Crime and Punishment

Pharma bro, accused fraudster Martin Shkreli involved in new company that is seeking $1 million in debt offering

Martin Shkreli, former Chief Executive Officer of Turing Pharmaceuticals
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Brother, can you spare $1 million — for Martin Shkreli?

A regulatory filing reveals that Shkreli — the notorious pharma bro and accused securities fraudster — is now also an executive officer and director of a new tech company that is trying to raise $1 million through a debt offering.

The company, Godel Systems, is a software entity that touts its founder as "an elite entrepreneur," according to an online job-listing site.

Last week's Securities and Exchange Commission filing by Godel Systems indicated the company has already raised $50,000 out of the $1 million in debt it began issuing in mid-January. The debt would be "convertible into equity securities," according to the filing.

It also indicates that one of the people involved in the new company is a long-time Shkreli associate whose employment history includes stints at both the hedge fund and pharmaceutical firm where Shkreli has been accused of fraud.

The SEC filing comes as Shkreli prepares to face trial in Brooklyn, New York, this summer on federal criminal charges. Shkreli is accused of defrauding the pharmaceuticals company he founded, Retrophin, out of millions of dollars in order to pay back investors in hedge funds he previously ran, and whom he was accused of ripping off.

The SEC is suing Shkreli in a related civil action that claims he committed fraud by misappropriating money from the MSMB Capital Management fund, which he had founded, and by making material misrepresentations to the fund's investors about its financial performance.

Shkreli, who is free on $5 million bond in the criminal case, has denied wrongdoing.

On Monday, a federal judge ordered Shkreli to pay $2.6 million to a pharmaceuticals expert, Thomas Koestler, who for years had asked Shkreli to honor an agreement to transfer shares in Retrophin to him in exchange for consulting services Koestler provided to the company.

CNBC contacted Shkreli's criminal defense lawyer and left a message at Godel System's voicemail box seeking comment on the debt issuance filing. Neither has replied as of yet.

Godel Systems is located at the address of a "co-working" office space in Manhattan's Flatiron District, according to the SEC filing.

A Google search for a website registered to Godel Systems did not return any results.

However, a job-listing site for programmers contains a description of Godel Systems.

"Godel Systems, Inc. is a professional software company that aims to be the leading information provider of data, workflow and communications solutions for financial, law and scientific professionals. Gödel's first vertical will target the $27bill+ financial market with additional future verticals planned in law and science. We plan to revolutionize the data aggregation and communications model for millions of users across multiple industries in new and exciting ways," according to a job posting.

"Godel's founder has a tremendous track record as an elite entrepreneur with the last two ventures reaching valuations of over $500mill and $1bill respectively! We are well funded with proven management, while at the same time aiming to maintain the most important elements of the start-up culture," the posting said.

Godel Systems' post said it is looking to hire a "Full Stack JavaScript Developer." The company says it offers "great benefits," a "smart and ambitious team," "proven track record" and "unique start-up culture."

The "Godel" in the company's name appears to be a reference to the renowned Austrian mathematician, Kurt Gödel.

Turing Pharmaceuticals, the company that Shkreli founded after being ousted from Retrophin in 2014, was named after the famous British mathematician Alan Turing.

The SEC filing, dated Jan. 31, reveals that besides Shkreli, another executive officer and director of the Godel Systems is a Shkreli associate named Kevin Mulleady.

Mulleady is identified by name several times in a pending federal civil lawsuit by Retrophin that accuses its founder and former CEO Shkreli of "repeatedly breaching his duty of loyalty to Retrophin." Mulleady, who is not a defendant in that suit, is identified as having been a Retrophin employee, but it is not clear what formal duties, if any, he had.

The suit details a complicated stock swap of Retrophin shares allegedly involving Mulleady and Shkreli after the SEC opened a probe of MSMB Capital Management, the hedge fund that Shkreli and Mulleady had operated. Shkreli was chief investment officer and Mulleady was CEO of MSMB Capital.

That swap allegedly had the effect of giving the SEC the false impression that MSMB Capital Management had assets under management that it actually did not possess.

The federal criminal complaint against Shkreli does not mention Mulleady by name.

But a section of that criminal complaint mirrors the Retrophin suit's claims that Shkreli, in late 2012, induced Mulleady and another Retrophin employee to deliver 90,000 of their Retrophin shares to him in exchange for a promise of unrestricted shares in a corporate entity being used to accomplish a reverse merger with Retrophin. Shkreli allegedly transferred 75,000 of those initial shares to MSMB Capital.

In the criminal indictment of Shkreli, a grand jury describes that alleged legerdemain.

The indictment says Shkreli and Retrophin's counsel, Evan Greebel, "orchestrated a transfer of shares from Shkreli from Co-Conspirator 1, as well as Corrupt Employee 1 and Corrupt Employee 2, individuals whose identities are known to the Grand Jury, and backdated them to the summer of 2012." The names of the co-conspirator and the "corrupt" employees are not given in the indictment.

The indictment, in an earlier section, first introduced "Co-Conspirator 1" as someone who allegedly misappropriated funds with Shkreli from MSMB Capital.

Mulleady, when contacted by CNBC on Wednesday, said, "I have no comment" when asked about his involvement in Godel Systems.

Mulleady said, "I have no comment on that" when asked about whether he is a person referred to without being named in the federal criminal complaint against Shkreli, given that indictment's overlap with allegations related to him in Retrophin's civil lawsuit.

Mulleady, according to campaign finance records, worked at Shkreli's new pharma company, Turing Pharmaceutical, after Shkreli was ousted by Retrophin.

It was while CEO of Turing that Shkreli first gained public notoriety by hiking the price of the decades-old antiparasite drug Daraprim from $13.50 per pill to $750.

Mulleady's LinkedIn page identifies him as CEO of The StoneCorner Group for the past six years, and before that as a portfolio manager for Morgan Stanley.

The current LinkedIn page for Mulleady does not mention MSMB Capital Management, Retrophin or Turing Pharmaceuticals.

A third executive and director of Godel Systems is identified as Akeel Mithani, Godel System's chief financial officer.

Like Shkreli, Mithani is a graduate of Baruch College in New York City.

Correction: The SEC suit claims Shkreli made material misrepresentations to MSMB Capital Management fund investors about its financial performance. An earlier version misstated this claim.