Shkreli, best known for raising the price of Daraprim — a 62-year-old drug primarily used to treat newborns and HIV patients — from $13.50 to $750 a pill, went on trial Wednesday for allegedly defrauding investors. After struggling for more than two days to seat a jury, Shkreli’s attorney spoke directly to the Brooklyn native’s reputation as the worst of Wall Street.
“As Lady Gaga would say: He was born this way,” Brafman said.
Federal prosecutors alleged that for five years Shkreli lied to investors in two hedge funds and the biopharmaceutical company Retrophin, all of which he founded. After losing money on stock bets he made through one hedge fund, Shkreli allegedly started another and used his new investors’ money to pay off those who had lost money on the first fund. Then, as pressure was building, Shkreli started Retrophin, which was publicly traded, and used cash and stock from that company to settle with other disgruntled investors, prosecutors contend.
Shkreli repeatedly lied to investors, shareholders and the board of Retrophin to cover up his losses, prosecutors said Wednesday.
“Telling lies on top of lies — this is what that man, Martin Shkreli, did for years,” said G. Karthik Srinivasan, an assistant U.S. attorney in the Eastern District Court in Brooklyn.
Shkreli told investors that he had a successful track record as a hedge-fund manager and sent them false performance reports and backdated documents to cover up his losses, Srinivasan said. He told potential investors that his hedge funds had millions more than they did, he said.
“That was a lie,” Srinivasan said.
But he was repeatedly able to persuade investors to give him money, he said. “He did this by convincing them that he was a Wall Street genius. In reality, he was just a con man.”
In the end, Shkreli defrauded investors and Retrophin shareholders out of more than $10 million, Srinivasan said.
But Shkreli’s attorney dismissed the notion that Shkreli’s investors were victims. “The people who invested . . . are high rollers,” Brafman said. “All of these people are worth tens of millions of dollars. They were betting on Martin Shkreli’s genius.” Shkreli, he said, had taught himself biology and DNA sequencing, helping to turn Retrophin into a nearly $1 billion company.
One investor continued to invest with Shkreli even after a meeting in which Shkreli was dressed in fluffy slippers, he said: “They were not being asked to invest rent money.” Another investor, he said, invested $100,000 and made $400,000. And Retrophin board members, who are also expected to testify, were “thugs” who manipulated Shkreli, he said.
Shkreli’s trial has garnered national attention as much for the charges he faces — he could be sentenced to more than 20 years in prison — as for his boisterous personality. When his decision to increase the price of Daraprim 5,000 percent outraged critics, Shkreli defended the move and said he could have increased it more. Even after being indicted, he struggled to take his attorney’s advice to stay quiet, continuing to battle critics on Twitter and hold hours-long talks about his life on YouTube.
While the prosecutor repeatedly called him a liar, Shkreli took notes and then smiled at one point.
The colorful opening statements kick-started a trial that got off to a slow start as lawyers struggled to seat an impartial jury. Over three days, more than 250 prospective candidates were dismissed many because of their views of the defendant.
One prospective juror said Wednesday: “The only thing I would be impartial about is which prison he goes to.” Another said he didn’t like Shkreli and didn’t understand “why someone would take a medication that people need and jack up the price.” The potential juror’s voice was shaking as he turned to Shkreli and raised his fist. “I would just go over there . . . is he just stupid or crazy?” the potential juror said.
“He is probably guilty and there is no way I can let him slide,” a third potential juror said. He then added that he didn’t like that Shkreli had been disrespectful to the Wu Tang Clan. Shkreli purchased the only known copy of an album by the rap group for $2 million and wouldn’t release parts of the album until Donald Trump was elected president.
In defending Shkreli, Brafman echoed the argument Shkreli himself offered in defending his price hike: He might be obnoxious. He might be outrageous. But what he did was not illegal. It was capitalism at work.
Brafman appealed to the egos of the seven women and five men chosen for the jury: They had survived more than two days of intense questions and were “savvy New Yorkers” and would be able to use their “street smarts” to see that Shkreli is not guilty.
“You can’t convict him for the people skills he lacked,” he said. “If you want to call him names, call him names — just don’t call him guilty.”
When Brafman finished speaking, Shkreli stood and hugged him.