Money Crimes with Nicole Lapin - GREED: Martin Shkreli

Episode Date: February 27, 2025

Martin Shkreli was more than just your average hedge fund manager -- by the time he was 33, he'd also founded his own pharmaceutical company. But he wasn't motivated by altruism. Behind the scenes, Martin was hiking drug prices up to astronomical levels... and committing all kinds of financial crimes. Money Crimes is a Crime House Original. For more content, follow us on Instagram and TikTok @crimehouse. To learn more about listener data and our privacy practices visit: https://www.audacyinc.com/privacy-policy Learn more about your ad choices. Visit https://podcastchoices.com/adchoices

I don't mean to be presumptuous, but I liken myself to the robber barons. These were the words Martin Shkreli told Vanity Fair in 2015 when a reporter asked him about his chaotic rise to fame. At just 32 years old, Martin had already covered a lot of ground. He dropped out of his elite Manhattan High School, interned at a prominent hedge fund, and made the Forbes 30 Under 30 list, all before founding his own pharmaceutical company. But soon enough, Martin Shkreli's name became mainstream for something a lot more nefarious, being a so-called pharma bro, one responsible for raising the price of a life-saving drug

by over 5,000%. People called him a lot of things, garbage, malicious, and even a morally bankrupt sociopath. But even in the wake of all of this criticism, Martin was unapologetic. that he didn't raise his prices even higher. As the saying goes, those who don't understand history are doomed to repeat it. That's especially true when it comes to money. If you wanna make the right decisions when it comes to managing your assets, you need to know what mistakes to avoid and how to spot a trap.

This is Money Crimes, a Crime House original. I'm your host, Nicole Lapin. Every Thursday, I'll be telling you the story of a famous financial crime and giving you advice on how to avoid becoming a victim yourself. At Crime House, we want to express our gratitude to you, our community, for making this possible. Please support us by rating, reviewing, and following Money Crimes wherever you've got your podcasts. Your feedback truly matters.

And for ad-free and early access to Money Crimes plus exciting bonus content, subscribe to CrimeHouse Plus on Apple Podcasts. Today I'm digging into the curious and rather complicated financial crimes of Martin Shkreli, the former hedge fund manager turned pharmaceutical CEO. In 2015, Martin became, as the BBC called him, the most hated man in America. Martin earned that label after infamously raising the price of the anti-parasitic drug Deriprim. When doctors, patients, even politicians spoke out against it, Martin doubled down on his

position. But as shocking and unethical as the price hike was, it wasn't how Martin landed in jail. Turns out, while Martin was building up his career in biotech, he was also building out an elaborate and illegal scheme to pay back old investors. For a while, it seemed like he might get away with it. Until the FBI came knocking on Martin's door. Hi there, it's Carter Roy, host of the Crime House original Murder True Crime Stories. If you're loving money crimes, you won't want to miss our studio's new show, Crime

House True Crime Stories. Every Monday, you'll go on an in-depth journey through two of the most notorious true crime cases from that week in history, all connected by a common theme. From notorious serial killers and mysterious disappearances to unsolved murders and more. Follow Crime House, True Crime Stories now wherever you get your podcasts. And for ad-free listening and early access to episodes, subscribe to Crime House Plus on Apple Podcasts.

TD Direct Investing offers live support, so whether you're a newbie or a seasoned pro, you can make your investing steps count. And if you're like me and think a TFSA stands for total fun savings adventure, maybe reach out to TD Direct Investing. A lot of hedge fund managers fit a very specific archetype, privileged upbringing, Ivy league degree, and tons of lucrative connections to the finance world. But this was far from the reality Martin Shkreli was born into. As the son of Albanian and Croatian immigrants,

his corner of New York looked less like Wall Street and more like the blue-collared boroughs. In the 1980s, Sheepshead Bay, Brooklyn was filled with families just doing their best to keep the lights on and create better opportunities for their children. While Martin and his siblings were at school, their father worked as a doorman and their mother did janitorial work along with other odd jobs.

At night, the family of six mostly kept to themselves, hanging out in their modest, rent-controlled apartment. It was a nice life, but even as a kid, Martin wanted more. He latched on to complex topics like science and finance, reading investment books, and learning about biotech stocks from an older neighbor. However, Martin's curiosity didn't exactly translate into being a model student.

Though he had the grades to get accepted to Manhattan's elite public Hunter College High School, he frequently skipped class out of boredom. One former teacher recalled Martin's inability to apply himself, saying that while he loved math and science, he lacked the drive to put in any real effort. Apparently, Martin's work ethic was so bad, he was eventually asked to leave the school altogether. Despite his unsavory exit from Hunter, Martin was clearly bright. He had an immense capacity for retaining information. If he came across anything to do with science or investing, he was more than interested.

He was obsessed. One former investor recalled his ability to memorize nearly anything technical, even chemistry textbooks. The skills came in handy as he plotted his path to Wall Street. After obtaining his GED, he attended New York's Baruch College at just 17 years old. That same year, in 2000, he landed an internship at Kramer Berkowitz, the hedge fund founded by Jim Kramer, who you might know as the host of Mad Money. Martin's knowledge of the biotech industry proved to be extremely valuable. He knew which businesses were solid, and more importantly,

which ones would fail, which meant he knew when to bet against them. So when he recommended Kramer-Berkowitz short one of these stocks, they actually took his advice. And it paid off. stocks, they actually took his advice. And it paid off. Shorting generally stands for short-selling a stock, a common practice any investor can use to make money off stocks they think are overvalued. Shorting involves borrowing a stock from a broker, then selling it on the open market while the price is high. If your instincts are right and the stock does come down after that, you can buy it back at that lower price. And when you return it to the broker, you get to keep the difference. While short selling can really pay off in some cases,

it's also riskier than more traditional investing strategies. Because if you're wrong and the stock goes up, you could be on the hook for a lot of money. Shorting is not for the faint of heart, and if you're going to try it, proceed with caution. But Martin seemed to be the master of it, and he wasn't afraid to bet on himself. After his experience at Kramer Berkowitz, he decided he was going to start his own hedge fund. By 2006, when Martin was 23, Alia Capital was up and running. Unfortunately, Alia ran into legal issues within a year.

The fund took out a massive bet that the stock market would go down. But when the market went up instead, Alia Capital couldn't pay the difference. The fund collapsed and Martin was back at square one. He was so strapped for cash, he had to move back in with his parents. But Martin dusted himself off and got back on the horse. In 2009, he started a new fund called MSMB Capital Management. Soon after, Martin also created an offshoot fund called MSMB Healthcare, which was dedicated to trading specifically in the healthcare industry. His reputation at MSMB quickly grew outside of Wall Street, largely due to the way Martin

presented himself to investors. By now, Martin knew how to work a room as a dynamic people pleaser. He molded his life story to fit the audience he was charming. When he needed to be relatable to investors, he was the hard-working underdog who had dropped out of college. But when he needed to wow them, he was the Ivy League graduate who had no trouble breezing through Columbia University. Both were lies.

He did graduate from college, but it was from New York's Baruch College, not Columbia. But his charade seemed to work. Martin claimed MSMB was generating impressive returns. But it wasn't long before he started to get bored of managing the company's portfolio. Making bets on what other companies were doing was like sitting on the sidelines. Martin wanted to actually play the game. According to Forbes, he believed he was better suited to be running a drug company rather than trying to make money off them as an outsider. So in late 2011, Martin launched Retrofin Pharmaceuticals.

And just one year later, at the ripe old age of 29, he landed on the Forbes 30 Under 30 list for his work as a biotech entrepreneur. As Martin told Forbes, he hoped his work could bring new therapies to patients suffering from complicated diseases. The article also said his investors praised him as an unconventional visionary. They believed he could disrupt the status quo of the pharmaceutical industry. At the time, Retrofin was on its way to launching its first clinical trial for a drug that could prevent kidney failure.

It seemed like the sky was the limit for both Martin and his company. There was just one problem. Martin never shared the actual mechanics of his business strategy with investors. The truth was, rather than focusing on innovative new treatments, Martin actually wanted to go after older, already vetted drugs. Acquiring the rights to those drugs was actually pretty easy, and within months of doing so, Martin knew he could hike the prices sky high to turn a profit. Now he knew these price hikes would be unpopular, that was for sure. But if it meant he could make a fortune, Martin was more than ready to play the villain. risk from major financial losses, data breaches, and natural disasters. Get customized coverage today starting at $19 per month at ZenSurance.com.

Be protected. Be Zen. Hi there, it's Carter Roy, host of the Crime House original Murder True Crime Stories. If you're loving money crimes, you won't want to miss our studio's new show, Crime House True Crime Stories. Every Monday you'll go on an in-depth journey through two of the most notorious true crime cases from that week in history, all linked by a common theme. From infamous serial killers and mysterious disappearances to unsolved murders, we are bringing you the defining events that

shape true crime, both past and present. Each episode dives into the stories behind the headlines, featuring high-profile cases from past and present, including the murder of Gabby Petito, the kidnapping of Elizabeth Smart, the Heaven's Gate cult tragedy, and so much more. Follow CrimeHouse, True Crime Stories now, wherever you get your podcasts. And for ad-free listening and early access to episodes, subscribe to CrimeHouse Plus on Apple Podcasts. By 2011, at just 29 years old, Martin Shkreli had already founded two hedge funds, but his true passion was in his pharmaceutical company Retrofin.

To outsiders, Martin's sudden choice to shift his focus from finance to pharmaceuticals didn't make a ton of sense. His hedge fund MSMB was supposedly doing well and its investors were seeing substantial returns. At least, that's what Martin told them through email statements. People wondered why he'd leave all that for new business. Well, MSMB's employees had a pretty good idea. The fund's bank and brokerage accounts barely totaled $1,000.

The truth was, Martin's hedge fund was nearly out of cash, and he needed a backup plan to pay investors back fast. Earlier that year, in February of 2011, MSMB Capital made a catastrophic short sale on a therapeutics company, one that basically zeroed out its accounts. More importantly, it left the broker of this trade, Merrill Lynch, holding the bag with a $7 million loss. When Merrill said they might pursue legal action to get their money back, Martin was angry. Not only did he insist he'd find a way to pay back the debt,

he also hinted that taking any legal action would be a very bad idea. This statement was almost laughable. At the time, Martin was neck deep in debt. Plus he was actively falsifying all sorts of financial reporting for MSMB, including who monitored it. Apparently he listed random accounting and legal firms as having oversight into the funds money. But really they'd never worked for MSMB or Martin. I wanna pause here and reiterate that this type of behavior known as securities fraud is very illegal.

While securities fraud can mean a lot of things, in Martin's case, it meant intentionally deceiving investors and manipulating markets for financial benefit. Lying to MSMB's investors about the actual value of their investments and their returns was one significant part of Martin's criminal behavior. When making any investment, it's critical to do your due diligence to protect yourself from fraudulent transactions. Taking precautions like thoroughly researching the investment, understanding exactly what you're buying and who you're buying it from can definitely help. If you're working directly with a financial advisor or broker, you can also ask them for

written documentation on the investment, like annual reports or financial statements. You should also cross-check these documents against reputable sources as a way to confirm the investment is, in fact, legitimate. Unfortunately, many investors who had put money into MSMB weren't always using financial best practices. Even though the statements Martin was sending them were clearly unprofessional, most didn't bother to investigate further. They were too pleased with the money he insisted they were making. He was such a brilliant salesman that his investors just trusted him. However, Martin's lies could only take him so far.

When he announced the hedge fund was closing for good in September of 2012, his investors took that as their cue to cash out. But when they asked for their money back, Martin reportedly either avoided responding to them or offered alternate forms of payment, like stock in his pharmaceuticals company, Retrofin. Ultimately, a lot of them opted to take the stock, and based on all the positive news around Retrofin, it may have seemed like a good idea. In December of 2012, about three months after Martin announced he was shutting down his hedge fund, Retrofin went public.

Martin hoped by going public, Retrofin's stock could grow and he could court new investors for more cash. As part of his growth campaign, Shkreli also tapped a new face to become Retrofin's CEO, a man named Steven Asselage. But it wasn't long before the two butted heads. It was clear that Martin likely wanted Steven to be the boss in name only. Steven also discovered that even though Retrofin was still a pretty young company, it had a lot going wrong already.

Its stock price floundered after going public. It was barely above $3 a share at the end of 2012. And the company was full of legal red flags. At the time, Retrofin wasn't even carrying insurance that would protect its directors and officers from getting personally sued for the company's financial activities. Steven was so worried about it, he wanted to resign as CEO. Martin ultimately convinced him to stay on the company's board of directors, but bad blood continued to mount between the two of them. By the summer of 2014, the tension got so bad,

Retrofin's board wanted Martin out of the company for multiple reasons. One issue was Martin's trading of Retrofin shares during blackout periods. If you're unfamiliar with investment blackout periods, there are windows where some employees or company leaders who own stock aren't allowed to buy or sell their shares. This safeguard exists to protect the company

from insider trading during sensitive time periods, like say before earnings reports are released. By imposing blackout periods, people who have access to non-public information can't financially benefit before it's released. Due to his attitude, his business strategy, and all sorts of problems, Martin was officially forced out of Retrofin Pharmaceuticals by October of 2014. This was a particularly bad time, given that Retrofin was already under the microscope.

The month before the company had raised the price of thiola, a drug it acquired to help prevent kidney stones, from just a dollar fifty to thirty dollars per pill. This move was a far cry from the innovative growth strategy Martin pitched when founding the company. cry from the innovative growth strategy Martin pitched when founding the company. Instead, Retrofin was just acquiring niche drugs that already existed and repackaging them with a much higher price tag for consumers. And Martin's behavior after being forced out only drew more attention to the company. He definitely did not go quietly. He reportedly even tried to take physical records and documents from Retrofin's office. His behavior was so aggressive, the company's leadership barred him from the building.

But Martin wasn't going to give up that easily. Retrofin may have been done with him, but he wasn't done with them. He was going to get his revenge by building a company that was even bigger and better. And it only took a few months to set up. Apparently, the weekend after Martin got let go by Retrofin, he was already setting up office space for his next venture. By February of 2015, less than two months after his exit, Martin had formally founded Two Ring Pharmaceuticals.

And of course, he installed himself as CEO. And what came next may have been Martin's most lucrative and sinister move yet. move yet. In 2015, 33-year-old Martin Shkreli was already hard at work growing his new company, Two Ring Pharmaceuticals. On paper, its mission statement was to deliver treatments for serious rare diseases. But that's what Martin said about his last company, Retrofin. And with Turing, he was following the same corrupt blueprint.

By August of 2015, Martin had helped Turing net almost $90 million in investment funding. Then he used a portion of that money to buy the rights to a specialty drug called Daraprim. Daraprim is used to treat an infection called Toxoplasmosis. The parasite that causes it is actually very common and can be found in contaminated food or water, but it rarely threatens people with healthy immune systems. However, for individuals with weakened immune systems, like organ transplant patients, those

with HIV, cancer, or pregnant women, the infection can be life-threatening. In fact, it's the leading cause of death caused by foodborne illness in America. So it goes without saying that whoever controls the medication to treat it holds a lot of power. No one believed this more than Martin Shkreli. He knew Daraprim could be a cash cow, especially since its competitor, a drug called fanceder, was discontinued earlier in the 2000s.

Meaning Daraprim had a monopoly on the market, which is why shortly after acquiring the rights to the drug, Martin raised the price from $13.50 to $750 per tablet. That's over a 5,000% markup, one that occurred overnight. The backlash to the price hike was swift. Doctors and healthcare advocates denounced Martin as a corrupt, unethical businessman. Now, patients without good health insurance had to spend hundreds of thousands of dollars annually to use Daraprim. And for those who needed to take the drug long-term, they were looking at even more than that.

Martin tried to defend himself by saying Daraprim had been underpriced for too long, and that his price hike would bring critical improvements to the drug's formula. But it was just more hot air. According to infectious disease expert Dr. Wendy Armstrong, this simply isn't true. Older drug formulas aren't necessarily less effective, especially when they work as well as Daraprim. The so-called improvements Martin promised were just reinventing the wheel at a much higher price tag.

Two Ring Pharmaceuticals paid $55 million for the rights to Daraprim. The price hike was undeniably part of the company's strategy to make that money back. The whole thing was so absurd that even other businesses felt compelled to take action. After the price hike on Daraprim, a large multi-purpose pharmacy called Express Scripts, announced it would offer an alternative medicine that only cost a single dollar. But that relief wouldn't be available for a while.

It would take another five years for the FDA to approve a generic alternative to Daraprim. The truth was, even if it was blatantly price gouging, Two Ring still held a monopoly on Deriprim. Price gouging has been in the news a lot lately. It's basically when a person, business, or corporation raises prices sharply and suddenly, especially when that product or service

is experiencing supply issues. Price gouging is illegal in certain cases, but it is legal in some circumstances. If you feel like you're encountering price gouging, legal or otherwise, you can reach out to your state's attorney general's office. They don't represent people for individual cases when it comes to price gouging,

but they do use civilian reports to help with larger investigations. But for the moment, nobody was stopping Martin from doing it again and again and again. In December of 2015, four months after the Daraprim price hike, the New York Times reported that Martin planned to raise the price on another medication. This drug had been used for years to treat a parasitic infection that causes serious heart problems. But I think it's important to zoom out here for a second, because I want to talk about what people thought of Martin while all of this was happening. Think about it, a pharma executive

sharply raises the price on one drug? You might think that's bad. And then he's going to do it again? Even worse. But the real tipping point was how arrogantly and unapologetically Martin wanted to profit off of it. If he'd made these decisions without advertising them, I'm sure there would still be public backlash. But the fact that Martin made no effort

to hide what he was doing while living large at the same time, well, that part was pretty hard for people to stomach. During this time, Martin's social media feed was full of photos of thousand dollar bottles of wine and visits to the Hamptons. And when he made a big purchase, he made sure everybody knew about it. That same year, in 2015, Martin bought a one-of-a-kind Wu-Tang Clan album for a reported $2 million.

But before the year was up, it all came to a screeching halt. In mid-December of 2015, the FBI arrested Martin while he was at home in Manhattan. But it wasn't for his unethical price hikes or anything he did at his newest company. Instead, Martin was arrested for his actions at his previous company, Retrofin. According to the feds, Martin had used Retrofin's assets to repay the investors he'd swindled at his former hedge fund, MSMB. The arrest was the culmination of months of investigation by the FBI. Their initial estimate was that, from his activities at MSMB Capital, MSMB

Healthcare and Retrofin, Martin had defrauded investors out of nearly $11 million. Martin finally went on trial in June of 2017 when he was 34 years old. In response to the mountain of evidence against his client, Martin's lawyer Benjamin Brafman had a very surprising response. He didn't totally disagree. Instead of trying to argue that Martin was innocent, his lawyer pointed out that in the end, everyone who invested in MSNB Capital and MSNB Healthcare got paid through either cash or shares. No harm, no foul. The jury wasn't buying it

because even if the investors were paid back, it was through fraudulent means. In August of 2017, Martin was found guilty on three counts of securities fraud. Martin was allowed to remain free on bond until his sentencing hearing. But that agreement didn't last long. Martin loved to be on the internet and he tended to get a little nasty.

Even as he awaited sentencing, Martin couldn't contain himself. He loved to taunt people, especially politicians like Bernie Sanders and Hillary Clinton. They'd both publicly criticized the DeraPrim price hike the year before. In September of 2017, Martin told his Twitter followers that he'd love one of Hillary Clinton's hairs, a trophy of sorts, for a $5,000 reward.

It wasn't a death threat per se, but sending people after a major public figure was still a very big deal. And even if Martin was joking, the judge overseeing his case didn't think it was very funny. He revoked Martin's bail, and for the next six months, he awaited his sentence behind bars. When Martin's punishment was handed down in 2018, he was sentenced to seven years in federal prison. The sentence was halfway between what the prosecution and defense were asking for.

Experts felt like he could have gotten even less if Martin hadn't been so obnoxious during the trial. He'd openly mocked the prosecution throughout the process, calling them, quote, the junior varsity. As John Coffey of Columbia Law School put it, it seemed like Martin's snark and arrogance had finally caught up to him. In spite of all of this,

Martin only served four out of seven years before being released on parole in May of 2022. And federal prison did little to dull his smugness. Upon being released, he tweeted, quote, "'Getting out of real prison is easier than getting out of Twitter prison,' a reference to being banned from the site five years earlier. Martin's return to society didn't get him out

of another more consequential mess, though. In January of 2022, he was banned from the pharmaceutical industry for life for his unethical price hikes. Whether or not Martin will be able to play by the rules he's been given remains to be seen, but as of this recording, he's returned to a more ordinary career, living and working as a software developer and consultant in Queens, New York. Martin Shkreli was extremely good at telling people what they wanted to hear. Whether it was guaranteeing incredible investment returns or promising medical miracles, he was willing to say and do whatever it took to make a profit.

And I know it's a drum I beat a lot on this show, but his story is the ultimate reminder of who to trust when you're making an investment. You may think you're setting yourself up for the future or even changing the world. But if you put your trust in someone like Martin Shkreli, it will only lead to disaster. Thank you so much for listening. I'm your host, Nicole Lappin. Come back next time as I take you through another wild story and offer you some advice along the way. Money Crimes is a CrimeHouse original. Join me every Thursday for a new episode. Here

at Crime House, we want to thank each and every one of you for your support. If you like what you heard today, reach out on social media at crime house on Tik Tok and on Instagram. Don't forget to rate, review and follow Money Crimes wherever you get your favorite podcasts. Your feedback truly makes all the difference. Money Crimes is hosted by me, Nicole Lapin, and is a Crime House original powered by PAVE Studios. It is executive produced by Max Cutler. This episode of Money Crimes was produced and directed by Ron Shapiro, written by Mackenzie

Moore, edited by Lori Maranelli, fact-checked by Sarah Tardiff, sound designed by Russell Nash, and included production assistance from Sarah Carroll. Looking for a deep dive into history's most notorious true crime cases? Check out Crime House True Crime Stories. Follow Crime House True Crime Stories now wherever you get your podcasts. And for ad-free time.