Martin Shkreli is going from Pharma Bro to Pharma Bro(ke).
After denying the Shkreli legal team’s long-shot motion to throw out one of Shkreli’s convictions on Friday, Brooklyn judge Kiyo Matsumoto, who presided over Shkreli’s summer trial that resulted in three convictions on securities and wire fraud, has released her recommendation for the financial restitution Shkreli must play to his purported victims.
Altogether, Shkreli – who was once worth $100 million but is now effectively broke – was found responsible for $10 million in restitution.
The news is bound to be a shock to his legal team, which argued that, since Shkreli’s “victims” ultimately made money on their investments in two hedge funds run by Shkreli, the former Pharma founder and CEO shouldn’t be forced to make restitution payments.
Judge in #MartinShkreli denies motion for acquittal and sets loss amount for sentencing purposes: “For the purposes of sentencing, the court will apply a loss amount of $2,998,000 on Count Three, $3,402,450 on Count Six, and $4,000,000 on Count Eight.” I.e. just north of $10M
— Dan Mangan (@_DanMangan) February 26, 2018
Whether Shkreli will end up paying the full recommended amount is unclear. Shkreli is due to be sentenced on March 9. He’s facing up to 20 years.
As Reuters explains, the ruling could mean more prison time for Shkreli. That’s because the dollar amount of financial loss plays a major role in federal sentencing guidelines. While Matsumoto must consider these guidelines, she is not bound to follow them.
Matsumoto said in Monday’s order that under federal law, all of the money that investors put in Shkreli’s funds as a result of his fraud – about $6.4 million – must be considered loss. She also said he shouldn’t get credit for paying his investors back because he only did so once they confronted him with their suspicions. He must also be held responsible for about $4 million in intended losses from trying to prop up the price of Retrophin shares, even though he was not successful.
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Shkreli, who was sent to a Brooklyn federal prison to await sentencing after publishing what prosecutors successfully argued were a series of threatening social media posts, made his first public court appearance in months on Friday. Reporters noted Shkreli had grown a prison beard, and was also looking surprisingly buff.
As the New York Post explained, Shkreli got buff in prison.
“He’s got his prison muscles,” under his navy blue detention uniform, one source close to the defense noted of the convicted Ponzi fraudster’s first court appearance since he was locked up in September.
The newly bearded Shkreli, 34, has apparently fit right in at his new home in Brooklyn’s Metropolitan Detention Center.
“They like him in there,” the source told The Post of Shkreli’s fellow cons.
“They don’t put their arms around him and say ‘Give me your money’ like they do to other new prisoners… they like him.”
Prosecutors initially asked for Shkreli to forfeit $7.3 million in assets, including a Picasso painting and one-of-a-kind Wu Tang Clan album.
Shkreli’s lawyers have been pushing for their client to receive a sentence of under 16 months. But two legal analysts told CNBC that the high dollar amount of the recommended restitution means Shkreli could be sentenced to a decade in prison – possibly longer.
John Coffee, director of the Center on Corporate Governance at Columbia University Law School, told CNBC, “Under the Sentencing Guidelines, the gain or loss from the offense is a principal factor in determining the sentence.”
“Such a finding of loss could justify a 10-year sentence – or longer. But federal judges no longer have to follow the guidelines and they are only advisory,” Coffee said.
“She has great discretion as to the sentence she imposes; she could recognize that he is a first offender and give him modest time. Or she could place more emphasis on the amount of the loss and his unrepentant attitude,” Coffee said.
“This is why most defense counsel instruct their client to appear modest and humble at their trial. Shkreli was the opposite and may pay a high price for his arrogance.”
Matthew Schwartz, a lawyer not affiliated with the Shkreli case, told CNBC, “In Shkreli’s case, if the government is right that the losses are between $9.5 [million] to $25 million, then there will be a 20-level increase to the applicable sentencing guidelines; whereas if Shkreli is right, the loss amount would be zero.”
“A 20-level difference in the sentencing guidelines could easily mean a difference of literally decades in prison,” said Schwartz, of the firm Boies Schiller Flexner. “Of course, the guidelines are just that, and the court is not required to adhere to them.”
The judge has not yet ruled on the amount of money Shkreli will fork over when he is sentenced, but prosecutors are recommending that he pay more than $7 million in restitution.