From Prison, Shkreli Accuses Ex-Mentor of Fraud

BROOKLYN, N.Y. (CN) – Lodging his second federal complaint from behind bars Friday, former pharmaceutical wunderkind Martin Shkreli is taking aim at a man who testified against him at his securities fraud trial.

Filed in Brooklyn, the lawsuit marks a new tangent in an already labyrinthine story.   

Martin Shkreli, the former hedge fund manager under fire for buying a pharmaceutical company and ratcheting up the price of a life-saving drug, is escorted by law enforcement agents in New York on Dec. 17, 2015, after being taken into custody following a securities probe. (AP Photo/Craig Ruttle, File)

Shkreli, 36, rose from obscurity just four years ago as the young CEO of Turing Pharmaceuticals. At the time policymakers the world over balked at Shkreli’s decision to hike the price of the life-saving AIDS drug Daraprim by 5,000%, but no laws barred him from doing so. It was in his capacity as CEO of another biopharmaceutical company, Retrophin, that Shkreli came into legal hot water.

A federal jury convicted Shkreli in August 2017 of looting revenue from Retrophin to compensate investors in his failing hedge funds, MSMB Health Care and MSMB Capital — conduct that the government likened to a Ponzi scheme.

On the road to trial and through his appeal — the Second Circuit affirmed his conviction two months ago — Shkreli has managed to never recede from the limelight.

Whether in buying the one-of-a-kind, sole copy of the Wu-Tang Clan album “Once Upon a Time in Shaolin,” setting a bounty on a lock of Hillary Clinton’s hair, or getting caught in prison with a contraband cellphone, Shkreli continues to make headlines.

The lifelong Brooklynite launched his latest flare Friday with a complaint against his former business mentor, Lee Yaffe, one of the government’s witnesses against him in his 2017 trial.

Shkreli says the trouble began in 2007 when Yaffe’s father, George Yaffe, invested $100,000 in another of Shkreli’s onetime hedge funds, Elea, only to lose the money — something Shkreli’s lawyer Edward Kang notes is an understood risk in this arena.

It was then, according to the complaint, that Lee Yaffe badgered Shkreli into making a $250,000 promissory note in favor of George Yaffe. Shkreli notes that he had recently founded Retrophin and relied on Lee Yaffe’s mentorship and industry advice.

“Although he had no legal obligations to pay any money to George Yaffe,” the complaint states, “Mr. Shkreli was persuaded into making a note by Lee Yaffe, who insisted that paying George Yaffe was the ‘right thing’ to do and that Mr. Shkreli should ‘man up.’”

Shkreli also says he “believed accepting Lee Yaffe’s advice was necessary to remain a respected figure in the healthcare industry.”

Adding insult to injury, according to the complaint, the note “included a usurious compound interest provision that is invalid under New York law.”

Shkreli says a New York state court has since entered a default judgment to the tune of $420,000 in an action that Yaffe brought to collect on the note.

Kang, an attorney with the firm Kang Haggerty in Philadelphia, also represents Shkreli in connection to a May 31 suit against three former Retrophin associates.

At his criminal trial, Shkreli was represented by defense attorney Benjamin Brafman. Mark Baker worked on Shkreli’s appeal.

A representative for the U.S. Attorney’s Office in the Eastern District of New York did not immediately return a request for comment Friday. 

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