FTC and States Seek Contempt Order Against Martin Shkreli for Pharma Stock Trading
The Federal Trade Commission and seven states have petitioned a federal judge to hold Martin Shkreli in contempt for allegedly violating a 2022 lifetime ban on the pharmaceutical industry. The filing claims Shkreli traded in at least 60 pharma stocks and publicly commented on industry management since his release from prison. Regulators seek forced divestment of his holdings, fines based on trading profits, and potential incarceration for future breaches.
Key points
- The FTC and seven states filed a motion on Tuesday asking a judge to hold Martin Shkreli in contempt for violating a 2022 civil court order.
- The 2022 order banned Shkreli for life from the pharmaceutical industry following a finding that he organized an anti-competitive scheme regarding the drug Daraprim.
- Regulators allege Shkreli flagrantly violated the ban by trading in at least 60 pharmaceutical stocks and broadcasting opinions on company management since his May 2022 release.
- The filing requests that Shkreli divest current pharma stocks and pay fines equal to his trading profits, excluding offsetting losses, plus prejudgment interest.
- FTC Commissioner Mark Meador emphasized that a lifetime ban requires commensurate consequences for breaches to remain effective.
Background
This action stems from a 2022 civil judgment unrelated to Shkreli’s 2017 securities fraud conviction. The civil case found that Shkreli’s conduct, including hiking the price of Daraprim from $17.50 to $750 per tablet, drove up costs and blocked generic competition. The 2022 order required him to disgorge over $64 million and prohibited him from working in the pharmaceutical sector. Shkreli was released from federal prison in May 2022 after serving part of a seven-year sentence for securities fraud.
Why it matters
The enforcement action signals that regulatory bodies will actively monitor and penalize individuals subject to industry bans, even years after the initial judgment. It underscores the FTC’s commitment to upholding civil orders and ensuring that lifetime prohibitions are not circumvented through stock trading or public commentary, potentially setting a precedent for enforcing similar restrictions in other sectors.
What to watch
A federal judge must review the contempt filing and decide whether to impose the requested penalties, including forced divestment and financial fines. The case may also establish clearer boundaries for what constitutes a violation of industry bans, potentially leading to stricter monitoring of individuals with similar restrictions.
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