Martin Shkreli has been arrested on charges of securities fraud.
The price-hiking pharmaceutical entrepreneur was picked up by the FBI in the early hours of Thursday following an investigation into a former hedge fund and drug company he headed back in 2011.
It is alleged he illegally used stock from the biotechnology firm Retrophin Inc. to pay off debts related to his struggling hedge fund and to pay back angry investors.
Bloomberg Business reports that federal prosecutors are accusing the 32-year-old of making secret payoffs and setting up sham consulting arrangements related to MSMB Capital Management, his now-defunct hedge fund which had lost millions.
This came to light when Retrophin filed a $65million lawsuit against Shkreli this past August for misusing company funds.
They allege he then used these funds to bailout MSMB after a trade with Merill Lynch lost the company $7million.
Retrophin also claims that Shkreli paid off some angry investors in MSMB by setting up fake consulting agreements or giving them unauthorized stock.
‘Through these schemes, Shkreli obtained over $5.6 million in cash and Retrophin shares or the use of Retrophin shares worth over $59 million (at current market prices),’ the compamny said in court papers.
In an interview with Bloomberg Business at the time Retrophin filed the suit, Shkreli called it ‘baseless and meritless’ before adding; ‘We’re going to win. They still owe me a substantial amount of money.’