Martin Shkreli in custody after securities probe

[rezznor]

Turing CEO Martin Shkreli in custody after securities probe
Updated 7:57 am, Thursday, December 17, 2015

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FILE - In this Oct. 1, 2015 file photo, AIDS activists pour cat litter on an image of Turing Pharmaceuticals CEO Martin Shkreli in a makeshift cat litter pan during a protest highlighting pharmaceutical drug pricing in New York. Shkreli, the former hedge fund manager under fire for buying a pharmaceutical company and ratcheting up the price of a life-saving drug, is in custody following a securities probe, Thursday, Dec. 17, 2015.

NEW YORK (AP) — Martin Shkreli, the former hedge fund manager under fire for buying a pharmaceutical company and ratcheting up the price of a life-saving drug, is in custody following a securities probe.
Calls to an attorney who has represented Shkreli in the past were not immediately returned. His arrest was confirmed Thursday by FBI spokeswoman Kelly Langmesser.

Shkreli stirred public outrage earlier this fall when his company, Turing Pharmaceuticals jacked the price of a drug used to treat a life-threatening infection by more than 5,000 percent. Turing raised the price on Daraprim, a 62-year-old drug whose patent expired decades ago, from $13.50 to $750 per pill. The drug is the only approved treatment for a rare parasitic infection called toxoplasmosis that mainly strikes pregnant women, cancer patients and AIDS patients.

Shkreli said the company would cut the drug's price. Last month, however, Turing reneged on its pledge. Instead, the company is reducing what it charges hospitals for Daraprim by as much as 50 percent. Most patients' copayments will be capped at $10 or less a month. But insurance companies will be stuck with the bulk of the tab, potentially driving up future treatment and insurance costs.

Turing, with offices in New York and Switzerland, bought U.S. rights to sell Daraprim in August, when it had no competition. Daraprim is one of numerous old drugs with limited competition whose makers have raised prices sharply.

Rising pharmaceutical prices has become a topic in the upcoming U.S. presidential race.

couldnt happen to a nicer guy

[rufuspaul]

This would be the best karma if he actually goes to a real pound me in the ass prison. Sad fact is he'll either flee or will work out a deal where he spends a little time at a country club federal facility and goes right back to being the total dick that he is.

[Velocirap31]

Martin is a cool dude. There are far worse investors out there that are walking free and richer than ever. The speculators who traded bad mortgages like stock in 2008 and gave them AAA ratings should be the guys in jail. They caused a recession for the world and got insanely rich from it.

[Thorpesaurous]

This would be the best karma if he actually goes to a real pound me in the ass prison. Sad fact is he'll either flee or will work out a deal where he spends a little time at a country club federal facility and goes right back to being the total dick that he is.

Maybe he'll get ass raped by an HIV positive IV drug using inmate and he can wind up using his own medication.

[rufuspaul]

Martin is a cool dude. There are far worse investors out there that are walking free and richer than ever. The speculators who traded bad mortgages like stock in 2008 and gave them AAA ratings should be the guys in jail. They caused a recession for the world and got insanely rich from it.

They're all f[COLOR="Black"]u[/COLOR]cking scum.

[rufuspaul]

Maybe he'll get ass raped by an HIV positive IV drug using inmate and he can wind up using his own medication.

One can only hope.

[Velocirap31]

You don't go to federal prison for non-violent financial crimes.

[UK2K]

This would be the best karma if he actually goes to a real pound me in the ass prison. Sad fact is he'll either flee or will work out a deal where he spends a little time at a country club federal facility and goes right back to being the total dick that he is.

Karma for what? Charging what he wants for something he owns?

If it's that important, you should be petitioning someone like Zuckerburg to research it and develop his own pill. Supply and demand.

As for this incident, sounds to me like once he raised the price of his pill, he pissed off some liberal government entity that probably kicked off an investigation of his entire life for the past 20 years.

[Take Your Lumps]

He thought he had to buy that $2 million Wu Tang album to live out his criminal fantasies.

Turned out he just had to wait another week or two.

[gigantes]

it just goes to show... if you're going to be a huge public a-hole in life, you better have clean books and an empty closet. whitewashed or not.

[KevinNYC]

Martin is a cool dude. There are far worse investors out there that are walking free and richer than ever. The speculators who traded bad mortgages like stock in 2008 and gave them AAA ratings should be the guys in jail. They caused a recession for the world and got insanely rich from it.

The guys who gave them AAA ratings were not speculators and their job was to look out for investors and of all the bad actors, they might have been the ones who were most responsible for the mess.

These AAA ratings were a crazy mispricing of risk, and allowed that risk to get systematically placed through out the whole system as companies and banks used these AAA rated securities as collateral for more loans in the shadow banking system.

As the book and movie The Big Short point out, as we moved from 2003 into 2005, 2006, the mortgages going in to these CDOs got worse and worse. So the risk was magnified but few people seemed to notice it at the time. And the ratings agencies kept giving AAA ratings. The guy Christian Bale plays in the Big Short found out how to bet against these CDO's by convincing someone to sell a credit-default-swap on these CDO's a sort of unregulated insurance. Offering this insurance was even stupider than the original CDO's and this is what brought AIG down. Since the Bale-character was betting these CDO's would fail, he started looking for the CDO's made of the crappiest mortgages and those are the ones he bet against. Eventually others caught on and Wall Street was selling a lot of these credit default swaps. Then some of the smarter sharks realized that could make a lot of money on this insurance if you had Wall Street deliberately, make bad CDO's?

Have you heard about the Magnetar trade? This hedge fund almost single handedly kept the housing bubble going.

The housing bubble was fueled by Wall Street. Traditional mortgages were sold to Fannie Mae and packaged and sold off there and those mortgages performed well. Subprime mortgages were sold to Wall Street primarily and Wall Street was making a killing selling these, because in 2005 tons of money from around the world was finding American Mortgages to be the place to invest. Wall Street could sell these just as fast as they put them together and they were doing huge deals. Why were they selling so fast? AAA ratings. So to keep this machine going Wall Street was buying more and more with virtually no questions asked. Do you think it was the poor people with bad credit ratings who were scamming mortgage lenders that caused this crisis? No. It was usually mortgage lenders selling bigger, more expensive mortgages to very unsophisticated borrowers. Why did they take this risk? Because they didn't need to hold the risk very long before selling to Wall Street. The CDO's were the driving force of the housing bubble.

But then housing prices started to peak, it became harder to put CDO's together, because you could selling the AAA slice of the pie, but the bottom lower rated slices of the pie were selling which meant the Wall Street bank would end up holding the riskiest part of the deal, the part Wall Street called Toxic Waste. Magnetar realized that you bought the Toxic Waste and someone was stupid enough to sell you the insurance on the Toxic Waste, you virtually couldn't lose. So in early 2006, when housing prices already started coming down, they stepped in in a gigantic way

According to bankers and others involved, the Magnetar Trade worked this way: The hedge fund bought the riskiest portion of a kind of securities known as collateralized debt obligations -- CDOs. If housing prices kept rising, this would provide a solid return for many years. But that's not what hedge funds are after. They want outsized gains, the sooner the better, and Magnetar set itself up for a huge win: It placed bets that portions of its own deals would fail.

Along the way, it did something to enhance the chances of that happening, according to several people with direct knowledge of the deals. They say Magnetar pressed to include riskier assets in their CDOs that would make the investments more vulnerable to failure. The hedge fund acknowledges it bet against its own deals but says the majority of its short positions, as they are known on Wall Street, involved similar CDOs that it did not own. Magnetar says it never selected the assets that went into its CDOs.....

An independent analysis commissioned by ProPublica shows that these deals defaulted faster and at a higher rate compared to other similar CDOs. According to the analysis, 96 percent of the Magnetar deals were in default by the end of 2008, compared with 68 percent for comparable CDOs.....

Magnetar wasn't the only market player to come up with clever ways to bet against housing. Many articles and books, including a bestseller by Michael Lewis, have recounted how a few investors saw trouble coming and bet big. Such short bets can be helpful; they can serve as a counterweight to manias and keep bubbles from expanding.

Magnetar's approach had the opposite effect -- by helping create investments it also bet against, the hedge fund was actually fueling the market. Magnetar wasn't alone in that: A few other hedge funds also created CDOs they bet against. And, as the New York Times has reported, Goldman Sachs did too. But Magnetar industrialized the process, creating more and bigger CDOs.
....."Magnetar went into the business of creating subprime CDOs on an unheard of scale. If the world had been spared their cunning, the insanity of 2006-2007 would have been less extreme and the unwinding milder."

So Magnetar came in and extended the bubble and made the crash much, much worse. Other folks caught on the trade they were making and started making it too.

NPR show on Magnetar.

[KevinNYC]

As for Shkreli, this case predates his recent notoriety

The federal case against him has nothing to do with pharmaceutical costs, however. Prosecutors in Brooklyn charged him with illegally taking stock from Retrophin Inc., a biotechnology firm he started in 2011, and using it to pay off debts from unrelated business dealings.

In the case that closely tracks that suit, federal prosecutors accused Shkreli of engaging in a complicated shell game after his defunct hedge fund, MSMB Capital Management, lost millions. He is alleged to have made secret payoffs and set up sham consulting arrangements. A New York lawyer, Evan Greebel, was also arrested early Thursday. He's accused of conspiring with Shkreli in part of the scheme.


Retrophin replaced him as CEO “because of serious concerns about his conduct,” the company said in a statement. The company, which hasn’t been accused of any wrongdoing, has “fully cooperated with the government investigations into Mr. Shkreli.”

[Derka]

Wouldn't be a story if he hadn't decided to become a public asshole.

He's going to some country club prison if he's convicted, so lets not waste our breath asking for butt-rapings or any such foolishness.

[KevinNYC]

Magnetar is a pretty tight name. Sounds like an off-brand 50s comic book.

I believe it's a dying star.

It's the most magnetic thing in the universe.

[Sarcastic]

Damn, he was just about to bail out Bobby Shmurda too.