Ponzi scheme accused 'made $138m bogus claim'

Martin Shkreli (left) leaving the court with his attorney Benjamin Brafman in New York on Monday. Prosecutors say one record showed that Shkreli moved more than US$1.3 million from his start-up drug company, Retrophin, to his personal account.
Martin Shkreli (left) leaving the court with his attorney Benjamin Brafman in New York on Monday. Prosecutors say one record showed that Shkreli moved more than US$1.3 million from his start-up drug company, Retrophin, to his personal account.PHOTO: BLOOMBERG

NEW YORK • Martin Shkreli boasted to potential clients that he was managing as much as US$100 million (S$138 million) in hedge fund investments.

In reality, prosecutors say, the net asset value of his fund MSMB Capital at one point fell to minus 33 US cents, and never held more than US$1.2 million.

He is now on trial, accused of operating his businesses as Ponzi schemes. Shkreli gained international notoriety for raising the price of a potentially life-saving drug by 5,000 per cent.

Prosecutors on Tuesday showed jurors a series of transactions between Shkreli's hedge fund, brokerage accounts, his start-up drug company and his personal accounts to back their allegation that the former pharmaceutical executive was duping investors with bogus claims about his holdings.

The records also showed that within days of investors putting money into Shkreli's hedge fund, he repeatedly shuffled it around. The investments would sometimes show up as transfers to Retrophin, the pharmaceutical start-up he created after closing his hedge fund, according to the records.

On the same day that an investor sent a US$850,000 wire transfer to Shkreli's hedge fund on Feb 3, 2012, US$900,000 was transferred from the fund's accounts to Retrophin, according to the records.

Prosecutors say he took investors' money from the hedge fund to start Retrophin without their authorisation, and later used US$11 million from the drug company to repay the investors.

Jurors saw that after Shkreli made a disastrous trade on Feb 1, 2011, his hedge fund's net asset value also plummeted, from a high of US$1.1 million the day before to just US$55,786 on Feb 28, recording a balance of minus 33 cents by July of that year.

One record showed that Shkreli also moved more than US$1.3 million from Retrophin to his personal account. Shkreli also charged to Retrophin's credit card US$10,000 for the purchase of tickets to a Jay-Z benefit concert at Carnegie Hall in February 2012, according to records presented by prosecutors.

The trial continues.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on July 13, 2017, with the headline 'Ponzi scheme accused 'made $138m bogus claim''. Print Edition | Subscribe