BROOKLYN (CN) – A federal judge in Brooklyn ordered convicted fraudster Martin “Pharma Bro” Shkreli to pay $7.36 million Monday for a scheme to defraud investors in his failing hedge funds, and he may also have to give up a Picasso and the only known copy of a secret Wu-Tung Clan album as part of the forfeiture.
Shkreli was convicted last August on two counts of securities fraud and one county of conspiracy to commit securities fraud after ransacking his startup pharmaceutical company, Retrophin, to pay back his investors in two hedge funds, MSMB Capital and MSMB Healthcare.
In November, government prosecutors estimated Shkreli’s chicanery had earned him $7.36 million and demanded he forfeit it, using his $5 million bond and assets that include an unspecified Picasso painting, the only known copy of a secret Wu-Tung Clan album called “Once Upon a Time in Shaolin,” and the Lil Wayne album “Tha Carter V.”
U.S. District Judge Kiyo Matsumoto’s sided with the government on Monday, ordering Shkreli to turn over the money either in cash or substitute assets. He has 10 days to tell the government where to find the artwork and the albums.
“The evidence at trial shows that direct proceeds of Mr. Shkreli’s criminal conduct were either dissipated…or transferred to Retrophin or the MSMB investors, or Mr. Shkreli,” she wrote in a 15-page ruling.
Shkreli’s lawyer, Benjamin Brafman, has argued that in the end, no investors lost money and in fact Shkreli made them millions, so he should not have to forfeit funds.
“But he did in fact take that money to perpetuate a fraud,” Assistant U.S. Attorney Alixandra Smith said at a Feb. 23 hearing. “What mattered to him was his reputation as a hedge fund manager.”
Brafman’s letter to the court made no mention of the Wu-Tang Clan album or an unspecified Picasso that prosecutors also want forfeited. He also claimed Shkreli owed millions to the IRS, his attorneys and accountants, and would not be able to pay up if he had to forfeit too much.
In Monday’s ruling, Matsumoto rejected that argument.
“Mr. Shkreli has provided no authority…for the proposition that otherwise forfeitable proceeds should not be subject to forfeiture because the defendant owes money to other potential creditors,” the judge wrote.
The Feb. 23 hearing was Shkreli’s first court appearance since he was remanded to jail in September for offering a bounty on Hillary Clinton’s hair.
Matsumoto ruled from the bench that loss in the Retrophin scam amounted to more than $10 million and followed up with a written ruling three days later, in which she declined to acquit him on the charge of conspiracy to commit securities fraud.
The high loss amount, which is separate from the forfeiture, will likely affect the amount of time Shkreli spends in prison – federal sentencing guidelines tend to call for more time for higher losses.
Matsumoto said the $10 million figure was the amount that investors were “fraudulently induced to invest” as a result of Shkreli’s misrepresentations.
Brafman’s lawyers have called for a light sentence of 12 to 18 months in prison plus counseling and community service.
Shkreli will be sentenced on Friday.
Brafman did not immediately respond to a request for comment Monday, and prosecutors declined to comment.