13. The Pharma Bro (Martin Shkreli)

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A greedy mentality of identifying companies that can be acquired simply by where you can get away with raising prices by the largest percentage possible has real public policy and healthcare ramifications.

And make no mistake, you can try to dress up this business model with do-good sounding phrases, but it is very simple.

Purchase the companies that develop a drug that that has little to no competition.

Give them a healthy profit.

Fire the scientists and jack the prices up as high as you possibly can get away with.

It's using patients as hostages.

It's immoral.

It hurts real people.

It makes Americans very,

very

angry.

That's Senator Claire McCaskill questioning officials and investors of Valiant Pharmaceuticals on April 27th, 2016.

She's describing the company's business strategy of acquiring other drug companies, cutting their costs, and drastically raising the prices of the products, a strategy viewed by most as unethical and greedy.

But Valiant shareholders loved the company's new business model because it was lucrative and perfectly legal.

This controversial strategy was implemented by Valiant's new CEO, Michael Pearson, who was hired to head the company in 2008, even though he had no prior experience in the pharmaceutical industry.

He had spent the past two decades working at McKinsey ⁇ Company, a global consulting firm where his father had also worked.

When Pearson took control of Valiant, it was just another pharmaceutical company investing heavily in developing new drugs of its own while hardly turning a profit.

One of his first orders of business was to engineer a reverse merger with another struggling pharmaceutical company based in Canada in order to lower Valiant's tax burden.

The second step of his plan was to gut the research and development activities of the company.

Pearson believed that money spent on developing new drugs was money wasted.

Yeah, there's a misperception about us.

It's not that we don't like R ⁇ D, we just have a different model.

What we don't think is a good bet is early stage science.

Most drugs get discovered by universities and entrepreneurs, not by large drug companies.

Wasting money was not part of Michael Pearson's philosophy.

A typical pharmaceutical company allocates about 20% of its total budget for the purpose of R ⁇ D.

The R ⁇ D budget at Valiant had been slashed to just 3%.

Pearson felt that there was better earning potential through buying out rival, more established drug companies.

Well, because they create even more value for shareholders, and that's my job.

It's our board's job, is to do whatever we can to create value for shareholders.

Valiant Pharmaceuticals became the darling of Wall Street around 2010.

The company began using massive amounts of debt to rapidly acquire other pharmaceutical companies and ruthlessly firing the scientists and research departments.

Valiant would then take the drugs it had acquired through these acquisitions and increase the prices.

And they were mostly drugs for rare diseases without generic alternatives.

Drugs like cyprene, which is used to treat Wilson's disease, an inherited and potentially fatal condition if untreated, that causes copper to accumulate in vital organs.

The price of cyprene was increased from $650 for a month's supply to more than $21,000.

And Cyprene was just one example.

During Michael Pearson's tenure, Valiant acquired over 100 different drug companies.

In 2014 alone, the company increased the prices of 62 drugs.

Some prices were increased as much as 3,000% of their original cost.

Another 54 medications experienced price increases in 2015, and Wall Street loved it.

Valiant's stock price soared.

Investors really began to take notice when renowned hedge fund manager Bill Ackman, who Forbes magazine referred to as baby Warren Buffett, announced that he had purchased a 5% stake in Valiant.

I've admired what these guys have accomplished over six years, but never really took a hard look at the company because I've not invested in healthcare before.

And the reason why is healthcare is generally a business.

Most pharmaceutical companies are very difficult to understand.

They're black box.

You know, they rely on these pipelines where they spend enormous amounts of money.

And you wake up one day and then one of the drugs doesn't get approved, the stock collapses.

And I was introduced to Mike through actually a business school classmate, and we spent some time together.

I really like the business model, and the business itself reminds me a lot more of the kind of companies we invest in.

And then, when you understand their operating philosophy and their approach to capital allocation discipline, cost discipline, the way they compensate their team, it fits into the Pershing mold of an investment.

And that's what got us interested in Valiant.

Valiant Pharmaceuticals, which was valued at $2.3 billion on the day that Michael Pearson took over, was now worth more than $116 billion, becoming the most valuable company in Canada.

But not everybody was a believer.

In October 2015, Andrew Left at Citroen Research began digging deeper into the company's operations.

In his report, Left compared Valiant's shady accounting practices to those of Enron.

He discovered a questionable relationship between Valiant and a specialty pharmacy named Philador.

There was evidence to suggest that Valiant was using Philador to book fake sales and boost its revenue numbers while appearing as two separate entities, a practice that had been kept secret from Valiant shareholders and, according to him, from the CEO himself.

Well, there's lots of allegations that have been made, but nothing has been proven yet, and I was unaware of any of the allegations.

Valiant was also accused of using Philador to change prescriptions as a way to push their higher-priced drugs onto patients without them knowing that there was more affordable alternatives available.

Wall Street reacted to the allegations levied against Valiant the way Wall Street always reacts to even the slightest hint of trouble.

Valiant's stock price tanked and continued to tank for months.

So while the stock market is climbing, there's one stock that is not participating, Valiant.

Earlier this week, the company slashed its revenue forecast and delayed its 10K filing.

But the selling in the stock began months ago on accusations by a short seller and scrutiny from Washington over drug price increases.

This year alone, shares are down about 70%.

And as Make Terrell reports, Valiant's creditors are starting to get antsy.

One person who remained confident in Valiant was Bill Ackman.

A few weeks after Citroen's damning report was released, Ackman bought another $2 million in Valiant shares.

Even after Michael Pearson admitted during a conference call that Valiant had purchased Philador for $100 million,

which all but confirmed the allegations of its shady practices.

In March of the following year, Valiant stock continued to plunge and the board of directors demanded a change, and CEO Michael Pearson was fired.

It was Bill Ackman who made the call to tell him.

Even with this change of direction, investors were still leery of Valiant.

The price of the company's shares continued to plummet until finally bottoming out at $8 per share, a 97% decrease from its peak.

Bill Ackman eventually lost faith too.

He sold his 5% share in Valiant in 2016, losing about $4 billion in the process.

Yet with all of this change, some things remain the same, like the price of cyprene, for instance, and almost all of the other drugs who had their prices increased by Valiant, even after Valiant executives agreed that prices should be lowered.

People who suffered from Wilson's disease did receive some good news earlier this year, though.

In February, Teva Pharmaceuticals announced that an alternative to Cyprine had been approved.

Patients would no longer be forced to pay 20 grand for a month's supply in order not to die.

Instead, they would only have to pay $18,000 a month.

Oh,

meet the new boss.

Same as the old boss.

No charges have been filed against Michael Pearson or anyone else at Valiant.

Again, raising the price of medicine is perfectly legal.

Almost every pharmaceutical company has done it and are still doing it.

However, a senior official from Valiant named Gary Tanner and the former head of Philador, Andrew Davenport, were eventually arrested and convicted on fraud and conspiracy charges.

Tanner had apparently received $10 million from Davenport to help inflate Philador's value to influence Valiant's purchase of the pharmacy.

Valiant were the victims here.

Poor babies.

Both Gary Tanner and Andrew Davenport are currently awaiting sentencing.

Although Valiant gets credit for being the pioneers of acquiring medicines for rare diseases and jacking up the prices, the company never became the lightning rod for public outrage aimed at pharmaceutical greed.

That role was reserved for someone else, someone named Martin Scraly, a drug company CEO in his early 30s who loved the media spotlight and reveled in negative attention.

Martin Scraly became the face of pharmaceutical price gouging and immoral capitalism, and that face featured a nauseating smirk, just like we had always imagined it would.

A former hedge fund manager embodies the American dream and exposes the ugly truth about for-profit healthcare systems on this episode of Swindled.

They bribed government officials

and clear violations of the AA state law earlier.

Doubting up the table records in the high platform.

Support for Swindled comes from Simply Safe.

For the longest time, I thought home security meant an alarm going off after someone broke in.

But if the alarm is already blaring, it's too late.

The damage is done.

That's a reactive approach, and it leaves you with that awful feeling of violation, even if the intruder runs away.

That's why I switched to SimplySafe.

They've completely changed the game with Active Guard outdoor protection, designed to stop crime before it starts.

Their smart, AI-powered cameras don't just detect motion.

They can tell you when there's a person lurking on your property.

That instantly alerts SimplySafe's professional monitoring agents in real time.

And here's the game changer.

The agents can actually intervene while the intruder is still outside.

Talk to them through two-way audio, hit them with a loud siren and spotlight, and call 911 if needed.

It's proactive security, and that's real security.

I trust SimplySafe because there are no long-term contracts, no hidden fees, and a 60-day money-back guarantee.

They've been named best home security systems by U.S.

News and World Report for five years in a row, and I can see why.

Get 50% off your new SimplySafe system at simplysafe.com/slash swindled.

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Martin Shkrelli was named the most hated man in America.

Dubbed by some the most hated man in America.

Maybe the most hated man in America.

Martin Skrelly, the most hated little dweeb in America.

Martin Skrelly has become the most hated man in America.

Before he became the most hated man in America, Martin Skrelly was just a normal kid growing up in Brooklyn.

He loved music and movies and video games and hanging out with his friends.

The only difference between Martin and the other kids in his neighborhood was that Martin was very, very smart.

Born on April Fool's Day in 1983, Martin recalls being depressed as a little kid.

A childhood friend of his named Frankie Gutman says that he remembers Martin being ashamed of his own upbringing.

Scraly claims his parents were physically abusive both to him and his siblings and to each other.

Yet he claims to have a positive relationship with his mother and father despite any childhood trauma.

He dismisses what he calls the borderline abuse he suffered by his parents as typical disciplinarian behavior that he claims is a common occurrence in Eastern European families.

Martin's parents were working-class immigrants from Montenegro.

His father was a doorman and on his days off he would perform janitorial services with Martin's mother in office buildings around the city, jobs which they still hold today.

Martin's parents even live in the same house that he grew up in, and it's not because Martin hasn't offered them help.

When he became wealthy, Martin pleaded with his mother to quit her job, but she refused.

She and Martin's father just don't value wealth the same way that he does.

Our family doesn't, you know, we never cared about money too much.

I mean, I probably cared about it way more than everyone else, but in my family, money doesn't make you a good person.

It shouldn't make you a good person than any family.

They're proud of me and my accomplishments, but if I did something bad, they wouldn't be proud of me.

And if I, you know, if I did something that they felt was morally wrong, I'd be shy.

Martin Skrelly was also a nervous little kid who had frequent panic attacks.

He found relief in math and numbers, which he studied relentlessly.

His sister recalls that by the time Martin was six years old, he could calculate square roots and recite the periodic table from memory.

As a kid, my friends knew all the Yankees and Mets players' batting averages and how many home runs they hit, Skrelly told CNN.

I knew everything about all the public companies.

Martin bought stock in Compaq, the computer company, when he was just 12 years old.

He bought shares of Amazon when he was 15.

He learned about the stock market and specifically biotech stocks from an older man that lived in his building named Marty.

Marty and Martin would play game after game of chess together while discussing the happenings on Wall Street.

Martin credits his relationship with Marty as being instrumental in helping him discover what he was born to do.

Martin dropped out of Hunter College High School when he was 16 years old because he was bored and uninterested.

In order to graduate, he joined a work study program that helped land an internship at a hedge fund named Kramer, Berkowitz and Company.

The Kramer in Kramer-Berkowitz is Jim Kramer, the CNBC mad money guy.

Kramer left his hedge fund for television less than a year after Martin Skrelly started working there.

He claims to hardly know him.

Kramer responded to accusations that he had molded the young intern with a tweet that read, quote, Martin Skrelly was never my protege, and anybody who said that is dreaming.

And these firms are going to go out of business and he's nuts.

They're nuts.

They know nothing.

Okay, so so maybe Jim Kramer is not that important to this story.

He had little influence on the person that Martin Screlly ultimately became, but it did give me an excuse to play that clip of him losing his mind before the financial recession of 2008.

That clip alone is worth mentioning his name.

At Kramer Berkowitz, Martin was tasked with menial clerical work like retrieving coffee and ensuring that the coffee machine stayed full of paper.

He remained in that role for over two years before getting his first taste of what a hedge fund actually does.

Outside of work, Martin was enrolled in the business school at Baruch College, while at the same time teaching himself biology and chemistry at home.

Martin utilized his knowledge of science while researching biotech stocks in his free time.

He noticed a concerning trend in the data for an obesity drug manufactured by a company named Regeneron that had not yet received approval by the Food and Drug Administration.

Skrelli fully expected the drug to deliver less than stellar results.

He passed this information to his associates at Kramer-Berkowitz and recommended that the hedge fund short Regeneron stock.

Simply put, shorting a stock is like placing a bet that the price of the stock will decrease.

In this case, since Martin was expecting Regeneron's new drug to test poorly, he anticipated the price of Regeneron shares to fall amid the disappointing news.

In order for the hedge fund to short the stock, it would borrow shares from a broker like Merrill Lynch with the promise that it would return the same number of shares at a later date.

If the price of the stock rises, which is what you don't want if you're in this position, you return the shares to the broker at the newer, higher price and the difference comes out of your pocket.

If the share price decreases, you return the shares at the lower price and you get to keep the difference minus fees and taxes, of course.

Short selling is a legitimate strategy used by hedge funds all over the world, including Kramer-Berkowitz.

The hedge fund took Martin's advice, shorted Regeneron's stock, and watched with glee as the company's shares lost half their value in a single day.

Martin Skrelly had been correct.

He was rewarded with a job, a real job, at the hedge fund, managing the money of investors like Elliot Spitzer, the former governor of New York who would eventually resign in shame amid a prostitution scandal.

Skrelly worked for Kramer Berkowitz for about four years in total.

He looks back fondly at those years because it was where he made his first successful trade.

It was also where he had his first encounter with the Securities and Exchange Commission.

The SEC had questioned Kramer Berkowitz about the Regeneron short sale and wondered if the hedge fund had used insider information to make the trade.

They hadn't, because they had Martin Skrelli, the boy wonder whom the SEC would become quite familiar with in due time.

After leaving Kramer-Berkowitz and Company, Martin Skrelli bounced around a couple of other wealth management companies before eventually starting his own hedge fund.

He had convinced a group of investors that he could duplicate the success he had at Kramer-Berkowitz shorting biotech stocks.

Elia Capital Management was born in 2006 and had died less than a year later when Skrelly bet the wrong way on a drug stock, which resulted in him losing all of his investors' money and owing millions of dollars to Lehman Brothers, the investment bank from which he borrowed the shares.

Lehman Brothers sued Skrelly and Elia Capital, and they were awarded a default judgment of $2.3 million.

$2.3 million that Martin Skrelly did not have.

He was screwed.

The last thing he wanted to do was face his angry investors and tell them that he had lost all of their money and that the fund was bankrupt.

But luckily for him, LDA Capital wasn't the only investment company going bankrupt.

Alex Deshore and thousands of other Lehman Brothers employees here in Jersey City were left shaken and helpless.

The 158-year-old investment bank filed for bankruptcy Monday morning after suffering billions of dollars in losses last year.

On September 15th, 2008, as a result of the subprime mortgage crisis, Lehman Brothers failed, resulting in the largest bankruptcy filing in U.S.

history.

Martin Skrelly caught a break.

He would not have to pay the $2 million he owed to Lehman Brothers because Lehman Brothers ceased to exist.

Skrelly was off the hook, but he was dead broke.

He had moved back into his parents' house for a few years, where he took up residence in his childhood bedroom and plotted his next move.

In September 2009, Skrelly teamed up with a childhood friend to launch a new hedge fund called MS-MB Capital Management, where he would again short-sell biotech stock.

But this time, Martin had an idea on how to influence the prices of the shares that he needed to fall.

He would invade internet investing forums to criticize certain pharmaceutical companies in which he had a vested interest.

He hoped his internet trolling would cause investors to sell their shares in a panic, which would result in a drop in the stock price.

His plan wasn't very effective.

He was still making wrong bets left and right.

He was losing so much money that the $3 million he had received from investors had dwindled to $331.

In order to save his investors' money and his hedge fund, he took one last gamble and borrowed 32 million shares of a company named Erexogen Therapeutics from Merrill Lynch.

Erexogen's stock price was already nosediving.

after the FDA declined to approve its newest drug.

This company was heading for the bottom, so Martin decided to jump on the sinking ship and shorted his borrowed shares.

This was as sure of a bet as any, or so he thought.

Scurly was already counting the profits in his head when something strange happened.

The price of Erexogen shares had recovered and were rising quickly.

Martin's sure bet had turned into a huge loss.

A $7 million loss, to be exact.

Although he was able to settle the $7 million debt healed to Merrill Lynch for only $1.35 million, Martin's latest gamble proved to be the deathblow to his latest investment venture.

Ilmass MB Capital was bankrupt, but he never told his investors.

In fact, he told them the opposite.

He sent out fake charts and reports to his shareholders as evidence that he had doubled their money.

He also sent out a letter announcing a new company called Ilmass MB Healthcare.

that was in need of additional capital to invest in pharmaceutical companies.

Investors didn't hesitate to send Skrelli more money, especially after seeing the handsome returns generated by his other fund.

In total, 13 investors sent Martin Skrelly over $5 million,

1.35 of which he used to settle his debt with Merrill Lynch.

The remainder was used to invest in a brand new biotech company called Retrofin, a company that Martin Skrelly was very familiar with because Martin Skrelly was the one who founded it.

As CEO of Retrophin, Skrowley continued to remain primarily focused on shorting biotech stocks as a way to generate funds to research and develop treatments for rare diseases.

He took the company public to generate even more capital, and he used that capital to partake in a practice that would later make him a villain in the eyes of the entire country.

Skrelly purchased the rights to market a drug named Thiola, which was used to treat a rare disease that causes persistent kidney stones called cystenuria.

Before Martin acquired it, Thiola was priced at $1.50 per pill.

As a product of Ritrophin, theola would cost $30 per pill, and patients were required to take up to 15 pills per day, and there were no alternatives.

The strategy was fruitful.

Ritrophin was rolling in the profit, and Martin Skrelly was excited about the future, because he was aware of a few other drugs that he could acquire and do the exact same thing.

But he would never have the chance, at least not at Ritrophin.

In September 2014, Retrofin's board of directors voted to remove Skrelly as CEO after the company was sued by a former employee of MS-MB Healthcare, who claimed he was being harassed by Martin Skrelly.

Martin had accused Timothy Peroti of stealing $3 million from him and he had contacted every member of Tim's family trying to collect.

Skrelly sent Facebook messages to Peroti's brother, his elderly father, and both of his teenage sons.

He sent text messages and letters to Peroti's wife, one of them which read, quote, I hope to see you and your four children homeless, and will do whatever I can to assure this.

Ratrophin settled the suit with Peroti out of court to avoid having the company's computers analyzed.

They then sued Skrelli for $65 million, accusing him of repaying the MS-MB investors whose money he had lost with Ratrophin's stock.

Martin denied these allegations as preposterous, saying, quote, the company hasn't paid me close to $50 million that it owes me in severance.

They're sort of concocting this wild and crazy and unlikely story to swindle me out of the money.

Even though Martin Screlly and Ritrophin parted ways unceremoniously, his legacy at the company lives on.

The price of Diola, the kidney stone drug, remains at $30 per pill.

2015 was the year that Martin Skrelly became a household name.

He founded another drug company named Turing Pharmaceuticals and raised $90 million in funding almost immediately.

Investors liked his new strategy of acquiring these orphan drugs, these medicines without patents, and re-evaluating their prices.

Skrelly initially pursued purchasing the rights to two drugs used to treat Wilson's disease from Valiant Pharmaceuticals, but Valiant refused to sell because they had plans of their own.

So he turned his attention to another drug whose patent was expired named Dariprim.

Deriprim is used to treat toxoplasmosis, an infection that causes flu-like symptoms that can be especially dangerous, even fatal, to people with compromised immune systems.

like pregnant women, unborn children, and AIDS and cancer patients.

Daraprome had been around for over 60 years, and it was the only drug available to treat toxoplasmosis.

The process to obtain FDA approval to manufacture generic versions of the drug would be painstaking and expensive.

There was no competition in sight, and Martin Skrelly knew that.

In August 2015, he arranged to purchase the rights to the life-saving drug for $55 million.

He then closed off all distribution channels for the drug, requiring fulfillment by specialty pharmacies only.

And he jacked up the price from $13.50 per pill to $750 per pill, a 5,000% increase.

And we also feel that this is the more appropriate price for Daraprim.

At this price, Daraprim is still actually on the low end of what orphan drugs cost.

And we're certainly not the first company to raise drug prices.

You know, at the end of the day, there have been much larger drug price increases by much bigger drug companies that actually,

you would argue, large multi-billion dollar companies with lots of cash don't necessarily need to do something like this.

Turing is a very small company.

It's a new company and we're not a profitable company.

So for us to try to exist and maintain a profit, I think is pretty reasonable.

I think profits are a great thing to sustain

your corporate existence.

The backlash was almost immediate.

Members of the media, government officials, and the public were outraged.

Presidential candidate Bernie Sanders, one of Skrelly's most vocal critics, made lowering prescription drug prices one of his primary campaign issues.

Skrelly responded by donating $2,700 to Bernie's campaign.

Sanders refused the contribution, saying he would not accept money from the quote, poster boy of drug company greed, and he redirected the funds to an HIV clinic.

Presidential candidate Donald Trump disapproved of Skrelly's actions as well.

You're talking about where this young guy, where this young guy raised the price to a level that's absolutely ridiculous, and he looks like a spoiled brat to me.

You want to know the truth?

He looks like a spoiled brat.

And he's a hedge fund guy who, as you know, the only one that I'm raising taxes, they are going to be paying up.

But I thought it was a disgusting thing what he did.

I thought it was a disgrace.

Martin Skrelly took offense to being called a spoiled brat, telling Vanity Fair, quote, My parents were immigrants and janitors.

Trump inherited wealth fuck him

presidential candidate Hillary Clinton encouraged Skrelly to do the right thing and lower the price of deraprim

she also sent out a tweet that read quote price gouging like this in the specialty drug market is outrageous tomorrow I'll lay out a plan to take it on

also just about 45 minutes maybe an hour ago we started to see the NASDAQ biotech index take a hit and that's right around the same time look they're down 2.6% now the IBB that's right around the time hillary clinton tweeted out a new york times story about a drug whose price was increased 5 000 percent after its company touring pharmaceuticals acquired it without really changing the drug at all she tweeted a link to that story and said price gouging like this in the specialty drug market is outrageous tomorrow i'll lay out a plan to take it on now i've been talking with analysts and industry experts today who've been saying that Hillary Clinton's candidacy could potentially put a damper on these high drug industry valuations.

Folks are really worried that she'll potentially advocate for the U.S.

government to have the ability to negotiate on drug prices, and that could really put a damper on this wild and crazy biotech market, Carl.

Hillary's comments had spooked investors.

The biotech index dropped 5% because they expected her to win the presidency and enforce tighter restrictions on the drug market.

It has gotten to the point where people are being asked to pay not just hundreds, but thousands of dollars for a single pill

and I can tell you that is not the way the market is supposed to work that is bad actors making a fortune off of people's misfortune some of you may have read about an egregious example of this that was in the news yesterday A drug that has been around for decades.

It wasn't just invented with new research and new dollars backing that up.

It's been around for decades that went from costing $13.50 a pill to $750

a pill literally overnight.

That's price gouging, pure and simple.

Martin Skrelly continued to defend the price of Deraprim.

He even promised that patients who could not afford the drug would receive it for free through Turing's financial assistance program.

However, the the pressure continued to mount and at one point it seemed like Skrelly was going to reverse course.

We've agreed to lower the price of Deraprim to a point that is more affordable and is able to allow the company to make a profit but a very small profit and we think these changes will be welcome.

But Martin changed his mind a few weeks after he made that statement.

Turing announced that there would be no reduction in price after all.

After a few months had passed, after he had a little time to reflect on his decision, Skrelly was asked if he could do it all over.

Would he raise the price of Deraprim again?

Of course.

Shareholders, and in fact, you've seen Valiant, this is castigated for their price increases.

They raised prices after the Senate committee.

Pfizer raised prices of Viagra 13%.

I look at Bloomberg for inflation.

I don't see anywhere they need to keep up with 13% inflation.

So it's not like I'm surprising and saying I'd do it again.

Everybody's doing it.

In capitalism, you try to get the highest price that you can for a product.

I I probably would have raised the price higher is probably what I would have done.

I think healthcare prices are inelastic.

I could have raised it higher and made more profits for our shareholders, which is my primary duty.

And again, no one wants to say it.

No one's proud of it.

But

you know, this is a capitalist society, capitalist system and capitalist rules.

And my investors expect me to maximize profits, not to minimize them or go half or go 70%, but to go to 100% of the profit curve that we're all taught in MBA.

It seemed as if Martin Skrelly had successfully weathered the storm.

The media spotlight was finally off of him and he had millions of dollars that he didn't have before the scandal.

His investors were happy.

He was happy.

But he did kind of miss the attention.

Little did he know there would be much more attention headed his way in just a few short months.

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Today this office and the FBI are announcing the arrests this morning of Martin Shakrelli and Evan Grable and the unsealing of a seven-count indictment charging Shikrelli with securities fraud conspiracy, securities fraud, and wire fraud conspiracy and Grable with wire fraud conspiracy.

On Thursday, Thursday, December 17th, 2015, just a few weeks removed from spending $2 million on a one-of-a-kind Wu-Tang Clan album, Martin Skrelly was awakened at 6.30 a.m.

by a knock on the door of his Manhattan apartment.

He was escorted out of his building through a swarm of photographers wearing a gray hoodie and handcuffs.

Prosecutors were alleging that he had been running his companies like a Ponzi scheme.

using each new iteration to pay off defrauded investors from the last.

Like how he had used investments investments in MSMB healthcare and Ritrophin stock to pay off what he owed as a result of his lousy bets at MSMB Capital.

There were backdated transactions that made it appear as if MSMB had invested in Ritrophin when it really hadn't.

Prosecutors also alleged that he lied to his investors and to Ritrophin's board of directors and auditors.

Martin's lawyer Evan Grable, who was also arrested, helped Skrelly pull off the scheme, but the two immediately began pointing their finger at the

Grable pleaded not guilty and filed a motion to be tried separately from Martin.

The lawyer claimed that any illegal action he had taken was based on lies told to him by the young CEO.

Skrelly fired back, saying that if he had done anything illegal, it was based on advice given to him by Evan Grable, his legal counsel, and that if Grable hadn't been advising him, maybe he should return the millions of dollars that he was paid to do so.

Regardless, Martin Skrelly wasn't afraid.

He cashed in an E-Trade investment account and bailed himself out of jail for $5 million.

He labeled the prosecuting attorneys as the junior varsity, and he hired Ben Braffman, a high-powered criminal defense attorney that had represented Charles Kushner, Jared Kushner's father, and Sean Puff Daddy Combs.

Well, the trial is going to start in June.

I'm looking forward to it.

It's going to be quite a circus, an exciting circus.

We're going to win by landslide.

I've got my attorney, Ben Braffman, and the evidence is clear that I did nothing wrong.

There's no victims in my crime, crime, unlike the allegations revealed on Monday in Platinum Partners, where there's 600 investors out a billion dollars.

A billion dollars goes missing.

That's fraud.

My investor sent me Christmas cards.

The day after his arrest, Martin Skrelly conducted a live stream on his YouTube channel from his home office.

He sat in front of his computer in a bare white room playing guitar.

chatting with his audience and surfing online dating profiles for over five hours.

These marathon live streams would become a common occurrence in the following months leading up to his trial.

Without a job and a year and a half to wait until his trial date, Martin Skrelly had some time to kill.

Martin did leave his house one afternoon in February when he was summoned to testify in front of the House Oversight and Government Reform Committee.

The members of Congress who sat on the committee had some questions about the Daraprim prize hike, and for maybe the first time in his life, Martin Skrelly did not have much to say.

On the advice of counsel, I will not be giving an opening opening statement.

Representative Jason Chaffis opened up the questioning.

I want to ask you a few questions.

What do you say to that signal pregnant woman who might have AIDS,

no income?

She needs dereperim in order to survive.

What do you say to her when she has to make that choice?

What do you say to her?

On the advice of counsel, I invoke my Fifth Amendment privilege against self-incrimination and respectfully decline to answer your question.

You were quoted as saying on Fox 5 in New York, you were quoted as saying,

if you raise prices and you don't take that cash and put it back into research, I think it's despicable.

I think you should not be in the drug business.

We take all of our cash, all of our extra profit, and spend it on research for these patients for other patients who have terrible, life-threatening, life-ending diseases.

Did you say that?

On the advice of counsel, I invoke my Fifth Amendment privilege against self-incrimination and respectfully decline to answer your question.

Do you think you've done anything wrong?

On the advice of counsel,

I invoke my Fifth Amendment privilege against self-incrimination and respectfully decline to answer your question.

Next up was Congressman Trey Gowdy, who attempted to get Skrelly to speak by asking him simple questions like how to pronounce his name.

Thank you, Mr.

Chairman.

Is it pronounced Skrelly?

Yes, sir.

See, there, you can answer some questions.

That one didn't incriminate you.

I just want to make sure you understand you are welcome to answer questions, and not all of your answers are going to subject you to incrimination.

Do you understand that, don't you?

I intend to follow the advice of my counsel, not yours.

So do you understand you can waive your Fifth Amendment right?

On the advice of council, I invoke my Fifth Amendment privilege against self-incrimination and respectfully decline to answer your question.

Well, Mr.

Chairman, I'm vexed.

He's been willing to answer at least one question this morning.

That one didn't subject him to incrimination.

I don't think he's under indictment for the subject matter of this hearing.

So the Fifth Amendment actually doesn't apply to answers that are not reasonably calculated to expose you to incrimination.

And even if it did apply, he's welcome to waive it.

And I listened to his interview

and he didn't have to be prodded to talk during that interview.

He doesn't have to be prodded to tweet a whole lot or to show us his life on

that little webcam he's got.

So this is a great opportunity if you want to educate the members of Congress about drug pricing or what you call the fictitious case against you.

Or we can even talk about

the purchase of a, is it Wu-Tane Clan?

Is that the name of the album?

Name of of the group?

On the advice of council, I invoke my Fifth Amendment privilege against self-incrimination and respectfully decline to answer your question.

Mr.

Chairman, I am stunned.

Since Martin was obviously refusing to speak, Representative Elijah Cummings hoped that at the very least, maybe he would listen.

To Mr.

Terelli, since I have you in front of me,

after trying to get you in front of this committee for so long,

let me say this.

I want to ask you to, no, I want to plead with you

to use any remaining influence you have over your former company to press them to lower the price of these drugs.

You can look away if you like,

but I wish you could see the faces of people who cannot get the drugs that they need.

And by the way, It's the taxpayers.

Somebody's paying for these drugs.

Somebody's paying.

It's the taxpayers that end up paying for some of them.

And so, and those are my constituents.

People's lives are at stake because of the price increases you impose and the

access problems that have been created.

You are in a unique position.

You really are, sir.

Rightly or wrongly,

You've been viewed as a so-called bad boy, a farmer.

You have a spotlight and you have a platform.

You can use that attention to come clean, to right your wrongs,

and to become one of the most effective patient advocates in the country and one that can make a big difference in so many people's lives.

I know you're smiling, but I'm very serious, sir.

The way I see it, you can go down in history as the poster boy for greedy drug company executives, or you can change the system.

Yeah,

you.

You've detailed the knowledge about drug companies and the system we have today,

and I truly believe,

I truly believe,

are you listening?

Yes.

Thank you.

I truly believe you could become a force of tremendous tremendous good.

Of course, you can ignore this if you like,

but all I ask is that you reflect on it.

No, I don't ask, Mr.

Rowley.

I beg

that you reflect on it.

There's so many people that could use your help.

May God bless you.

Congressman Cummings' impassioned speech failed to resonate.

Hours after leaving the hearing, Martin took to Twitter and tweeted, quote, hard to accept that these imbeciles represent the people.

I think it's also important to point out that many of those imbeciles he was referring to had received enormous campaign contributions from pharmaceutical companies.

During the 2016 campaign season alone, drug companies donated almost $30 million to congressional candidates.

Is it any wonder why regulations are lax and price gouging remains legal?

Martin returned home to his toys and his computer.

He continued to live stream on YouTube, giving out relationship and career advice to thousands of his fans.

People from all over the world would tune in to watch Martin play video games and chess, to watch him discuss music and politics and the pharmaceutical industry.

Martin would even teach in-depth classes on finance, complete with Excel spreadsheets and demonstration files.

These live streams might be the only glimpse of who Martin Skrelly actually is or was.

Even for him, it became harder and harder to separate the villain he played on TV from the affable and funny guy that his friends and fans claimed him to be.

He would sometimes discuss his upcoming trial and remain defiant.

I do think that they were totally just a witch hunt.

You know, sometimes you can just, if you want to look through 50 million pages of emails and you know, try your hardest and coerce people like they they they just like had FBI agents knocking on people's doors that are like if you don't testify against martin we'll arrest you and it's like oh okay

this is supposed to be fair you know you know it's a witch hunt and

you know the good thing is that um i'm not scared of witch hunts and i'm not scared of the fbi and i'm not scared of the doj and i'm one of the few people who will stand up to them they expect plea deals they expect people to get scared and give up and that's just not the kind of person martin strelly is so i'll fight them and we'll see who wins.

But there were moments where it seemed like the realization of a possible prison stay was setting in.

But, you know, as I was pondering, you know, my old life and my new life, you know, my old life in the streets of Brooklyn and how

blue-collar crime is prosecuted unfairly.

Now in this life, white-collar crime is prosecuted unfairly.

Fucking all crime is prosecuted unfairly.

You know, I'm sitting there thinking like, everyone's like, oh, you know, it's, you know, I was in the, I was doing my pretrial services checkup, and I took a photo of those two black guys I was with who were there for crack for selling rocks.

And they were like, man, you're not going to go to prison.

You got money.

It's going to be no problem.

I was like, bro, it's not like that.

And I just explained to them that, like,

you know, our prosecution system, our whole criminal justice system is so fucked.

And I don't know.

And it was during these live streams where Martin would would really put the bro and farm a bro.

And let me be real.

If you're a fat girl, you can suck my dick.

That's all good.

That's the best that will ever happen to you.

That's it.

You can catch some dick, but yo, 15 minutes later, you best be out my place.

We'll talk.

Yo, if you got a kid, stay up off.

Stay up off me.

Yeah, no kids on.

I ain't trying to adopt you, bitch ass kid.

Fuck you.

Martin would tell you that he was joking in those clips.

He would tell you that extreme sarcasm makes up a large portion of his personality.

And that's probably true.

But it doesn't change the fact that his views and treatment towards women has always been a bit disturbing.

In January 2017, he began harassing a female journalist named Lauren Duca on social media.

Martin changed his Twitter background to a photo of Lauren and her husband with Martin's face superimposed on his body.

He made a post on Facebook to claim that if he were acquitted in the upcoming trial, he would finally be able to have sex with her.

Martin also sent Lauren a private message on Twitter, inviting her to be his plus one to the inauguration of Donald Trump, to which she responded.

I'd rather eat my own organs.

Lauren Duca eventually reported Skrelly for his harassment and he was banned from Twitter permanently.

But Martin Skrelly didn't have to resort to social media to harass somebody.

In September 2016, a few months before he was banned from Twitter, Martin had tracked down Hillary Clinton after she had left a 9-11 memorial service early due to illness.

He found her a few blocks from where he lived in Manhattan, leaving her daughter Chelsea's apartment.

As she walked down the street towards her car, Martin heckled her.

Do you need Farmer Bra's help?

Drop out!

Drop out!

Secretary, how are you feeling?

Drop out!

What happened?

What happened?

Drop out!

Martin also yelled out, go Trump, and why are you so sick to the presidential candidate?

And he bragged about it later on social media.

Later that month, Skrelly would raffle off a chance to punch him in the face.

He loved being the bad guy.

The trial started on June 26, 2017 and lasted over a month.

It was a struggle to find jurors who could promise to be impartial because his media presence was so repugnant.

At one point, even his lawyer Ben Brafman told the judge that sometimes he wants to give Martin a hug.

and other times he wants to punch him in the face.

As the trial neared the end, Martin live streamed from his apartment where he joked that if he were convicted, he would be playing Xbox at Club Fed with other white-collar criminals.

And if he were acquitted, he told his fans what he was looking forward to the most.

That's just my fantasy, you know, I'm just playing.

I don't want to get censored and banned from another

social media site.

The jury deliberated for five days and convicted Skrelli on two counts of securities fraud and a single count of conspiracy.

He was acquitted on the five other counts of conspiracy.

It was a verdict that Martin and his lawyers viewed as a win.

Thanks very much.

I think Ben said it all.

You know, we're, I think, delighted in many ways with this verdict.

Count seven

was the government's

attempt to theorize that that I robbed Peter to pay Paul, and the jury has spoken conclusively that the trophy was not defrauded in this case.

My investors made three to five times their money without any aid of any settlement agreement.

Some made ten times or more than that of their original investment after they did receive settlements.

I'm delighted the jury did their job.

They saw the facts as they were and this was a witch hunt of epic proportions and maybe they found one or two broomsticks, but at the end of the day

we've been acquitted of the most important charges in this case, and I'm delighted to report that.

Martin returned home to await sentencing.

If he kept his nose clean, he would have seven months of freedom before he had to appear in court again to find out his fate.

But just a month after his conviction, Skrelly logged onto Facebook and posted,

The Clinton Foundation is willing to kill to protect its secrets.

So on Hillary's book tour, try to grab a hair from her.

I must confirm the DNA sequences that I have.

We'll pay $5,000 per hair obtained from Hillary Clinton.

When Judge Keyo Matsumoto heard about Skrelli's antics, she revoked his bail on the basis that his post was a solicitation of assault.

Skrelly issued a written letter apologizing and arguing that it was just a joke, just political satire.

He asked the judge to give him another chance.

Judge Matsumoto denied his request, and Skrelli was taken to a federal jail in Brooklyn to await his sentencing.

While in jail, Martin Skrelli wrote a letter to a friend where he shared how he was spending his time.

Quote, things are not that awful here.

There are some bright sides.

I am teaching these prisoners some new things and hopefully some ways to change their lives.

Skrelli also continued his internet trolling by having a friend on the outside post on his social media accounts.

On March 9th, 2018, the day of his sentencing, Martin Skrelly's lawyer suggested that prison time was not necessary because his investors had been paid back.

Braffman argued that the only person to lose any money in Martin's scheme was Martin.

Other supporters of Skrelli wrote letters that described him as a bright and nerdy child who became consumed with internet fame.

While wiping tears away from his eyes, Martin Skrelly himself appeared as an actual human being and offered a heartfelt quote, I was never motivated by money.

I wanted to grow my stature and my reputation.

I am here because of my gross, stupid, and negligent mistakes I made.

Judge Matsumoto agreed that Martin seemed genuinely remorseful, but he had minimized any goodwill with his post-conviction behavior.

She ordered Skrelli to forfeit $7.36 million to cover his fraud.

and she authorized the government to seize his assets, including his prized Wu-Tang album.

She levied an additional fine of $75,000 and sentenced him to seven years in prison.

Evan Grable, Skrelly's former lawyer who had also been charged, was found guilty a month later.

He is currently awaiting sentencing.

So

when the guidelines are 25 years and the government is demanding 15 years, one would think that a seven-year sentence is good

but I'm disappointed.

I thought the sentence should have been less than seven years, but you know, Martin's fine and he will be fine and

you know, obviously it could have been a lot worse.

The government did not get what they wanted.

We did not

get what we wanted either.

This is a good judge who I think spent a great deal of time

trying to examine the facts and all of the letters that were written on behalf of Mr.

Skrelly and she made her decision and we all have to live with it.

Martin Skrelly is convinced that the only reason he was charged for the unrelated fraud is because he opened his mouth about drug pricing.

He truly was the most hated man in America at one point in time.

Even people in the pharmaceutical industry hated him because he was attracting attention to their money grab.

Martin Skrelly contends that his heart was in the right place, at least part of it.

He really was passionate about developing new drugs, but doing so requires playing within the rules of the game of a capitalistic society.

Besides, if money was his sole motivation, wouldn't he have been better served by just keeping his mouth shut?

Martin Skrelly has the kind of personality that America loves to hate.

The kind of personality that thrives on attention, whether it be positive or negative.

The public is continually distracted by theatrics and cults of personality, and we take the bait every time just to be entertained, while the issues that truly matter remain unresolved.

After all the angry political speeches and public posturing and media attention that had been directed at Martin Skrelli, the price of Daraprim remains at $750 per pill.

In my Albanian community, people look up to me for making it in America.

And I think they understand the sort of drug pricing thing.

If you look at the

drug inventions I've come up with, for instance,

I think they more than outweigh the sort of reality of high drug prices in this country that I'm not I didn't start and I'm not gonna finish.

I'm just a part of

But I am making drugs for rare diseases They're proud of that before this, you know, I was here before the drug price increased and I was doing good things, I think

But this got a lot of attention and it is what it is and I'm dealing with it the way I'm dealing with it Which is a little bit of denial a little bit of frustration, not a lot of poise or grace.

But,

you know, I'm 33 years old, and

life's happened a little too fast for me sometimes to deal with.

And this is the way I'm dealing with it.

And it's a little bit immature and it's a little bit silly, but it's the best way for me to process it.

And,

you know, I think it's working to a small extent.

Swindled is written, researched, produced, and hosted by me, a concerned citizen.

For more information about the show, you can visit swindledpodcast.com or connect with us on Facebook, Twitter, and Instagram at swindledpodcast.

All the music in this episode was written and performed by Ethan Helfrich, aka Rest You Sleeping Giant.

If you want to support the show, you can do so at patreon.com slash swindled.

For $5 a month, you will receive exclusive access to bonus episodes, early access to new episodes when possible, and free merch sometimes.

We're giving away a free t-shirt to one lucky Patreon supporter this month and for the month of June we will be giving away a free swindled flag poster to each new supporter while supplies last.

All Patreon content will remain advertisement free now and forever.

Go check it out, patreon.com slash swindled.

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Or if you're feeling extra generous, you can use the form on the homepage of the website to send us a one-time donation.

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Last but not least, I want to thank Elizabeth from Ohio Valley True Crime for helping us out.

She provided the voice of Lauren Duca.

And her podcast just launched.

You can find it by searching for Ohio Valley True Crime wherever you listen to podcasts.

Go check it out.

That's it.

See you next time.

Thanks for listening.

Thanks to Simply Safe for sponsoring the show.

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