And… In An 85 Page Footnote: Shkreli’s $60 To $90 Million Civil Securities Fraud — Against KaloBios & Its Shareholders

Here is the full PDF file complaint at law, as amended — and filed in the federal courts in San Jose, California Friday — to set out Mr. Shkreli’s highly-likely personal liability here.

It was refiled, so that the plaintiffs there could more completely pursue Mr. Shkreli personally, now that the outcome of his felony trial is known.

All the other formerly named civil defendants have paid up, and settled out — but not so, the 3X felony convict, at right. And so, we won’t cross post it in the  Humanigen review blog, at all. It is not that public company’s issue, any longer.

I’ll quote just a bit, here:

…Between September 2009 and September 2014, he engaged in extensive fraudulent and illegal misconduct at these companies by, inter alia, stealing hundreds of thousands of dollars from MSMB; fraudulently inducing investments in MSMB by deceiving investors as to its insufficient liquidity and as to his own abysmal track record as a hedge fund manager; lying to large investors in stating MSMB’s assets under management as $35 million when they were only $700 and by identifying as MSMB’s independent auditor and administrator firms that had never been hired; deceiving MSMB’s broker by misrepresenting that he had located shares sufficient to cover a failed short sale, when he had not done so, leading to the broker closing at a loss of $7 million; working with his lawyer (who was later indicted) to defraud Retrophin into settling MSMB debts and personal debts, including through use of MSMB settlement agreements disguised as sham Retrophin consulting agreements; working with his lawyer and corrupt employees to fabricate investments by MSMB in Retrophin through concealed stock transfers and backdated agreements; and working with his lawyer to hide settlements with defrauded MSMB and Elea Capital investors as sham consulting agreements with Retrophin, for which Retrophin paid consideration but received no services….

…Investors [in KaloBios] lacked any real visibility into Defendant Shkreli’s personal financial resources and his ability (or lack thereof) to fund any business ventures. Indeed, his public statements and actions falsely conveyed a greater personal wealth and liquidity than he actually possessed, both before and during the Class Period. Yet, the testimony given at his trial and the degree to which Shkreli had to resort to one fraud upon another to pay off liabilities, evidence that his lacked the resources necessary to stave off KaloBios’s bankruptcy and fund its operations, including necessary clinical trials for its drug candidates….

…Defendant Shkreli’s misstatements had the desired effect. On November 23, 2015, KaloBios’s stock reached an intra-day high of $45.82 and closed at $39.50, up over 200% from its prior day’s close of $18.25. At this price, the Shkreli Group’s 70% stake in KaloBios had risen in value to $113,957,500.00…. [Editor’s Note: And so, after he was arrested, and then 15 days later KaloBios was forced to file for bankruptcy protection, the stock was worth $0.90/share. The market cap of the company had plunged from about $162 million, on November 23, 2015 — to just $3.18 million, by December 31, 2015 — a loss to all investors of around $159 million, in under two months…. or, a loss of around $53 million to the non-affiliated stockholders. ]
…Investors were in the dark as to the criminal participation of Defendant Shkreli’s lawyer, Evan Greebel of law firm Kaye Scholer, in the MSMB and Retrophin frauds, for which he was also later arrested, post-Class Period, and now faces his own criminal trial. Significantly, Kaye Scholer served as outside legal counsel to KaloBios during the Class Period and was listed as its “Company Counsel” in the private placement transaction announced and closed during the Class Period (sometimes referred to as the “PIPES” placement or transaction), which defrauded the PIPES investors out of $8.2 million the day before Shkreli was arrested….
Indeed, by the start of criminal trial, Shkreli admitted that he had not paid the legal bills of his defense counsel in this [KaloBios securities fraud] action, that he had not paid monies owed to the IRS, and that he owed payments to accountants addressing his tax problems, such that he asked the judge overseeing his trial to release half his bail money ($3 million) to satisfy these various financial obligations. His own criminal counsel called Shkreli’s promises to pay various six-figure sums “preposterous” and said, “He doesn’t have any cash….”

Obviously, this too is “relevant conduct,” under the federal sentencing guidelines. Do take note, Mr. Brafman:

At least ten… it will be.


8 thoughts on “And… In An 85 Page Footnote: Shkreli’s $60 To $90 Million Civil Securities Fraud — Against KaloBios & Its Shareholders

      • condor says:

        Indeed — and today, we learned that Mr. Greebel’s pre-trial conference will be held at 12:30 PM Eastern on October 3, 2017:

        SCHEDULING ORDER as to Evan Greebel.

        Mr. Greebel has requested oral argument on his [326] Motion to Dismiss Count Seven of the Superseding Indictment, and on the parties’ motions in limine.

        The court will hear oral argument on these motions during the pre-trial conference, which will now be held on October 3, 2017 at 12:30 p.m.

        Ordered by Judge Kiyo A. Matsumoto on 8/28/2017….

        Now we all know.

        Loved the image of Marty’s “turnaround” on the other blog!



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