business

Shkreli Ordered to Stop Discussing Trial Around Courthouse

Updated on
  • Ex-pharmaceutical executive’s lawyers discussed plea deal
  • Shkreli accused of defrauding investors in hedge funds

Martin Shkreli Faces Day of Reckoning in Court

Martin Shkreli’s impromptu trial discussions with reporters at the Brooklyn federal courthouse are over as the judge overseeing the case ordered the former pharmaceutical executive to stop talking about it in and around the building. But he can go on discussing it on the internet.

Shkreli, on trial for securities fraud, spent about five minutes on June 30 in a courtroom set up for an overflow crowd, including reporters. He criticized prosecutors and the media while denying he defrauded the first witness in the case. The government argued a gag order was necessary to prevent Shkreli from causing a mistrial by exposing jurors to his opinions.

“I was shocked that there were these comments," U.S. District Judge Kiyo Matsumoto said at a hearing on Wednesday, where prosecutors sought a complete gag on Shkreli, including his comments on social media about the trial. The judge restricted him from talking “in the courthouse or on perimeter roads.”

Also at Wednesday’s hearing, prosecutors revealed for the first time that Shkreli’s lawyers offered to have him plead guilty at least three times, including a week before the June 26 start of the trial.

Shkreli’s lawyer Benjamin Brafman said he was doing his duty to see if the case could be worked out without a trial and his client didn’t initiate any of the talks and rejected the idea of admitting guilt.

“I would never plead guilty to something I did not do,” Brafman quoted Shkreli as saying. “We’re going to trial.”

Shkreli, 34, is fighting charges of operating two hedge funds like a Ponzi scheme.

Prosecutors claim he took clients’ money without permission and used it to start Retrophin Inc. Shkreli is also accused of looting $11 million of the drug company’s assets to pay off investors who’d lost money in the funds.

He faces as long as 20 years in prison if convicted of the most serious charges.

Jurors on Wednesday heard from an investor whom Shkreli once credited with helping create Retrophin.

Darren Blanton, 52, founder of the investment company Colt Ventures, testified he put $1.25 million into Shkreli’s hedge fund in 2011, but had second thoughts when he found out that the administrator Shkreli claimed helped run his fund denied working for him.

For three years, Blanton said he and his staff pestered Shkreli to return his money. In 2014, Blanton said Shkreli finally turned over $200,000 and gave him 160,000 restricted shares in Retrophin. He later gave him another 200,000 shares.

Brafman pointed out that from his $1.25 million investment, Blanton got $1.6 million back and is still holding 150,000 Retrophin shares worth about $3 million.

Earlier in the trial, another investor testified she made a $2.7 million profit from the sale of Retrophin shares Shkreli gave her when he repaid the initial $300,000 she invested. It took about a year to get her money and Retrophin stock, Sarah Hassan told the jury at the start of the trial.

Shkreli’s Social Media Antics and Other Reporters’ Notes from Trial

In his visit with reporters on Friday, Shkreli cited that testimony.

“It was kind of interesting that the victim of this case made 10 times her money,” he told reporters. “We should all only be this victimized in life.”

It’s those kinds of comments that prompted the judge Wednesday to impose the partial gag on Shkreli.

Shkreli, who broadcasts much of his life online, also commented on the trial in internet videos, his Facebook page and, according to prosecutors, on Twitter, despite having been banned from the site for harassing a female journalist. The account @BLMBro, which Shkreli allegedly used, was suspended recently.

Brafman defended Shkreli’s comments to the reporters saying he had a right to defend himself against an onslaught of negative media coverage. Brafman also insisted a gag order wasn’t necessary.

"So what happened Friday?" the judge asked. "He walks into a press room and he starts talking about the case?"

Brafman said a reporter with a "vendetta," baited Shkreli. "I hope your honor understands that he’s relatively young." The lawyer apologized to the judge and promised it wouldn’t happen again because a member of the defense team would be with Shkreli at all times.

The judge still had concerns about potentially exposing jurors to the comments, although she declined to restrict their movements in the court building or to sequester them.

"What is happening, based on your own client’s conduct, there is a danger that those jurors will be exposed,” Matsumoto said. “There is a great risk."

(Updates with witness testimony in 10th paragraph.)
    Before it's here, it's on the Bloomberg Terminal. LEARN MORE