Pharmaceutical entrepreneur Martin Shkreli, vilified for buying up drug companies and then dramatically boosting the prices of some medications, has been charged by the FBI with securities fraud related to his former hedge fund and a drug company he once ran. 

Shkreli, 32, currently the CEO of Turing Pharmaceuticals, was taken into custody at his New York City home Thursday. 

The case relates to his dealings at two firms, including Retrophin Inc., a biopharmaceutical company that he founded and used to head. Shkreli's arrest also stems from his time as manager of hedge fund MSMB Capital Management.

A seven-count indictment unsealed in Brooklyn Federal Court charged Shkreli with:

  • Conspiracy to commit securities fraud.
  • Conspiracy to commit wire fraud.
  • Securities fraud. 

Martin Shkreli, chief executive officer of Turing Pharmaceuticals, exits federal court in New York on Thursday. Shkreli was arrested on alleged securities fraud related to Retrophin Inc., a biotech firm he founded in 2011. (Louis Lanzano/Bloomberg)

Shkreli pleaded not guilty to the charges and a federal magistrate agreed to release him on a $5-million US bond.

The indictment against Shkreli alleges that he, among others, fraudulently induced people to invest in two separate funds, and misappropriated the assets of Retrophin to satisfy Shkreli's personal and unrelated professional debt obligations.

Prosecutors allege that Shkreli raided Retrophin for $11 million to pay back his hedge fund clients who'd lost money through a series of bad trades. Authorities called it a "Ponzi-like scheme" that ran for five years, ending in 2014. 

U.S. prosecutor Robert Capers said Shkreli had "engaged in multiple schemes to ensnare investors through a web of lies and deceit."

He faces up to 20 years in prison if convicted.

Increased drug price by 5,000%

Retrophin sued Shkreli in August for $65 million US. The firm claimed Shkreli had used his control over Retrophin to enrich himself and pay off claims of investors in MSMB. Shkreli denied those allegations.

The new allegations levelled at Shkreli on Thursday have nothing to do with the price-gouging accusations that turned him into a poster boy for corporate greed back in September. 

Shkreli was widely attacked when he jacked up the price of Daraprim, a potentially life-saving anti-parasitic drug treatment, from $13.50 a pill to $750.

The drug is the only one that is approved for the treatment of toxoplasmosis, a disease that is most commonly diagnosed among pregnant women, cancer patients and AIDS patients.

Faced with a firestorm of protest, he initially said his firm would lower the price. But Turing Pharmaceuticals later backed away from that promise.  

Through it all, Shkreli has been unapologetic about the huge price hikes he has engineered.

"No one wants to say it, no one's proud of it, but this is a capitalist society, a capitalist system and capitalist rules," Shkreli said in an interview earlier this month. "And my investors expect me to maximize profits, not to minimize them or go half or go 70 per cent but to go to 100 per cent of the profit curve."

With files from Reuters and The Associated Press