The Federal Trade Commission and seven U.S. states are asking a federal judge to hold Martin Shkreli in civil contempt, alleging that the former pharmaceutical executive violated a lifetime ban from the drug industry by trading biotechnology stocks and publicly promoting investment strategies involving pharmaceutical companies.
The request marks another legal challenge for Shkreli, who was barred from participating in the pharmaceutical industry in 2022 following an antitrust case involving the pricing of a life-saving medication, according to reporting by CNBC.
Federal regulators allege that Shkreli traded shares in at least 60 pharmaceutical companies after his release from prison in May 2022. They also contend that he used social media platforms, including YouTube, X and Reddit, to discuss his investments and encourage trading activity in biotechnology stocks.
The FTC argues that those activities breach a court injunction prohibiting Shkreli from directly or indirectly participating in pharmaceutical businesses, including through ownership interests or efforts to influence corporate operations.
The contempt allegations have not been adjudicated, and the court must determine whether Shkreli’s activities fall within the scope of the existing prohibition.
Regulators Seek Financial Penalties
The FTC and the participating states are requesting sanctions that would require Shkreli to dispose of any pharmaceutical stocks he currently holds and surrender profits generated from trading in the sector.
The proposed financial penalties would be calculated without allowing trading losses to offset gains and would include interest. Regulators are also seeking additional sanctions for future violations, potentially including incarceration.
Daniel Guarnera, director of the FTC’s Bureau of Competition, said in a statement reported by Quartz that the agency intends to enforce court orders designed to protect consumers from anticompetitive practices.
The dispute raises questions about how broadly a prohibition on pharmaceutical industry participation can be applied to stock market transactions and public investment commentary.
While the injunction explicitly restricts Shkreli’s involvement in pharmaceutical companies, the court will need to assess whether the trading and online activities identified by regulators constitute prohibited participation.
Earlier Antitrust Ruling
Shkreli gained national attention in 2015 when Turing Pharmaceuticals, which he headed, increased the price of Daraprim, a medication used to treat the potentially fatal parasitic infection toxoplasmosis, from $17.50 to $750 per tablet.
The increase prompted widespread criticism and intensified scrutiny of prescription drug pricing practices in the United States.
In January 2022, U.S. District Judge Denise Cote found that Shkreli had engaged in anticompetitive conduct designed to preserve the company’s control over the Daraprim market and obstruct lower-cost generic competitors.
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The ruling required Shkreli to pay approximately $64.6 million and permanently prohibited him from participating in the pharmaceutical industry. A federal appeals court upheld the decision in January 2024, according to reporting published by Investing.com.
The antitrust proceedings were separate from Shkreli’s earlier criminal securities fraud case.
He was convicted in 2017 on charges related to his management of hedge funds and dealings involving Retrophin, a pharmaceutical company he previously led. He received a seven-year prison sentence and was released in May 2022.
Renewed Scrutiny of Post-Prison Activities
The latest filing is not the first time regulators have questioned Shkreli’s compliance with the pharmaceutical industry ban.
In 2023, the FTC pursued contempt proceedings related to his involvement with Druglike, a business associated with drug-discovery technology, and his responses to regulatory requests for information.
Shkreli disputed those allegations, maintaining that the businesses involved were software companies rather than pharmaceutical enterprises, according to Reuters reporting at the time.
The current action focuses instead on his financial transactions and public statements about pharmaceutical investments.
According to the allegations described by CNBC, Shkreli used livestreams to discuss biotechnology trading strategies and publicly advocate positions against certain pharmaceutical stocks based on anticipated clinical trial results.
Source: CNBC
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