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Martin Shkreli sentenced to seven years in prison for defrauding investors

Former drug company executive Martin Shkreli, better known as Pharma Bro, was sentenced on March 9 to seven years in prison for defrauding investors. (Video: Reuters)

NEW YORK — A federal judge on Friday sentenced Martin Shkreli, the notorious former hedge fund manager, to seven years in prison for defrauding his investors of $10 million.

In imposing the sentence, U.S. District Judge Kiyo Matsumoto roughly split the difference between the 15 years prosecutors asked for and the up to 18 months sought by Shkreli’s defense team. Shkreli, 34, who delivered a tearful speech to Matsumoto apologizing for his conduct and pleading for leniency, did not react to the sentence.

A complicated picture of Shkreli emerged from the trial, said Matsumoto, who said the case had given her a case of insomnia. “It is more than clear that Mr. Shkreli is a gifted individual with a passion for science,” she said. But his crimes are serious and it is important to send a message that such fraud should be not tolerated, she said. “White collar offenders like Mr. Shkreli use their intelligence and acumen to elude detection,” she said.

Shkreli, best known for raising the price of an AIDS drug by 5,000 percent when he was chief executive of Turing Pharmaceuticals, was convicted last August of defrauding the investors in his hedge funds, MSMB Capital and MSMB Healthcare. Shkreli lied to obtain investors’ money and then didn’t tell them when he made a bad stock bet that led to massive losses, prosecutors argued. Instead, they said, he raised more money to pay off other investors, or took money and stock from Retrophin, a drug company he founded.

[What happened to the $750 pill that catapulted Martin Shkreli to infamy]

“For years, Shkreli told lie after lie in order to steal his investors’ money, manipulate the stock market and enrich himself,” said U.S. attorney Richard P. Donoghue. “He will now pay the price for repeatedly violating the trust placed in him by his investors, his employees and the public.”

In pleading for a short sentence, Shkreli’s defense attorney, Benjamin Brafman, portrayed Shkreli as a misunderstood genius suffering from depression and anxiety conditions. Shkreli had not defrauded vulnerable people or spent their money on luxury homes or cars, he said. Instead, his victims were rich, sophisticated investors, who ultimately made a healthy profit, he said.

“I am disappointed,” Brafman said outside the Brooklyn courthouse. “I think it is hard to claim victory when someone like Martin Shkreli is going to jail. … But Martin’s fine and he will be fine.”

Martin Shkreli, a former pharmaceutical CEO, spoke to reporters after he was convicted of three counts of securities fraud on Aug. 4. (Video: Reuters)

Usually boisterous and defiant, Shkreli spent most of the three-hour hearing, dressed in a dark prison uniform and black glasses, staring down into his lap. When he finally had a chance to address the judge, he cried as he explained that “poor judgment led me here. … The only person to blame for me being here is me.”

“I am not the same person I was during the MSMB era,” he said referring to his now dissolved hedge funds. “I apologize to all of the investors. I am terribly sorry I lost your trust.” At one point during his statement, Shkreli was handed a box of Kleenex.

Shkreli described the six months he has already spent in Metropolitan Detention Center in Brooklyn as “heartbreaking.”  Shkreli said he has counseled fellow inmates and taught classes on finance and mathematics. Shkreli’s attorney, Brafman, repeatedly noted that the detention center was not a low-security camp and that Shkreli was surrounded by violent inmates and subject to lock downs. “It is one thing to read about violence. It’s one thing to see it,” Brafman said.

“This is an interesting man with great potential,” said Brafman, who told the judge he had his “begging voice” on. But, he acknowledged, it is not difficult to understand people’s frustration’s with Shkreli. “There are times when I want to hold him and hug him,” he said. “And there are times when I want to punch him in the face.”

“He is a good person, judge, not a perfect person.”

Prosecutors were dismissive of Shkreli’s pleas for leniency. Shkreli doesn’t deserve a stiff sentence for his public persona as “the most hated man in America,” but because he was found guilty of serious crimes, said Assistant U.S. attorney Jacquelyn Kasulis. “This was not an isolated lapse in judgment,” said Kasulis. “This is four different fraud schemes over five years. … He has no respect for the law.”

“We are not saying he is a bad person with a capital b. But these are not victimless crimes. He stole from his investors.” He may not have spent the money buying luxury items, but he did use it for his person benefit — to promote the false image of himself as a successful businessman, she said. “He wants everyone to believe he is a genius. That image is everything to him. … He is no better than any other fraudster.”

“The public needs to be protected from Martin Shkreli. He is dangerous,” said Kasulis. “He does not deserve special treatment.”

In addition to his seven-year sentence, Matsumoto has already ordered Shkreli to forfeit more than $7 million, including his $5 million bond, and potentially, the only known copy of the Wu-Tang Clan’s “Once Upon a Time in Shaolin” and a Picasso painting. She estimated his personal net worth at about $27 million. Shkreli will get credit for six months he has already spent in jail awaiting his sentencing. Matsumoto also sentenced him to three years of probation after his release and ordered him to pay an additional $75,000 fine.

Shkreli received far less than the 20 years he faced under the sentencing guidelines. He may also still appeal his conviction and his attorney, Brafman, said that with “good time” he would be likely serve less than the total seven years.

In the two years since FBI agents ushered him from his Manhattan apartment, Shkreli has gone from a rising star in the hedge fund world to Wall Street bad boy. He has smirked his way through interviews and congressional appearances, and beefed with rappers, reporters and almost anyone else in his path. He was repeatedly kicked off Twitter. There was a satirical musical about him, “Pharma Bro: An American Douchical!” (it received good reviews) and an episode of CNBC’s “American Greed” dedicated to his troubles.

His antics continued during the trial, despite warnings from his attorneys. Early in the trial, Matsumoto chastised Shkreli for speaking with reporters where jurors might hear him after he strolled into a room full of media and called the prosecutors “junior varsity.” After his conviction, Matsumoto revoked his $5 million bailed after he offered his Facebook followers money to grab a strand of Hillary Clinton’s hair.

“What no doubt increased Mr. Shkreli’s sentence was his egregious and reckless conduct before, during and after trial,” said David Chase, a former prosecutor for the Securities and Exchange Commission. “He either could not control his impulses, did not care or never fully understood the depth of consequences his actions would ultimately bring about.

Matsumoto said the case was not “about Mr. Shkreli’s self-cultivated public persona … nor his controversial statements about politics or culture.” The trial was also not about addressing the issue of rising drug prices, she said, referring to Daraprim — a 62-year-old drug primarily used to treat newborns and HIV patients — which Shkreli raised the price of to $750 a pill from $13.50. “That is Congress’ job.”

Matsumoto said she had taken all of the evidence into consideration, including Shkreli’s upbring. His father, who sat on the front row of the courtroom throughout the more than four-week trial, looked at the floor as Matsumoto said that he had been physically and emotionally abusive and that Shkreli has received little support from his parents.

“Although he has been convicted of fraud, serious crimes, and he acted for pecuniary gain, he’s also a personally generous, giving and kind individual,” Matsumoto said. Still, she noted, that in a January email conversation, Shkreli allegedly wrote “f‑‑‑ the feds” and in other exchanges downplayed the seriousness of having to forfeit millions of dollars because of his conviction. “Those emails call into question the sincerity of [your] remorse,” she said.

“I do wish you well,” Matsumoto said to Shkreli at the end of the hearing, then encouraged him to seek mental health treatment while incarcerated. “Thank you very much, your honor,” Shkreli responded before being led out of the courtroom.

Read more:

The fascinating legal argument at the heart of the Martin Shkreli ‘Pharma Bro’ trial

Before becoming ‘Pharma Bro,’ Martin Shkreli was a sought-after Wall Street insider, testimony shows