Prosecution called its first witness in the trial of former Turing Pharmaceutical CEO Martin Shkreli on Thursday. The witness, a former investor in one of Shkreli’s funds, alleged that Shkreli misled her about the fund’s performance, touting returns that were “too good to be true.”
The witness, Sarah Hassan, told jurors that she invested $300,000 with Shkreli in 2011 after being told he was “a rising star in the hedge fund world” who managed $40 million. She said she was thrilled when Shkreli reported she made nearly $60,000 that year alone, according to the Associated Press. However, she said those returns far overstated Shkreli’s performance; in fact, the fund lost money. A year later, Shkreli told her that he was using all the assets in the fund to start up Retrophin. When she tried to get her investment back, he stalled for months before forcing her into a settlement that included shares of Retrophin and $400,000 cash, she said.
Day 4 of #Shkreli trial underway. First witness, Sarah Hassan, 27-year-old daughter of Fred Hassan, just took the stand. Govt questioning
— Meg Tirrell (@megtirrell) June 29, 2017
Sarah Hassan tells prosecutor she invested $300k with #Shkreli in MSMB Capital in Jan 2011
— Meg Tirrell (@megtirrell) June 29, 2017
“To hear over a year later that the cash was gone, it was upsetting,” Sarah Hassan testified as the first witness at Shkreli’s securities fraud trial in federal court in Brooklyn. “I saw that as being my cash. It was just not right.”
"To be frank, I felt somewhat betrayed at this point," Hassan, 27, told jurors in Brooklyn, New York, federal court. "I was told I could get my cash from the fund months ago."
It’s unclear whether Hassan is the same government witness who was allegedly threatened by a member of Shkreli’s family, as Bloomberg reported last week.
The defense has countered that the federal government unnecessarily frightened three of the defense’s witnesses after FBI agents repeatedly tried to contact them.
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The Shkreli trial is just getting started, but already there have been more than a few interesting twists. The trial was supposed to begin Monday, but, thanks to Shkreli’s reputation as “the most hated man in America,” the jury selection process consumed two full days as the defense meticulously interviewed 250 potential jurors, with many claiming they would be unable to issue a fair judgment thanks to Shkreli’s reputation as the “pharma bro” who hiked the price of lifesaving AIDS drug Daraprim by 5,000%.
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MedCity, a pharma blog that"s covering the trial, published a ranking of the top five excuses potential jurors used to get out of jury duty - one juror was excused for saying Shkreli "looks like a dick." Another said he couldn"t be impartial because Shkreli "disrespected the Wu Tang Clan."
“In my head, I said, ‘That’s a snake,’” one woman told attorneys, perhaps the most iconic comment to date.
“Honestly? Because he kind of looks like a dick,” another juror said more bluntly, explaining his bias to the judge. The individual was reportedly familiar with Shkreli’s ownership of the sole copy of the Wu-Tang Clan album “Once Upon a Time in Shaolin,” purchased through an online auction in 2015 for $2 million.
“He disrespected the Wu-Tang Clan, so…” On a related note, CNBC reported that on day three a potential juror also brought up the issue and the aftermath, in which Shkreli leaked the record.
“In this particular case, the only thing I’d be impartial about is what prison he goes to” — another gem from day three.
And finally; “I am,” from the man Judge Matsumoto asked directly “Are you concerned for your safety?”
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However, in a sign of hope for the embattled Shkreli – who is facing up to 20 years in prison if convicted - defense lawyer Benjamin Brafman has hit upon a novel defense strategy, according to the New York Times.
Brafman, a celebrity criminal defense lawyer known for representing Sean “P Diddy” Combs, Charles Kushner, and former Mafia boss Sammy the Bull Gravano, is claiming that much of the public’s hostility toward his client stems from Shkreli’s odd behavior, which he implied could be related to his client being mildly autistic - though it"s unclear if a doctor has diagnosed him as such.
They’re calling it: The “Born This Way” defense, after the 2011 Lady Gaga hit single celebrating LGBTQ youth:
“An odd duck. Perhaps Autistic. Weird. Maybe with Asperger’s. A guy who shuffled around his office in bunny slippers with a stethoscope around his neck because he felt comfortable that way. This is how Martin Shkreli was portrayed on Wednesday for his trial on fraud charges – by Benjamin Brafman, his own lawyer.
“Is he strange? Yes,” Mr. Brafman said of his client. But he added, “every single government witness will concur that Martin Shkreli, despite his flaws and his personality, is brilliant beyond words.”
Brafman also pushed back against the defense’s claims, arguing that none of Shkreli’s investors lost money. In fact, Brafman told the jury they made money thanks to Shkreli’s financial prowess.
Shkreli is being tried on eight counts of securities fraud and wire fraud related to his time running two hedge funds, MSMB Capital and MSMB Healthcare, and a pharmaceutical company he founded called Retrophin.
In particular, Shkreli has been accused of falsifying investor statements, backdating documents and misleading investors about his record as a fund manager. He also allegedly misstated how much money was in the funds, according to prosecutor G. Karthik Srinivasan, who, in his opening statement, accused Shkreli of being a “con man” who managed to convince his investors that he was “a Wall Street genius.”
Prosecutors alleged that the string of events that led to Shkreli’s arrest began with a bad trade at his first hedge fund, MSMB Capital. Shkreli lost millions of dollars on a trade that put the fund in the red.
Around the same time, Shkreli founded MSMB Healthcare, a second fund, and Retrophin, a pharmaceutical company. Shkreli allegedly told his investors they could have their money back in cash or Retrophin stock, and when a couple of investors threatened to sue, Shkreli hired them as consultants at Retrophin.
“Retrophin owed these investors nothing – the defendant owed these debts,” Srinivasan said.
As Brafman noted, since Shkreli"s departure, Retrophin has become enormously profitable - it"s now worth about $700 million, and, Brafman said, the board is still "raping" the company. Brafman also argued that the board"s treatment of Shkreli was unceasingly cruel, saying they mocked him and questioned his sexuality - all for being "different."
Investors may have made their money back, but Shkreli still committed fraud, the prosecution countered.
The trial is expected to last between four to six weeks.
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