Investing

SEC Charges Hedge Fund Manager Martin Shkreli With Fraud

Wikimedia Commons

The U.S. Securities and Exchange Commission (SEC) has charged Martin Shkreli, former CEO of pharmaceutical company Retrophin, with committing fraud during a five-year period when he also was working as a hedge fund manager.

The agency alleges that Shkreli misappropriated money from two hedge funds he founded and made material misrepresentations to investors, among other widespread misconduct. The SEC also charged Retrophin’s former outside counsel and corporate secretary Evan Greebel with aiding and abetting certain aspects of Shkreli’s alleged fraud.

Shkreli was portfolio manager for the hedge fund MSMB Capital Management from October 2009 to March 2014, where he misappropriated about $120,000 from MSMB from October 2009 to July 2011 to unlawfully pay for food, clothing, medical expenses, clothing, office rent and cash withdrawals.

Apart from this, Shkreli misled investors and prospective investors in MSMB about the fund’s size and performance, claiming for example in July 2010 to have “returned +35.77% since inception on 11/1/2009.” In fact, the fund generated losses of about 18%.

From September 2013 to March 2014, Shkreli, with assistance from Greebel, fraudulently induced Retrophin to issue stock and make cash payments to certain disgruntled investors in Shkreli’s hedge funds who were threatening legal action.

Andrew J. Ceresney, director of the SEC’s Division of Enforcement, commented:

Over a five-year period, Shkreli is alleged to have perpetrated a series of frauds on investors in his hedge funds and Retrophin’s shareholders in order to cover up his poor trading decisions.

Andrew M. Calamari, director of the SEC’s New York Regional Office, added:

Greebel’s alleged role in facilitating Shkreli’s fraud on Retrophin’s shareholders not only crossed legal boundaries but also grossly violated both his professional and ethical obligations.

In a parallel action, the U.S. Attorney’s Office for the Eastern District of New York Thursday announced criminal charges against Shkreli and Greebel.

Take Charge of Your Retirement In Just A Few Minutes (Sponsor)

Retirement planning doesn’t have to feel overwhelming. The key is finding expert guidance—and SmartAsset’s simple quiz makes it easier than ever for you to connect with a vetted financial advisor.

Here’s how it works:

  1. Answer a Few Simple Questions. Tell us a bit about your goals and preferences—it only takes a few minutes!
  2. Get Matched with Vetted Advisors Our smart tool matches you with up to three pre-screened, vetted advisors who serve your area and are held to a fiduciary standard to act in your best interests. Click here to begin
  3. Choose Your  Fit Review their profiles, schedule an introductory call (or meet in person), and select the advisor who feel is right for you.

Why wait? Start building the retirement you’ve always dreamed of. Click here to get started today!

 

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.

AI Portfolio

Discover Our Top AI Stocks

Our expert who first called NVIDIA in 2009 is predicting 2025 will see a historic AI breakthrough.

You can follow him investing $500,000 of his own money on our top AI stocks for free.