NEW YORK — The jury at the securities fraud trial of “Pharma Bro” Martin Shkreli has heard investors accuse the quirky former biotech CEO of repeatedly giving them the runaround when they tried to pull their money out of his failing health care hedge fund.
But the government witnesses have made a concession that the defense hopes plays in its favor: In the end, they made a killing.
Whether jurors at the trial that began June 26 in federal court in Brooklyn will see Shkreli’s clients as victims of a crime is central to a case that’s featured odd subplots, including a self-serving rant by the defendant to reporters and email evidence by a mentor about wanting to touch his “soft skin.”
The lack of clear-cut financial harm separates the alleged fraud from others like Bernard Madoff’s notorious Ponzi scheme, which wiped out the nest eggs of ordinary investors. Prosecutors have argued it doesn’t matter because Shkreli still broke the law by blowing investors’ funds with bad stock picks and then lying to them for months — or even years — while he cooked up a way to get out of it.
“I don’t think it mattered to him — it was just what he thought he could get away with,” said Richard Kocher, a New Jersey construction company owner who invested $200,000 in with Shkreli in 2012. “It was insulting.”
Darren Blanton, a Dallas-based investment firm founder, testified Shkreli stalled for three years when he tried to redeem his $1.3 million investment.
Over time, “I was worried Martin might be lying to me and not credible,” Blanton, who notified the Securities and Exchange Commission.
Shkreli, 34, was arrested in 2015 after he already had gained notoriety by using his drug company to raise the price of a life-saving medication by 5,000 percent and for his nonstop posturing and trolling on social media, a compulsion that spawned the “Pharma Bro” nickname.
Federal authorities focused instead on his MSMB Capital hedge fund, accusing him of lying to investors by boasting about too-good-to-be-true returns at a time when he had lost more than $7 million on a 2011 trade and let the fund dwindle to about $2 million in assets. He’s also charged with starting a new drug company, Retrophin, and looting it for $11 million to pay his investors back.
An unrepentant Shkreli has denied wrongdoing, complaining to reporters last month that prosecutors “blame me for everything. They blame me for capitalism.” The comments prompted the judge to order him to shut up about the case in and around the courthouse.
On cross-examination, the investor witnesses have admitted that Shkreli made settlement deals that ultimately proved profitable. Blanton got $2.6 million — $200,000 in cash and the balance from shares of Retrophin he sold, and in addition still holds shares worth $3 million; Kocher made an estimated $350,000 the same way; a third witness, Schuyler Marshall, doubled his initial $200,000 investment.
Marshall, another Dallas-based financier, testified that Shkreli reminded him of “Rain Man,” but that didn’t mean he was making fun of him, as the defense has suggested.
Marshall saw Shkreli as more of a potential rainmaker “who was intensely focused on one small segment of the stock market, and just lived it day and night, and that was his investing advantage,” he said.
The trial got personal last week when another investor, former American Express executive Steven Richardson, testified about growing close to Shkreli after meeting him at cocktail party, helping him launch Retrophin and becoming the company’s chairman before Shkreli was fired in 2014.
The 63-year-old gay witness testified Shkreli made him uncomfortable with comments about gay sex and sought assurances that their relationship was platonic, even as he told him he loved him as a friend and bought him clothes to clean up his “disheveled” appearance.
Richardson struggled on cross-examination to explain emails he wrote saying he’d meet with Shkreli “only if I can touch your soft skin” and another asking, “I’m drunk, where are you?” He insisted he was referring to how a rash on Shkreli’s neck had cleared up and that he couldn’t remember writing the “drunk” email.
He also testified that his $400,000 stake in Retrophin is now worth $1.9 million.
“That’s a good investment, fair to say?” Shkreli’s lawyer asked.
He could only answer “Yes.”