United States Attorney Robert L.

Capers
Eastern District of New York
FOR IMMEDIATE RELEASE
THURSDAY, DECEMBER 17, 2015
WWW.USDOJ.GOV/USAO/NYE

CONTACT: NELLIN MCINTOSH

OFFICE: (718) 254-6323

PRESS RELEASE
FORMER HEDGE FUND MANAGER AND NEW YORK ATTORNEY
INDICTED IN MULTIMILLION DOLLAR FRAUD SCHEME
Martin Shkreli Charged With Defrauding Former Hedge Funds Investors
And Then Misappropriating More Than $11 Million In Assets From
Publicly Traded Retrophin Inc. (RTRX) To Pay Back Defrauded Investors
BROOKLYN, N.Y. A seven-count indictment was unsealed this morning in federal court
in Brooklyn, New York, charging Martin Shkreli, the founder and managing member of hedge
funds MSMB Capital Management LP (MSMB Capital) and MSMB Healthcare Management LP
(MSMB Healthcare) and former Chief Executive Officer of Retrophin Inc. (Retrophin), a
biopharmaceutical company that trades under the ticker symbol RTRX; and Evan Greebel, a former
partner at the New York office of Katten Muchin Rosenman LLP who served as outside counsel to
Retrophin.1 Shkreli is charged with securities fraud, securities fraud conspiracy, and wire fraud
conspiracy for orchestrating three interrelated schemes: schemes to defraud investors in MSMB
Capital and MSMB Healthcare and a scheme to misappropriate Retrophins assets. Greebel is
charged with wire fraud conspiracy for his role in the Retrophin scheme. Shkreli and Greebel will
be arraigned later today before United States Magistrate Judge Robert M. Levy, at the U.S.
Courthouse, 225 Cadman Plaza East, Brooklyn, New York.
The charges were announced by Robert L. Capers, United States Attorney for the Eastern
District of New York, and Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of
Investigation, New York Field Office (FBI).
As alleged, Martin Shkreli engaged in multiple schemes to ensnare investors through a
web of lies and deceit. His plots were matched only by efforts to conceal the fraud, which led
him to operate his companies, including a publicly traded company, as a Ponzi scheme, where he
used the assets of the new entity to pay off debts from the old entity. When regulators and
auditors questioned Shkrelis decisions, he joined forces with Evan Greebel, who used his law
license and training to conceal and further the scheme, stated United States Attorney Capers.
The charges and arrests announced today reflect our commitment to hold accountable corporate
1

The charges announced today are merely allegations, and the defendants are presumed
innocent unless and until proven guilty.

executives and licensed professionals who betray their positions of trust in order to fraudulently
enrich themselves. Mr. Capers thanked the Securities and Exchange Commission, New York
Regional Office (SEC), and the Financial Industry Regulatory Authority, Inc., Criminal
Prosecution Assistance Group (FINRA CPAG), for their significant cooperation and assistance
during the investigation.
The charges announced today describe a securities fraud trifecta of lies, deceit, and
greed. As charged, Martin Shkreli targeted investors and retained their business by making
several misrepresentations and omissions about key facts of the funds he managed. He
continued to lie about the success of the investments and used assets from Retrophin to payoff
MSMB investors. In the end, Shkreli and Greebel used a series of settlement and sham
consulting agreements that resulted in Retrophin and its investors suffering a loss in excess of
$11 million. While the charges announced today are significant, they are but one example of
whats left to come as the FBI continues this investigation, stated FBI Assistant Director-inCharge Rodriguez.
As detailed in the indictment and below, between September 2009 and September 2014,
Shkreli, together with others, orchestrated three interrelated fraudulent schemes: (i) a scheme to
defraud investors and potential investors in MSMB Capital, (ii) a scheme to defraud investors
and potential investors in MSMB Healthcare, and (iii) a scheme to defraud Retrophin.
The MSMB Capital Hedge Fund Scheme
Between September 2009 and January 2011, Shkreli and his co-conspirators falsely
represented to potential investors, among other things, that: (i) MSMB Capital was a transparent
investment vehicle for sophisticated investors with monthly liquidity; (ii) Shkreli would only
receive a one percent management fee per year based on net assets of the partnership; (iii)
Shkreli was entitled to receive twenty percent of the limited partners net profits for the year; and
(iv) MSMB Capital had retained independent certified public accountants as auditors who would
issue an audit report on the annual financial statements. Shkreli also failed to disclose to
investors that he had lost all the money he managed in Elea Capital, his prior hedge fund, and
that Lehman Brothers had a $2.3 million default judgment against him. Finally, Shkreli lied to
his biggest investor telling him that MSMB Capital had $35 million in assets under management,
when in fact MSMB Capital had less than $700 in its bank and brokerage accounts. Based on
these and other false representations, Shkreli and his co-conspirators induced approximately $3
million in investments from eight investors.
In February 2011, MSMB Capital failed to settle a short position of more than 11 million
shares of Orexigen Therapeutics, Inc. (OREX) that Merrill Lynch ultimately closed at a loss of
over $7 million. At this time, MSMB Capital also suffered more than $1 million in other trading
losses. Based on these trading losses, the value of assets in MSMB Capitals bank and brokerage
accounts, not including the OREX losses at Merrill Lynch, declined from more than $1.12
million on January 31, 2011 to $58,500 at the end of February 2011. MSMB Capital did not
engage in any trading after February 2011.
For months following the complete loss of the investments in MSMB Capital and the end
of trading activity, Shkreli continued to send fabricated performance updates to investors that

-2-

touted profits of as high as forty percent since inception. In September 2012, more than eighteen
months after MSMB Capital had lost all its assets, Shkreli sent an email to MSMB Capital
investors informing them that he was winding down the fund and that original MSMB investors
(2009) have just about doubled their money net of fees. Shkreli also misappropriated funds
from MSMB Capital by withdrawing more than $200,000 from MSMB Capital, which was far in
excess of the one percent management fee and the twenty percent net profit incentive allocation
permitted by the partnership agreement.
The MSMB Healthcare Hedge Fund Scheme
Following the collapse of MSMB Capital after the failed OREX trades, from
approximately February 2011 to November 2012, Shkreli solicited investments in MSMB
Healthcare from potential investors while concealing from them his disastrous past performance
as a portfolio manager for MSMB Capital and Elea Capital and the $7 million liability that
Shkreli owed Merrill Lynch for the February 2011 OREX trades. Shkreli also falsely
represented that MSMB Healthcare had $55 million in assets under management. Based on
these and other false representations, Shkreli and his co-conspirators induced approximately $5
million in investments from thirteen investors.
As with MSMB Capital, Shkreli provided MSMB Healthcare investors with performance
updates that were based, in large part, on an internal inflated valuation of Retrophin, his private
biopharmaceutical company that had received investments from MSMB Healthcare. Here again,
Shkreli misappropriated funds by withdrawing money from MSMB Healthcare that was far in
excess of the one percent management fee and the twenty percent net profit incentive allocation
permitted by the partnership agreement. Additionally, without the investors knowledge or
consent, Shkreli improperly used MSMB Healthcare assets to pay for obligations that were not
the responsibility of MSMB Healthcare, including using at least $900,000 to settle claims
brought by Merrill Lynch in connection with the failed OREX trades.
The Retrophin Misappropriation Scheme
Between March 2011 and September 2014, Shkreli and Greebel, together with others,
engaged in a scheme to defraud Retrophin by misappropriating Retrophins assets in an effort to
pay off Shkrelis personal and unrelated professional debts and obligations. Specifically, Shkreli
and Greebel defrauded Retrophin by causing it to: (i) transfer Retrophin shares to MSMB Capital
even though MSMB Capital never invested in Retrophin; (ii) enter into settlement agreements
with defrauded MSMB Capital and MSMB Healthcare investors to settle liabilities owed by
Shkreli and the funds; and (iii) enter into sham consulting agreements with other defrauded
MSMB Capital, MSMB Healthcare, and Elea Capital investors as an alternative means to settle
liabilities owed by Shkreli and his hedge funds.
In December 2012, despite the fact that Retrophins books and records did not reflect any
investments by MSMB Capital, Shkreli and Greebel engaged in a series of fraudulent and
backdated transactions to create the appearance of an investment by MSMB Capital in
Retrophin. They orchestrated these transactions, in part, to support Shkrelis false
representations to the U.S. Securities and Exchange Commission in November 2012 that MSMB

-3-

Capital was still in operation and had $2.6 million in assets under management.
Between February 2013 and August 2013, Shkreli and Greebel, together with others,
caused Retrophin to enter into settlement agreements with MSMB Capital and MSMB
Healthcare investors to resolve their claims and threats of claims which were based on Shkrelis
false representations about the exceptional performance of the funds. Notably, Shkreli and
Greebel did not seek authorization from the Board prior to entering into these fraudulent
settlements. Shkreli and Greebel caused Retrophin to pay more than $3.4 million in cash and
RTRX stock to settle claims with seven MSMB Capital and MSMB Healthcare investors.
In August 2013, when Retrophins external auditor questioned the settlement agreements
and determined that Retrophin was not responsible for the claims resolved in the settlement
agreements, Shkreli and Greebel caused MSMB Capital and MSMB Healthcare to execute
indemnification agreements and promissory notes for the benefit of Retrophin even though they
knew that the funds had no assets. Shkreli and Greebel, together with others, then devised an
alternative approach to settle with the remaining defrauded hedge fund investors, namely,
settlement agreements under the guise of consulting agreements. On October 16, 2013, when
Shkreli initially questioned this new approach, Greebel explained, We can call it a settlement
agreement, but given [the auditors] recent behavior they may require it to be disclosed in the
financials. I was trying to prevent that issue. Between September 2013 and March 2014,
Shkreli and Greebel caused Retrophin to enter into four sham consulting agreements with
defrauded investors from the funds. Retrophin did not receive any legitimate consulting services
based on these sham agreements, but paid more than $7.6 million in cash and RTRX stock to
settle claims that the auditors had previously determined were not the responsibility of
Retrophin.
*

The criminal case has been assigned to United States District Judge Kiyo A. Matsumoto.
If convicted, Shkreli and Greebel each face a maximum sentence of 20 years imprisonment.
The governments case is being prosecuted by the Offices Business and Securities Fraud
Section. Assistant United States Attorneys Winston Paes, Alixandra Smith, and David Kessler
are in charge of the prosecution.
*

The charges were brought in connection with the Presidents Financial Fraud
Enforcement Task Force. The task force was established to wage an aggressive, coordinated,
and proactive effort to investigate and prosecute financial crimes. With more than 20 federal
agencies, 94 U.S. attorneys offices, and state and local partners, it is the broadest coalition of
law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since
its formation, the task force has made great strides in facilitating increased investigation and
prosecution of financial crimes; enhancing coordination and cooperation among federal, state,
and local authorities; addressing discrimination in the lending and financial markets; and
conducting outreach to the public, victims, financial institutions, and other organizations. Since
fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more

-4-

than 25,000 defendants. For more information on the task force, please visit
www.StopFraud.gov.
The Defendants:
MARTIN SHKRELI
Age: 32
Residence: New York, New York
EVAN GREEBEL
Age: 42
Residence: Scarsdale, New York
E.D.N.Y. Docket No. 15-CR-637 (KAM)

###

-5-