIM ZARROLI, BYLINE: The charges announced today have nothing to do with the pricing scandal that earned Shkreli so much notoriety. Instead, U.S. officials say he cheated investors in a pair of hedge funds he ran, lying to them about the assets he had under management. In one case, he allegedly told a major investor that his fund had $35 million when it only had $700. Here was U.S. attorney Robert Capers at a press conference in New York today.

(SOUNDBITE OF PRESS CONFERENCE)

ROBERT CAPERS: Shkreli essentially ran his companies like a Ponzi scheme, where he used each subsequent company to pay off the frauded investors from the prior company.

ZARROLI: At one point, Shkreli became chief executive of a publicly traded biotech company called Retrophin, and officials say he used assets from that company to prop up his money-losing hedge funds. They say he did this by giving his hedge fund investors fake consulting contracts at Retrophin.

U.S. officials say Shkreli was able to get away with the scheme with the help of an attorney, Evan Greebel, who was also charged today with fraud. But Shkreli was eventually fired by Retrophin's board. He has denied any wrongdoing in the past. Shkreli went on to found Turing Pharmaceuticals, which became infamous for buying the rights to a life-saving drug called Daraprim and then raising the price from $13.50 to $750 a dose. He was widely reviled, but Shkreli defended the move in an interview on CNBC.

(SOUNDBITE OF ARCHIVED RECORDING)

MARTIN SHKRELI: We paid a very, very large amount to buy an unprofitable medicine. We can't continue to make - to lose money on the drug at that price. So we took it to a price where we can make a comfortable profit but not any kind of ridiculous profit.

ZARROLI: As pressure built, Shkreli said he would lower the price by giving volume discounts to hospitals. Now with today's indictment, Shkreli faces much bigger problems. Tom Gorman is a partner at Dorsey and Whitney and formerly worked at the SEC.

TOM GORMAN: This is more than just mismanagement and greed. If you're really stealing the investor's money, this is the kind of case that could end you up in prison.

ZARROLI: Shkreli made headlines again this fall when he had the winning bid in an auction of the only copy of a Wu-Tang Clan album. He paid $2 million. Gorman says if Shkreli is convicted and doesn't have enough money to pay restitution and fines, he may have to sell off assets, and that could include the record album. Jim Zarroli, NPR News, New York.

ARI SHAPIRO, HOST:

One more thing about that Wu-Tang Clan album. It's called "Once Upon A Time In Shaolin." And some people wondered if investigators seized it when they arrested Shkreli, and if so, then maybe - just maybe - the world would get to hear it.

CORNISH: Well, wonder no more. This afternoon, the FBI's field office in New York tweeted this out, quote, "breaking no seizure warrant at the arrest of Martin Shkreli today, which means we didn't seize the Wu-Tang Clan album." Well, there you go. Transcript provided by NPR, Copyright NPR.