Biotech and Pharma

Prosecution says 'all the information' Martin Shkreli's investors got 'was false' as closing arguments start in fraud trial

Key Points
  • "You are the only people who know the whole story of what happened," prosecutor Alixandra Smith told jurors.
  • Shkreli "did not talk about the fact that he had blown up a fund, lost people's money," Smith said.
  • Shkreli's lawyer will begin his own closing argument later Thursday.
A file photo of Martin Shkreli, former chief executive officer of Turing Pharmaceuticals AG, arriving at federal court in Brooklyn, New York.
Peter Foley | Bloomberg | Getty Images

A prosecutor on Thursday told jurors at the Martin Shkreli securities fraud trial that they were the only people who could see the entire scope of the "Pharma bro's" allegedly widespread schemes that duped investors and directors at his drug company for years.

"You are the only people who know the whole story of what happened," said assistant U.S. Attorney Alixandra Smith as she began closing arguments in Shkreli's fraud trial in Brooklyn, New York, federal court.

Smith said that after a month-long trial it was time "to pull back the curtain on these... fraud schemes and finally see the truth behind all these lies."

Shkreli, 34, is accused of defrauding a group of investors in two hedge funds by lying about his investing track record, and doubling down on those lies by issuing glowing financial reports about their money even as he was losing it.

He also is charged with ripping off Retrophin, the drug company he later founded, out of stock shares and cash to pay back those investors.

Smith told jurors that "to this day" investors in Shkreli's two hedge funds "have no idea what really happened to their money, what happened to their funds."

"All of the information they got... was from the defendant, and it was false," Smith said.

Smith said Shkreli routinely lied about his past experience in running a prior hedge fund when he was soliciting investments for his MSMB Capital and MSMB Healthcare funds.

"He did not talk about the fact that he had blown up a fund, lost people's money, and had a [legal] judgment that he owed," Smith said.

Shkreli also lied about having auditors and advisers for his funds, and grossly overstated the total amount of assets that his funds actually had under management, Smith said.

And he also then gave investors "false performance statements and the false [claim] about being able to redeem their money" within 30 days.

In the case of young investor Sarah Hassan, Smith noted, the performance reports she received from Shkreli "all show positive returns, all the while."

But, Smith added, that was false, and Shkreli had actually "stopped trading altogether" in the fund where Hassan had invested her money, "in February 2011 because there was nothing left in the fund."

"The brokerage account [for the fund] was actually shut down in 2011," the prosecutor said.

Hassan was "told her investment had grown, which is a lie, and she's also told she can take her investment [out] in cash or stock, which is lie," Smith said.

Hassan and other witnesses testified at length how Shkreli stonewalled them for months or more as they sought the redemption of their money after he said his hedge funds were closing. Hassan, like a number of other investors, ended up getting a combination of Retrophin stock and cash, instead of just cash from the hedge fund, as she had requested.

Defense lawyers have repeatedly underscored the fact that Hassan and the other Shkreli investors all ended up getting stock and cash that was worth more than their original stakes in his hedge funds.

Smith's closing statement was expected to continue until midday. After that, Shkreli's lawyer will give his own argument.

Prosecutors are expected to conclude their statements with a rebuttal to the defense argument on Friday morning. After that jurors will receive legal instructions from Judge Kiyo Matsumoto, and begin their deliberations.

Defense lawyers did not call a single witness in the case, which began in late June. Shkreli earlier this week told Matsumoto he would not testify.

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