Eventually, Mr. Shkreli opened his own hedge fund — Elea Capital. It didn’t last long, collapsing in 2007 on a big bet he made that went against him. Undeterred, in 2009, he started his second hedge fund, MSMB Capital, the initials of Mr. Shkreli and his partner, Marek Biestek, whom he met while attending Baruch College.
Like Elea, MSMB’s performance wasn’t nearly as hot as Mr. Shkreli let on. From 2009 through 2012, Mr. Shkreli lost millions of dollars trading in the market, according to the accusations contained in the indictment. But he hid those losses, telling investors instead that the funds had strong double-digit returns.
In 2011, Mr. Shkreli started Retrophin, which quickly adopted a controversial business strategy, acquiring old, neglected drugs used for rare diseases and quickly raising their prices.
Soon, however, Mr. Shkreli was making a plan to use Retrophin assets to pay off MSMB investors. When seven MSMB investors threatened to sue in 2013, Mr. Shkreli and Evan Greebel, the lead outside counsel for Retrophin, used $3.4 million in Retrophin funds and stock to settle the investors’ claims, even though Retrophin had no responsibility, the indictment says.
