Martin Shkreli, the chief executive of Turning Pharma and KaloBios Pharmaceuticals Inc (NASDAQ:KBIO), has been arrested on securities fraud charges. In September, he raised the price of a life-saving drug called Daraprim by 5000% from $13.50 to $750. Shkreli was arrested this morning in New York, according to Bloomberg. However, the federal case against him has nothing to do with the price of Daraprim.
KaloBios stock bites dust after Shkreli’s arrest
Martin Shkreli is accused of illegally taking stock from Retrophin, a company he founded in 2011, and using it to pay off hedge funds from unrelated business dealings. Retrophin board later ousted and sued him. Federal prosecutors are currently probing Retrophin’s claims. Shkreli has repeatedly denied any wrongdoing, including allegations in the lawsuits.
Following his arrest, KaloBios shares tumbled 50.19% to $11.75 in pre-market trading Thursday. Shkreli became the CEO of KaloBios in November. Notably, KaloBios was a penny stock before Martin Shkreli made his first investment in the company in mid-November. Soon after reports of Shkreli’s investment, KaloBios shares skyrocketed 700% from $1.97 to $16 per share.
Martin Shkreli engaged in a complex shell game
Federal prosecutors have also accused him of indulging into a shell game after his now-defunct hedge fund MSMB Capital Management lost millions of dollars. Shkreli dropped out of a Manhattan high school and hit the Wall Street even before he was 20. The 32-year old hedge fund manager-turned entrepreneur came under widespread criticism when his company bought manufacturing license for Daraprim and jacked up its price 55 times to $750.
Daraprim is an effective treatment for toxoplasmosis, a parasitic condition that could prove deadly for unborn babies and patients with weak immune systems. Last month, Shkreli defended the price hike, saying Daraprim has always been affordable. At a Forbes summit in New York, he said if anything he would have “raised the price higher” because investors “expect me to maximize profits.” BBC News has called him “the most hated man in America.”