'Pharma bro' Shkreli to be held responsible for $10.4 million in losses: US judge

NEW YORK (Reuters) - Former U.S. drug company executive Martin Shkreli will be held responsible for $10.4 million in financial losses when he is sentenced for defrauding investors, a federal judge ruled on Monday, rejecting his argument that he did not cause any losses because his investors eventually came out ahead.

The ruling from U.S. District Judge Kiyo Matsumoto could mean more prison time for Shkreli, since the amount of financial loss plays a major role in federal sentencing guidelines. While Matsumoto must consider the guidelines at the sentencing, which is scheduled for March 9, she is not bound to follow them.

Martin Shkreli throughout trial:

22 PHOTOS
Martin Shkreli throughout trial
See Gallery
Martin Shkreli throughout trial
Martin Shkreli, former chief executive officer of Turing Pharmaceuticals AG, right, exits federal court with his attorney Benjamin Brafman, left, in the Brooklyn borough of New York, U.S., on Friday, Aug. 4, 2017. Shkreli, notorious for raising the price of a potentially life-saving drug by 5,000 percent, was found guilty Friday of defrauding investors in two hedge funds and in�Retrophin Inc., a pharmaceutical company he co-founded. Shkreli was convicted of three of eight charges, including securities fraud. Photographer: Peter Foley/Bloomberg via Getty Images
Martin Shkreli, former chief executive officer of Turing Pharmaceuticals AG, right, exits federal court with his attorney Benjamin Brafman, left, in the Brooklyn borough of New York, U.S., on Friday, Aug. 4, 2017. Shkreli, notorious for raising the price of a potentially life-saving drug by 5,000 percent, was found guilty Friday of defrauding investors in two hedge funds and in�Retrophin Inc., a pharmaceutical company he co-founded. Shkreli was convicted of three of eight charges, including securities fraud. Photographer: Peter Foley/Bloomberg via Getty Images
Martin Shkreli, former chief executive officer of Turing Pharmaceuticals AG, left, speaks to members of the media with his attorney Benjamin Brafman outside federal court in the Brooklyn borough of New York, U.S., on Friday, Aug. 4, 2017. Shkreli, notorious for raising the price of a potentially life-saving drug by 5,000 percent, was found guilty Friday of defrauding investors in two hedge funds and in�Retrophin Inc., a pharmaceutical company he co-founded. Shkreli was convicted of three of eight charges, including securities fraud. Photographer: Peter Foley/Bloomberg via Getty Images
NEW YORK, NY - AUGUST 04: Former pharmaceutical executive Martin Shkreli pauses while speaking to the media in front of U.S. District Court for the Eastern District of New York with members of his legal team after the jury issued a verdict, August 4, 2017 in the Brooklyn borough of New York City. Shkreli was found guilty on three of the eight counts involving securities fraud and conspiracy to commit securities and wire fraud. (Photo by Spencer Platt/Getty Images)
Martin Shkreli, former chief executive officer of Turing Pharmaceuticals AG, exits federal court in the Brooklyn borough of New York, U.S., on Friday, Aug. 4, 2017. Shkreli, notorious for raising the price of a potentially life-saving drug by 5,000 percent, was found guilty Friday of defrauding investors in two hedge funds and in�Retrophin Inc., a pharmaceutical company he co-founded. Shkreli was convicted of three of eight charges, including securities fraud. Photographer: Peter Foley/Bloomberg via Getty Images
NEW YORK, NY - AUGUST 4: (L to R) Lead defense attorney Benjamin Brafman walks with former pharmaceutical executive Martin Shkreli after the jury issued a verdict at the U.S. District Court for the Eastern District of New York, August 4, 2017 in the Brooklyn borough of New York City. Shkreli was found guilty on three of the eight counts involving securities fraud and conspiracy to commit securities and wire fraud. (Photo by Drew Angerer/Getty Images)
Martin Shkreli, former chief executive officer of Turing Pharmaceuticals AG, right, arrives at federal court in the Brooklyn borough of New York, U.S., on Friday, Aug. 4, 2017. The 34-year-old Shkreli, known as 'Pharma Bro,' is accused of taking money from investors in his previous hedge funds and using it to start Retrophin, then using the drug-development company's cash to pay them back. Photographer: Peter Foley/Bloomberg via Getty Images
Martin Shkreli, former chief executive officer of Turing Pharmaceuticals AG, center, while his attorney Benjamin Brafman, right, speaks to members of the media outside federal court in the Brooklyn borough of New York, U.S., on Friday, Aug. 4, 2017. Shkreli, notorious for raising the price of a potentially life-saving drug by 5,000 percent, was found guilty Friday of defrauding investors in two hedge funds and in�Retrophin Inc., a pharmaceutical company he co-founded. Shkreli was convicted of three of eight charges, including securities fraud. Photographer: Peter Foley/Bloomberg via Getty Images
NEW YORK, NY - AUGUST 04: Former pharmaceutical executive Martin Shkreli speaks to the media in front of U.S. District Court for the Eastern District of New York with members of his legal team after the jury issued a verdict, August 4, 2017 in the Brooklyn borough of New York City. Shkreli was found guilty on three of the eight counts involving securities fraud and conspiracy to commit securities and wire fraud. (Photo by Spencer Platt/Getty Images)
Martin Shkreli, former chief executive officer of Turing Pharmaceuticals AG, right, arrives at federal court in the Brooklyn borough of New York, U.S., on Friday, Aug. 4, 2017. The 34-year-old Shkreli, known as 'Pharma Bro,' is accused of taking money from investors in his previous hedge funds and using it to start Retrophin, then using the drug-development company's cash to pay them back. Photographer: Peter Foley/Bloomberg via Getty Images
Martin Shkreli, former chief executive officer of Turing Pharmaceuticals AG, left, exits federal court with his attorney Benjamin Brafman in the Brooklyn borough of New York, U.S., on Thursday, Aug. 3, 2017. The 34-year-old Shkreli, known as 'Pharma Bro,' is accused of taking money from investors in his previous hedge funds and using it to start Retrophin, then using the drug-development company's cash to pay them back. Photographer: Peter Foley/Bloomberg via Getty Images
Martin Shkreli, former chief executive officer of Turing Pharmaceuticals AG, arrives at federal court in the Brooklyn borough of New York, U.S., on Thursday, Aug. 3, 2017. The 34-year-old Shkreli, known as 'Pharma Bro,' is accused of taking money from investors in his previous hedge funds and using it to start Retrophin, then using the drug-development company's cash to pay them back. Photographer: Peter Foley/Bloomberg via Getty Images
NEW YORK, NY - AUGUST 3: (L to R) Former pharmaceutical executive Martin Shkreli and attorney Benjamin Brafman depart the U.S. District Court for the Eastern District of New York, August 3, 2017 in the Brooklyn borough of New York City. Jurors finished their fourth day of deliberations and have not reached a verdict. Shkreli faces eight counts of securities fraud and conspiracy to commit securities and wire fraud. (Photo by Drew Angerer/Getty Images)
NEW YORK, NY - AUGUST 3: Former pharmaceutical executive Martin Shkreli departs the U.S. District Court for the Eastern District of New York, August 3, 2017 in the Brooklyn borough of New York City. Jurors finished their fourth day of deliberations and have not reached a verdict. Shkreli faces eight counts of securities fraud and conspiracy to commit securities and wire fraud. (Photo by Drew Angerer/Getty Images)
Martin Shkreli, former chief executive officer of Turing Pharmaceuticals AG, center, exits federal court with his attorney Benjamin Brafman, right, in the Brooklyn borough of New York, U.S., on Thursday, Aug. 3, 2017. The 34-year-old Shkreli, known as 'Pharma Bro,' is accused of taking money from investors in his previous hedge funds and using it to start Retrophin, then using the drug-development company's cash to pay them back. Photographer: Peter Foley/Bloomberg via Getty Images
Martin Shkreli, former chief executive officer of Turing Pharmaceuticals AG, center, leaves federal court with his attorney Benjamin Brafman, left, in the Brooklyn borough of New York, U.S., on Wednesday, Aug. 2, 2017. The jury mulling the fate of Shkreli ended a third day of deliberations without a verdict. Photographer: Peter Foley/Bloomberg via Getty Images
NEW YORK, NY - AUGUST 2: Former pharmaceutical executive Martin Shkreli (c) and attorney Benjamin Brafman (l) depart the U.S. District Court for the Eastern District of New York, August 2, 2017 in the Brooklyn borough of New York City. After hearing closing arguments on Friday, jurors are set to begin deliberations on Monday morning. (Photo by Joe Penney/Getty Images)
NEW YORK, NY - AUGUST 2: Former pharmaceutical executive Martin Shkreli departs the U.S. District Court for the Eastern District of New York, August 2, 2017 in the Brooklyn borough of New York City. After hearing closing arguments on Friday, jurors are set to begin deliberations on Monday morning. (Photo by Joe Penney/Getty Images)
NEW YORK, NY - AUGUST 03: (L-R) Former pharmaceutical executive Martin Shkreli walks with attorney Benjamin Brafman as they arrive at the U.S. District Court for the Eastern District of New York, August 3, 2017 in the Brooklyn borough of New York City. Jurors are continuing deliberations on Thursday. Shkreli faces eight counts of securities fraud and conspiracy to commit securities and wire fraud. (Photo by Spencer Platt/Getty Images)
NEW YORK, NY - AUGUST 2: (L-R) Former pharmaceutical executive Martin Shkreli and attorney Benjamin Brafman arrive at the U.S. District Court for the Eastern District of New York, August 2, 2017 in the Brooklyn borough of New York City. Jurors are continuing deliberations on Wednesday. Shkreli faces eight counts of securities fraud and conspiracy to commit securities and wire fraud. (Photo by Drew Angerer/Getty Images)
Martin Shkreli, former chief executive officer of Turing Pharmaceuticals AG, center, leaves federal court with his attorney Benjamin Brafman, left, in the Brooklyn borough of New York, U.S., on Wednesday, Aug. 2, 2017. The jury mulling the fate of Shkreli ended a third day of deliberations without a verdict. Photographer: Peter Foley/Bloomberg via Getty Images
Martin Shkreli, former chief executive officer of Turing Pharmaceuticals AG, leaves federal court in the Brooklyn borough of New York, U.S., on Wednesday, Aug. 2, 2017. The jury mulling the fate of Shkreli ended a third day of deliberations without a verdict. Photographer: Peter Foley/Bloomberg via Getty Images
HIDE CAPTION
SHOW CAPTION
of
SEE ALL
BACK TO SLIDE

Benjamin Brafman, a lawyer for Shkreli, said in an email that he was "disappointed by the ruling but still hopeful that the court will find it in her heart to impose a reasonably lenient sentence."

A spokesman for the prosecutors declined to comment.

Shkreli, 34, became famous as the "Pharma Bro" after raising the price of anti-infection drug Daraprim by over 5,000 percent in 2015 while he was chief executive of Turing Pharmaceuticals. He was found guilty by a jury in August of unrelated securities fraud charges brought against him in December 2015.

Shkreli has been in jail since September, when Matsumoto revoked his bail after he offered a $5,000 bounty for a strand of Hillary Clinton's hair in a Facebook post.

He was convicted of lying to investors about the performance of two hedge funds he controlled, MSMB Capital and MSMB Healthcare, and of conspiring to manipulate the stock price of a pharmaceutical company he founded, Retrophin Inc<RTRX.O>.

Prosecutors have not disputed that Shkreli's investors came out ahead after Shkreli paid them in shares of Retrophin, and in some cases through settlement agreements and consulting contracts with the company. Shkreli's lawyers argued that as a result, he should not be held responsible for financial loss.

Matsumoto said in Monday's order that under federal law, all of the money that investors put in Shkreli's funds as a result of his fraud, about $6.4 million, must be considered loss. She also said he should get no credit for paying investors back because he only did so after they became suspicious.

The judge said that Shkreli should be held responsible for about $4 million in intended loss to investors for trying to prop up the price of Retrophin shares by trying to stop a group of investors from selling them, even though he was not fully successful.

 

(Reporting By Brendan Pierson in New York; Editing by Susan Thomas)

Read Full Story