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UPDATE 3-'Pharma bro' Shkreli convicted of fraud in U.S. court, assails 'witch hunt'

'witch hunt'@ (Adds quote from Shkreli, outside comment)

NEW YORK, Aug 4 (Reuters) - A U.S. jury convicted Martin Shkreli, the brash former drug company and hedge fund executive who drew fierce criticism for jacking up drug prices, of securities fraud on Friday in an unrelated case.

Shkreli, who was acquitted of five of the eight charges against him in U.S. District Court in Brooklyn, characterized the verdict as a victory and called the case a "witch hunt."

Federal prosecutors had accused the 34-year-old of defrauding investors in his hedge funds and stealing from his old drug company, Retrophin Inc, to pay them back.

Jurors found him guilty of two counts of securities fraud and one count of conspiracy.

But they acquitted Shkreli of five other conspiracy counts, including conspiracy to commit wire fraud in connection with Retrophin, the seventh count.

The securities fraud convictions each carry a prison term of up to 20 years and the conspiracy conviction can lead to a sentence of up to five years. However, defendants in such cases rarely receive the maximum sentence.

The verdict came on the fifth day of deliberations, which followed a monthlong trial.

As the decision was read, Shkreli showed little emotion.

Before going on trial, he had been best known for raising the price of anti-infection drug Daraprim by 5,000 percent in 2015 as chief executive of Turing Pharmaceuticals.

That increase sparked outrage from U.S. lawmakers and patients - and earned Shkreli the nickname "Pharma bro."

Outside court after the verdict, Shkreli portrayed the decision as a victory.

"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," he told reporters.

Shkreli emphasized the jury's finding that he did not conspire to steal from Retrophin.

"Count seven was the government's attempt to theorize that I robbed Peter to pay Paul, and the jury has spoken conclusively that Retrophin was not defrauded in this case," Shkreli told reporters.

The charges stemmed from his career before Turing, as chief executive of Retrophin and manager of hedge funds MSMB Capital and MSMB Healthcare.

Prosecutors claimed that between 2009 and 2014, he lied to MSMB investors, lost their money and paid them back with cash and stock misappropriated from Retrophin.

Jurors heard testimony from several MSMB investors who said Shkreli falsely claimed to have an outside auditor and tens of millions of dollars in assets, sent them fabricated account statements after losing their money and became evasive when they asked for their investments back.

Prosecutors said Shkreli eventually paid investors back with stock or cash from Retrophin by having them sign settlement or consulting agreements with the company. Retrophin directors testified that they did not approve those agreements in advance.

Shkreli's lawyer, Benjamin Brafman, had urged jurors to see his client not as a fraudster but as an eccentric genius determined to find cures for rare diseases.

Brafman said that while Shkreli's statements to investors were not always true, he made them in good faith. He also emphasized that none of Shkreli's investors lost money, a rarity in a securities fraud case.

Christopher LaVigne, a former federal prosecutor who is now a defense lawyer at the law firm of Shearman & Sterling, said it was notable that prosecutors secured a conviction even though investors did not lose money, and said it could encourage more such cases in the future.

A case like this, I think it emboldens them a little bit, he said.

(Reporting By Brendan Pierson in New York; Editing by Jonathan Oatis and Noeleen Walder)