Biotech and Pharma

'Pharma bro' fraudster Martin Shkreli ordered to pay $388,000 in restitution to swindled investor

Key Points
  • Martin Shkreli was ordered to pay $388,336.49 in restitution to Richard Kocher, a hedge fund investor he defrauded.
  • Shkreli was convicted of duping Kocher and other investors, and of manipulating the stock of his pharmaceuticals company Retrophin.
  • He gained infamy for raising the price of the drug Daraprim by more than 5,000 percent, has been in jail since offering a bounty for hair plucked from the head of Hillary Clinton.
Ex-pharmaceutical executive Martin Shkreli arrives at the U.S. District Court for the Eastern District of New York in June, 2017.
Getty Images

A federal judge on Tuesday ordered "pharma bro" scammer Martin Shkreli to immediately pay a defrauded hedge fund investor about $388,000 in restitution, roughly half of what the investor asked for.

The order comes a month after Judge Kiyo Matsumoto sentenced Shkreli to seven years in prison for defrauding that investor, Richard Kocher, and a number other people, as well as for conspiring to manipulate stock shares.

In addition to his prison sentence, Matsumoto also imposed a fine of $75,000 on the 35-year-old Shkreli and ordered him to forfeit almost $7.4 million in assets to the federal government.

Kocher, a New Jersey builder, was the only one of Shkreli's investors to seek restitution for damages from the crimes.

Those crimes were related to Shkreli misleading Kocher and other investors about key details of his two hedge funds, sending them phony financial performance statements and refusing to redeem their investments when they asked.

Both funds effectively went belly up after Shkreli's purported stock picking acumen turned out to be a charade.

But the investors ended up getting back their original investments, and even more money, after Shkreli paid them off with a combination of stock and cash from a new pharmaceuticals company he had founded, Retrophin.

Shkreli's lawyer, Benjamin Brafman, had argued that given that fact, none of the investors were entitled to restitution under the law.

But Kocher, who had originally invested $200,000 in Shkreli's fund, claimed he was entitled to nearly $779,000 in restitution.

That claim was based on the fact that Shkreli delayed, for months, repaying Kocher his investment stake when Kocher told him in early 2013 he needed it to finance a real estate deal in New Jersey.

Kocher said that because he was not able to get his money back from Shkreli when he needed it, he was forced to take on a partner in the transaction.

And when the deal came to fruition, Kocher has said, he had to pay that partner $769,477 as a share of its profits.

"Had Mr. Shkreli not defrauded Mr. Kocher, Mr. Kocher would have been able to use his own money as funding for the real estate investment, and would not have had to take on a partner," Matsumoto noted in her order Tuesday.

Kocher asked Matsumoto to order Shkreli to pay him what Kocher had to give his partner for the deal. He also wanted Shkreli to cover the legal costs he incurred in trying to redeem his MSMB hedge funds investment and more than $200 in costs related to his testimony at Shkreli's trial.

Matsumoto, however, said Shkreli would have to pay Kochher only $388,336.49.

That amount, the judge noted, represents Kocher's lost profits from the real estate deal and his legal costs related to the hedge fund fraud, less the value of the $390,421.14 in Retrophin stock and cash he previously got as a settlement from Shkreli.

A message left at Kocher's office requesting comment on Matsumoto's order was not immediately answered.

Shkreli's lawyer Brafman declined to comment on the order.

Brafman last month filed a notice of appeal of Shkreli's conviction.

That appeal will play out while Shkreli remains locked up in federal custody in a Brooklyn, New York, jail, where he has been since last September.

Shkreli landed in jail when Matsumoto revoked his $5 million bail after saying he represented a threat because of his offer of a $5,000 bounty for each strand of hair from the head of Hillary Clinton provided to him by his Facebook followers.

The U.S. Bureau of Prisons has yet to disclose where it intends to send Shkreli to serve the remainder of his sentence.

Brafman has asked for Shkreli to do his time in a minimum security federal camp adjacent to the U.S. Penitentiary Canaan in northeastern Pennsylvania, or another such facility near New York City. Matsumoto has endorsed Brafman's request, but her recommendation is not binding.

Shkreli gained notoriety in 2015 while heading another drug company, then known as Turing Pharmaceuticals, and raising the price of its drug Daraprim by more than 5,000 percent. The drug is used to treat a parasitic condition found in pregnant women, babies and HIV-infected people.