Martin Shkreli was arrested this morning, but not because he raised the price of a drug by 5,000%

Martin ShkreliGetty ImagesMartin Shkreli (2nd R), CEO of Turing Pharmaceutical, is brought out of 26 Federal Plaza by law enforcement officials after being arrested for securities fraud on December 17, 2015 in New York City.

Martin Shkreli was arrested Thursday morning on charges of securities-fraud.

The charges were not related to the incident that made Shkreli, who is currently the CEO of Turing Pharmaceuticals and KaloBios, a household name — his 5,000% price increase of a critical anti-parasitic drug called Daraprim.

While the Daraprim price hike is what got him so much notoriety, it wasn’t the first time he’s done this. In 2014, as the head of pharmaceutical company Retrophin, Shkreli bumped up the price of a drug called Thiola by 2,000%.

Shkreli has been charged by the federal government with seven counts, or statements of different alleged crimes:

  • 2 counts of securities fraud
  • 2 counts of conspiracy to commit securities fraud
  • 3 counts of conspiracy to commit wire fraud.

All of the above charges are related to events that happened earlier in his career, while he was managing hedge funds.

Here’s where the two narratives meet up: After managing funds at MSMB Capital, where he lost $3 million on bad trades but neglected to tell investors, according to allegations from US Attorney Robert Capers, he then went on to found another hedge fund, called MSMB Healthcare and convinced investors to back it as well. With that money, he payed back his debts to MSMB Capital investors, alleged Capers.

From there, the federal government alleges in a complaint, there was “a scheme to defraud Retrophin by misappropriating Retrophin’s assets through material misrepresentations and omissions in an effort to satisfy Shkreli’s personal and unrelated professional debts and obligations.” That was interwoven in the MSMB Capital and MSMB Healthcare relationships.

In other words, the charges have little to do with the drug industry or with his practice of hiking up drug prices.

Everything related to that still awaits Congress, which has recently amped up its investigations into his behaviour and other companies who’ve taken similar actions.

But it does mean that the House of Representatives might have a harder time getting Shkreli to attend their hearing.

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