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'Pharma bro' Martin Shkreli moved from federal prison after claim he was running drug company with banned cellphone

Key Points
  • "Pharma bro" Martin Shkreli has been removed from the federal prison in Fort Dix, New Jersey, after claims that the convicted fraudster was running his pharmaceuticals firm Phoenixus AG while locked up with the help of a contraband cell phone.
  • Shkreli, whose firm gained him infamy for hiking the price of the drug Daraprim by more than 5,000 percent, now is being held at the Metropolitan Detention Center in Brooklyn and will be transferred to the federal prison in Allenwood, Pennsylvania, his lawyer said.
  • He was convicted in 2017 of defrauding investors in two hedge funds he ran, and conspiring to manipulate shares in another drug company, Retrophin. A judge revoked his release bond after his trial because of his offer of a $5,000 bounty on Facebook for anyone who could give him a lock of Hillary Clinton's hair.
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.
Getty Images

The "Pharma Bro" is back in his native Brooklyn — for now.

Notorious drug-company fraudster Martin Shkreli has been removed from a federal prison in New Jersey after there were claims he was running his pharmaceuticals firm while locked up with the help of a contraband cellphone.

Shkreli, who had been in the low-security prison in Fort Dix serving a seven-year fraud sentence, now is being held at the Metropolitan Detention Center in downtown Brooklyn, according to the U.S. Bureau of Prisons.

He will remain at the facility — not far from the location of his conviction in Brooklyn federal court — until he is transferred to his new home, a federal prison facility in Allenwood, Pennsylvania, his lawyer Benjamin Brafman told CNBC.

"A formality," Brafman said in an email when asked about the move to Brooklyn and its reason.

A Bureau of Prisons spokesman said "we do not share the reasons why a specific inmate was transferred to a particular correctional institution."

However, the spokesman said that generally speaking, "there are number of factors that must be considered." Those include "the level of security and supervision the inmate requires, medical and programming needs, and other considerations. including proximity to an individual's release residence," he said.

Shkreli, who was born in Brooklyn and who was living in Manhattan when he was convicted at trial, previously spent more than half a year locked up in the same Brooklyn federal jail where he now is being held.

In September 2017 — a month after he was convicted of multiple criminal charges — Shkreli's $5 million release bond was revoked by his trial judge because of his offer of a $5,000 bounty on Facebook to any of his social media followers who could provide him with a lock of Hillary Clinton's hair.

The Wall Street Journal reported on March 7 that Shkreli, 36, "still helps call the shots" at the drug company Phoenixus AG, using a banned cellphone to fire the Manhattan company's CEO — a decision he later reversed — and direct other actions as part of his plan to acquire rare medications and invest in "an ambitious research-and-development agenda."

Phoenixus gained Shkreli and the firm international infamy under its previous name, Turing Pharmaceuticals, in 2015 when it hiked by more than 5,000% the price of a medication, Daraprim, which is used to treat a parasitic infection found in pregnant women, babies and HIV patients. That price increase made Shkreli the poster boy for the issue of rising drug costs in the United States.

The inmate handbook at Fort Dix specifically says, "Conducting a business, in any way, is a prohibited act," the Journal noted.

The Journal also reported that Shkreli, who had been banned by Twitter while still a free man, was tweeting under a new account, which became suspended when the article appeared.

A day after the Journal's article was published, the Bureau of Prisons said it was investigating whether Shkreli had broken prison rules barring inmates from running a business or possessing a cellphone. He reportedly was moved into solitary confinement at Fort Dix that same day.

Shkreli was convicted in August 2017 of three out of eight felonies.Two of those counts related to misleading investors about key details and the awful financial performance of two hedge funds he had operated, MSMB Capital and MSMB Healthcare.

He also was convicted of conspiring to fraudulently manipulate stock shares of Retrophin, the pharmaceuticals company he founded after his hedge funds collapsed.

At trial, prosecutors alleged that Shkreli defrauded multiple investors out of millions of dollars placed in his hedge fund, only to repay them with stock and cash that he looted from Retrophin.

At his sentencing, Shkreli wept and told Judge Kiyo Matsumoto, "The one person to blame for me being here today is me."

"Not the government. There is no conspiracy to take down Martin Shkreli," he said. "I took down Martin Shkreli with my disgraceful and shameful actions."

He also said, referring to the investors he had swindled, "I am terribly sorry I lost your trust ... you deserve far better."