FTC seeks contempt finding against Martin Shkreli for alleged pharma ban violation

Investing.com -- The Federal Trade Commission and seven states are seeking to hold Martin Shkreli in contempt of court, alleging that the former pharmaceutical executive violated a lifetime ban on participating in the drug industry.

The motion, as described in the draft, centers on Shkreli’s alleged trading in pharmaceutical stocks and online commentary about biotech investments. Regulators contend that his activities violate a 2022 court order barring him from the pharmaceutical industry.

According to the allegations, Shkreli traded shares in at least 60 pharmaceutical companies and used livestreams on YouTube, X and Reddit to discuss trading strategies and short-selling campaigns. In one reported remark, he told viewers, "I’m showing you how to trade and invest in biotech."

The FTC and the states are seeking remedies that could require Shkreli to divest his pharmaceutical holdings and surrender profits from the alleged violations, with interest. They are also seeking penalties for future violations, potentially including further court sanctions.

Why Shkreli Was Banned From the Pharmaceutical Industry

Shkreli became widely known in 2015 after Turing Pharmaceuticals, which he led, raised the price of Daraprim from $17.50 to $750 per tablet, an increase of more than 4,000%. The drug is used to treat toxoplasmosis, a potentially life-threatening parasitic infection that poses particular risks to immunocompromised patients.

The price increase drew widespread condemnation, but the lifetime ban stemmed from a separate antitrust case. The FTC and seven states sued Shkreli and other defendants in 2020, alleging that they had used restrictive distribution arrangements and supply agreements to prevent generic-drug developers from obtaining the materials needed to compete with Daraprim.

In January 2022, U.S. District Judge Denise Cote found Shkreli liable for antitrust violations, ordered him to pay $64.6 million and barred him for life from participating in the pharmaceutical industry. The Second Circuit Court of Appeals upheld the ruling in January 2024.

Separately, Shkreli was convicted in 2017 of securities fraud and conspiracy involving his hedge funds and Retrophin, a pharmaceutical company he previously led. He was sentenced to seven years in prison and released in 2022.

The latest allegations raise a question about the scope of the lifetime injunction: whether Shkreli’s pharmaceutical-stock trading and online investment commentary constitute prohibited participation in the industry. That question remains for the court to decide.

Original Article

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