By: Akanksha
The Federal Trade Commission and seven states have asked a federal court in Manhattan to hold Martin Shkreli in civil contempt for trading the stocks of at least 60 pharmaceutical companies and publicizing his views on them, in violation of a 2022 order that barred him from the drug industry for life.
The FTC, joined by the attorneys general of New York, California, Illinois, North Carolina, Ohio, Pennsylvania, and Virginia, announced the motion filed in the Southern District of New York on October 13. The filing contains only allegations, and the court has not yet ruled.
The lifetime ban grew out of Shkreli's scheme to prevent cheaper generic competition for Daraprim, a decades old drug for a potentially fatal parasitic infection.
The FTC and New York sued Shkreli and Vyera Pharmaceuticals over Daraprim in January 2020, and other states later joined the case. Vyera, with Shkreli as CEO, bought the drug in 2015 and raised its list price from $17.50 to $750 per tablet. Regulators said the company then used restrictive distribution deals and other tactics to keep generic makers from getting the samples and ingredients they needed.
In January 2022, U.S. District Judge Denise Cote ruled that Shkreli ran an illegal scheme to protect that monopoly, and barred him from the pharmaceutical industry for life. She held him liable for $64.6 million in disgorgement, the legal term for giving up ill-gotten gains. A federal appeals court upheld the lifetime ban and the $64.6 million judgment in January 2024, and the Supreme Court declined to take his appeal of the order in October 2024.
Shkreli was separately convicted in 2017 of two counts of securities fraud and one count of conspiracy after he was caught defrauding investors in relation to his two hedge funds and pharmaceutical company. He was sentenced to seven years in prison, faced up to $7.3 million in fines, and was released in May 2022 after serving four years and three months.
According to regulators, Shkreli began trading pharmaceutical stocks soon after his release from prison in May 2022. They allege he livestreamed trades on YouTube, posted about them on X and Reddit, and ran public campaigns to bet against, or short, certain drug stocks by predicting that key clinical trials would fail.
The 2022 order bars Shkreli from directly or indirectly participating in the pharmaceutical industry, including holding ownership interests in drug companies or trying to influence their management or business.
The regulators are asking the court to order Shkreli to show cause why he should not be held in contempt. Specifically, they want him to:
Sell any pharmaceutical stocks he owns.
Pay a fine equal to his drug-stock trading profits from February 4, 2022, when the ban took effect, plus interest and without offsetting losses.
Pay for an auditor to account for his pharmaceutical trading.
Face escalating penalties, including jail time, for future violations.
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The filing also asks the judge to order Shkreli's sister, Leonora Izerne, and his significant other, Chelsea Voss, to preserve all evidence relating to potential violations of the injunction against Shkreli as both women appear to have assisted or to be assisting Shkreli in violating the permanent injunction.
The FTC voted 1-0 to file the motion, with Chairman Andrew Ferguson recused.
(Rh/APC)
