Shkreli Appeal 2018

Case 18-1084, Document 27, 08/31/2018, 2380471, Page1 of 218
(
18-0819- cr ,L)
18-1084-cr(CON)
United States Court of Appeals
for the
Second Circuit

UNITED STATES OF AMERICA,

Appellee,
– v. –
EVAN GREEBEL,
Defendant,
MARTIN SHKRELI,
Defendant-Appellant.
___________________________
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NEW YORK (BROOKLYN)
BRIEF and SPECIAL APPENDIX

FOR DEFENDANT-APPELLANT
BENJAMIN BRAFMAN
MARK M. BAKER
MARC AGNIFILO
ANDREA ZELLAN
JACOB KAPLAN
TENY R. GERAGOS
BRAFMAN & ASSOCIATES, P.C.
Attorneys for Defendant-Appellant
767 Third Avenue, 26th Floor
New York, New York 10017
(212) 750-7800
Table of Contents
Table of Authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv
Statement of Subject Matter

And Appellate Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Statement of the Issues Presented for Review . . . . . . . . . . . . . . . . . . . . 3
Statement of the Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
A. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
B. The Indictment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
C. The Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1. The Government’s Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
a. Defendant’s Career in Finance . . . . . . . . . . . . . . . . . . . 7
b. The MSMB Capital Scheme

(Counts One, Two and Three). . . . . . . . . . . . . . . . . . . . 8
c. The MSMB Healthcare Scheme

(Counts Four, Five and Six) . . . . . . . . . . . . . . . . . . . . 15
1) MSMB Healthcare . . . . . . . . . . . . . . . . . . . . . . . 15
2) Retrophin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
d. The Retrophin Misappropriation Scheme

(Count Seven) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
e. The Retrophin Unrestricted Securities Scheme

(Count Eight). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2. The Court’s Charge, Jury Deliberations

and Verdict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
D. The Motion for Forfeiture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
E.. The Sentencing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Summary of Argument. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Argument . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Point I
The District Court’s Failure to Include the Language Approved
in United States v. Berkovich, When Instructing the Jury on
“No Ultimate Harm” With Respect to the Securities Fraud and
Securities Fraud Conspiracy Charges, Was Unduly Prejudicial,
Causing Jury Confusion Which Resulted in the Split Verdict . . 27
A. Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
B. The “No Ultimate Harm” Instruction . . . . . . . . . . . . . . . . . 33
C. Discussion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Point II
When Determining the Amounts to Be Forfeited, the District
Court Erroneously Applied the Distinct Materiality Test for
Weighing the Evidential Sufficiency of the Underlying
Securities Fraud Count, Which Does Not Require Any Showing
of Ill Gotten Gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
A. Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
1. Government’s Motion for Forfeiture. . . . . . . . . . . . . . 47
2. Defendant’s Response . . . . . . . . . . . . . . . . . . . . . . . . . 48
-ii-
3. The Court’s Decision . . . . . . . . . . . . . . . . . . . . . . . . . . 52
B. Governing Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
1. Forfeiture Requires Unlawful Gains . . . . . . . . . . . . . 54
2. Securities Fraud Does Not Require Any

Intended Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
C. Discussion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
1. Monies Lawfully Acquired . . . . . . . . . . . . . . . . . . . . . 59
a. Count Three . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
b. Count Six . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
2. Deduction of Costs in Providing Goods

and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
a. Count Three . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
b. Count Six . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
3. Factoring and Thereby Deducting the

Extraordinary Profits Paid to Investors. . . . . . . . . . . 68
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Certificate of Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Special Appendix
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Table of Authorities
Cases
Basic Inc. v. Levinson, 485 U.S. 224 (1988). . . . . . . . . . . . . . . . . . . . . . 57
Bollenbach v. United States, 326 U.S. 607 (1946) . . . . . . . . . . . . . . 34, 45
Blueford v. Arkansas, 132 S.Ct. 2044 (2012) . . . . . . . . . . . . . . . . . . . . . 39
Evans v. Michigan, 568 U.S. 313 (2013) . . . . . . . . . . . . . . . . . . . . . . . . 39
McBoyle v. United States, 283 U.S. 25 (1931) . . . . . . . . . . . . . . . . . . . . 56
United States v. Alfisi, 308 F.3d 144 (2d Cir. 2002) . . . . . . . . . . . . . . . 38
United States v. Bajakajian, 524 U.S. 321 (1998) . . . . . . . . . . . . . . . . . 69
United States v. Bass, 404 U.S. 336 (1971) . . . . . . . . . . . . . . . . . . . . . . 56
United States v. Berkovich, 168 F.3d 64 (2d Cir. 1999). . . . . . . . . Passim
United States v. Bodouva, 853 F.3d 76 (2d Cir. 2017) . . . . . . . . . . 55, 59
United States v. Capoccia, 503 F.3d 103 (2d Cir. 2007) . . . . . . . . . . . . 54
United States v. Cartelli, 272 F. App'x 66

(2d Cir. 2008) (Summary Order). . . . . . . . . . . . . . . . . . . . . . . . . . 37
United States v. Castello, 611 F.3d 116 (2d Cir. 2010) . . . . . . . . . . . . . 69
United States v. Contorinis, 692 F.3d 136

(2d Cir. 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53, 55, 57, 59
United States v. Daugerdas, 837 F.3d 212

(2d Cir. 2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
-iv-
United States v. Dinome, 86 F.3d 277 (2d Cir.1996) . . . . . . . . . . . . 34, 42
United States v. Dixon, 536 F.2d 1388 (2d Cir.1976) . . . . . . . . . . . 40, 58
United States v. Emerson, 128 F.3d 557(7th Cir.1997) . . . . . . . . . . . . . 55
United States v. Ferguson, 676 F.3d 260 (2d Cir. 2011) . . . . . . . . . . . . 37
United States v. Finazzo, 682 F. App'x 6 (2d Cir. 2017) . . . . . . . . . . . . 37
United States v. Gradwell, 243 U.S. 476 (1917) . . . . . . . . . . . . . . . . . . 56
United States v. Henry, 888 F.3d 589 (2d Cir. 2018). . . . . . . . . . . . . . . 38
United States v. Hollnagel, 2013 WL 5348317

(N.D. Ill, Eastern Div 2013) . . . . . . . . . . . . . . 50, 51, 56, 68, 69, 70
United States v. Ingram, 490 F. App'x 363

United States v. Kalish, 626 F.3d 165 (2d Cir.2010) . . . . . . . . . . . . . . . 55
United States v. Koh, 199 F.3d 632 (2d Cir. 1999) . . . . . . . . . . . . . . . . 37
United States v. Lange, 834 F.3d 58 (2d Cir. 2016),

cert. denied sub nom. Russell v. United States,
137 S. Ct. 6771 (2017), and
cert. denied, 137 S.Ct. 685 (2017) . . . . . . . . . . . . . . . . . . . 37, 40-44
United States v. Leonard, 529 F.3d 83 (2d Cir. 2008) . . . . . 37, 41, 42, 43
United States v. Levis, 488 F. App'x 481 (2d Cir. 2012)

(summary order) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
United States v. Litvak (Litvak I), 808 F.3d 160

(2d Cir. 2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40, 56, 57, 58
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United States v. Litvak (Litvak II), 889 F.3d 56

(2d Cir. 2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57, 58, 60
United States v. Mahaffy, 693 F.3d 113 (2d Cir. 2012) . . . . . . . . . . 65, 67
United States v. Marzo, 312 F. App'x 356

United States v. McIntosh, No. 11-CR-500 (SHS)

2017 WL 3396429 (S.D.N.Y. Aug. 8, 2017). . . . . . . . . . . . . . . . . . 55
United States v. Rossomando, 144 F.3d 197 (2d Cir. 1998) . . . . . Passim
United States v. Rybicki, 38 F. App'x 626

(2d Cir. 2002) (summary order) . . . . . . . . . . . . . . . . . . . . . . . . . . 37
United States v. Santos, 553 U.S. 507 (2008) . . . . . . . . . . . . . . . . . . . . 56
United States v. Stevens, 210 F.3d 356 (2d Cir. 2000)

(summary order) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
United States v. Various Computers & Computer Equip.,

82 F.3d 582, 588 (3d Cir.1996). . . . . . . . . . . . . . . . . . . . . . . . . . 55
United States v. Vilar, 729 F.3d 62 (2d Cir. 2013)

cert denied, 134 S.Ct. 2684 (2014) . . . . . . . . . . . . . . . 52, 57, 58, 63
United States v. Warshak, 631 F.3d 266 (6th Cir. 2010). . . . . . . . . . . . 58
Waddington v. Sarausad, 555 U.S. 179 (2009)

(Souter, J., dissenting) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Weeks v. Angelone, 528 U.S. 225 (2000). . . . . . . . . . . . . . . . . . . . . . . . . 39
-vi-
Statutes
15 U.S.C. §78j(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 39, 41
18 U.S.C. §981(a)(1)(C). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
18 U.S.C. §981(a)(2)(B). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Passim
18 U.S.C. §1956( c)(7)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
18 U.S.C. §1961(1)(D) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
18 U.S.C. §1343 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
28 U.S.C. §1291 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
31 U.S.C. §5313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
31 U.S.C. §5317 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Rules
Fed. R. App. P. 4(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Fed. R. App. P. 32 (a)(7)(B)(i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Fed. R. App. P. 32(a)(7)(C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Fed. R. Crim. P. 29(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Passim
Fed. R. Crim. P. 7(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-vii-
UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT
18-819
Appellee,
- against -
EVAN GREEBEL
Defendant,
MARTIN SHKRELI,
Defendant-Appellant
On Appeal From a Judgment of the United States

District Court for the Eastern District of New York
BRIEF AND SPECIAL APPENDIX FOR APPELLANT
Statement of Subject Matter

And Appellate Jurisdiction
Following proceedings on Indictment No. 15-cr-637 (KAM),
filed in the United States District Court for the Eastern District of New
York on December 14, 2015, pursuant to Fed. R. Crim. P. 7(f), this is an
appeal from a final judgment of that court (Hon. Kiyo A. Matsumoto and
a jury), rendered on March 26, 2018, that disposes of all parties' claims,
convicting Defendant-Appellant Martin Shkreli (“Defendant”) of violating
15 U.S.C. §78j(b) (two counts) and 18 U.S.C. §371. The judgment imposed
a term of imprisonment of eighty-four months to run concurrently with all
counts, to be followed by a concurrent term of supervised release of three
years. Also included was a fine of $25,000 on each count for a total of
$75,000, restitution in the amount of $388,336.89 and forfeiture of
substitute assets in the amount of $7,360,450.00.
Timely notice of appeal was filed on March 26, 2018. A434.1
The instant appeal invokes the jurisdiction of the Court of Appeals
pursuant to 28 U.S.C. § 1291 and Fed. R. App. P. 4(b).
1
Numerical references preceded by the letter “A” are to
Appellant’s Appendix. Those references preceded by the letters “SPA”
are to the attached special appendix and those absent any prefix are to
the transcript of trial.
-2-
Statement of the Issues Presented for Review
1. Whether, upon instructing the jury on the issue of “no
ultimate harm” concerning the securities fraud and securities fraud
conspiracy charges of which Defendant was convicted, the district court
erred, to Defendant’s great prejudice, by giving the equivalent instruction
as that condemned in United States v. Rossomando, 144 F.3d 197 (2d Cir.
1998), rather than the language approved in United States v. Berkovich,
168 F.3d 64 (2d Cir. 1999) which it employed with respect to the wire
fraud conspiracy charges of which Defendant was acquitted?
2. Whether, upon calculating the amount of forfeiture under
Counts Three and Six, the district court erred in merely relying on its
ruling in denying Defendant’s Rule 29(c) motion, which did not require
any determination of “proceeds” obtained by Defendant, as statutorily
defined in 18 U.S.C. §981(a)(2)(B), rather than making independent
findings of any ill gotten gains after deducting “direct costs incurred in
providing goods and services”?
-3-
Statement of the Case
A. Introduction
Defendant Martin Shkreli was indicted under eight counts. The
charges included several counts of conspiracy to commit securities fraud,
conspiracy to commit wire fraud, and substantive securities fraud
violations. Following a five week trial, Defendant was convicted of the two
substantive securities frauds and one charge of conspiracy to commit
securities fraud. He was acquitted of two securities fraud conspiracies and
all the mail fraud conspiracies, however, based on the same evidence.
On this appeal, Defendant argues that his inconsistent
acquittals and convictions are easily explained by the court’s varied jury
instructions between the securities fraud related counts on the one hand,
and the wire fraud conspiracies on the other. Specifically, it is argued
that, with respect to the “no ultimate harm” instruction given in
conjunction with the securities fraud counts and securities fraud
conspiracy, of which he was alone convicted, the court improperly failed
to instruct the jury -- unlike with respect to the wire fraud counts
resulting in acquittal -- with the additional language sanctioned in United
-4-
States v. Berkovich, 168 F.3d 64 (2d Cir. 1999).
Defendant further argues that the district court improperly
determined the amount of forfeiture, where it relied solely on its earlier
denial of Defendant’s Rule 29(c) motion. Defendant maintains that, unlike
the finding in that motion, which did not require a quantitative
determination of the amount of ill gotten gains, if any, the forfeiture
statute requires a precise finding of the proceeds illegally collected, minus
certain offsets which the district court failed to consider.
B. The Indictment
On December 17, 2015, Defendant was arraigned on
Indictment 15-cr-637 (KAM) along with co-defendant Evan Greebel, the
former counsel to Defendant’s pharmaceutical company, Retrophin. A
superseding indictment was unsealed on June 3, 2016, alleging four
interrelated fraud schemes. A58.
Included in the charges was the MSMB Capital Scheme
(Counts One, conspiracy to commit securities fraud; Two, conspiracy to
commit wire fraud; and Three, securities fraud); and the MSMB
Healthcare Scheme (Counts Four, conspiracy to commit securities fraud;
-5-
Five, conspiracy to commit wire fraud; and Six, securities fraud). Each
scheme alleged that Defendant, as managing partner of separate hedge
funds, had made material misrepresentations and/or omissions to
investors, as well as prevented redemptions from the funds by providing
investors with fabricated performance statements and concealing trading
losses.
The third alleged scheme (Count Seven, conspiracy to commit
wire fraud) was the Retrophin Misappropriation Scheme. It theorized that
the defendants had resolved liabilities using settlement and consulting
agreements to repay MSMB investors with the shares of Retrophin and
cash. The fourth scheme (Count Eight, conspiracy to commit securities
fraud) was the Retrophin Unrestricted Securities Scheme. It theorized that
the defendants conspired to control the price and trading volume of free
trading Retrophin shares.
Upon dual motions, the district court severed the trials.
Defendant proceeded to trial first, commencing on June 28, 2017, followed
by five weeks of testimony.
-6-
C. The Trial
1. The Government’s Case
a. Defendant’s Career in Finance
Defendant began his career in the financial industry at age17,
interning at the investment firm Cramer Berkowitz where he found a
niche studying healthcare stocks. GX 6; Blanton: 1780; Aselage: 3385. He
later joined UBS, where he met Josiah Austin. Austin: 1189.
Austin became “very interested in [Defendant’s] ideas” because
Defendant clearly “knew Biotech” well. Id. Defendant worked very hard
helping Austin amass a controlling interest in Chelsea Therapeutics, even
accompanying Austin to Chelsea’s Headquarters in North Carolina to
speak with Management, Austin: 1193, 1250, 1253, 1257, and contacting
the top executives at Chelsea so often that they asked Austin to call him
off. Austin: 1263. Austin became a 10% shareholder in Chelsea, which had
an estimated value of about $30 million. Austin: 1255. Austin, however,
lost money in his Chelsea investment.
During this time period, in 2006, Defendant started Elea
Capital, in which Austin invested. The entirety of this investment was
-7-
lost, however, resulting in Lehman Brothers suing Defendant, Austin, and
Elea Capital. This loss -- both of the money and of Austin’s trust -- crushed
Defendant. He wrote to Austin: “Markets go up, markets go down, but
there are no excuses. I’m embarrassed by my performance but steadfast
in my conviction on top ideas.” Austin: 1222-24. Stunted by litigation,
Defendant shut down Elea.
b. The MSMB Capital Scheme

(Counts One, Two and Three)2
Not accepting Elea’s failure as a setback, Defendant continued
his deep analysis of healthcare stocks and biopharmaceutical companies
in New York. In 2009, he formed MSMB Capital with his friend, Marek
Biestek. Richardson: 2749-50. The government presented evidence that
Defendant made a series of misrepresentations and omissions to induce
investments in MSMB Capital, including the fund’s assets under
management (“AUM”), trading activity, Defendant’s record as a hedge
fund manager,3 and third-party oversight of its operations. The
government presented evidence that the Defendant prevented investors
2
Defendant was acquitted of Counts One and Two.
3
The Defendant did not disclose his prior performance at Elea to
the majority of investors.
-8-
from seeking redemptions by sending out performance reports reflecting
trading activity and positive returns when the fund was not in fact
trading.
Although some investors testified that Defendant did not
discuss MSMB Capital’s AUM with them, Neill: 4052, or misrepresent the
AUM, Richardson: 2752-53 (“I think he was saying that he was hoping as
he got it ready for November to have at least a couple of million dollars”),
others testified that the Defendant stated it either had $35 million in
AUM, Blanton: 1567, or $40-50 million AUM, S. Hassan: 921.
Furthermore, the fund’s Private Placement Memorandum (“PPM”) stated
that NAV Consulting and Rothstein Kass would serve as the fund’s third-
party administrator and auditor, when the fund had never formally
retained either.4 From 2009 to 2011, seven investors invested $2,998,000
into MSMB Capital.
Prior to these investments in the fund, Defendant had spent a
4
At trial, the parties stipulated that Nav Consulting, Inc. served
as the Fund Administrator for MSMB Healthcare Management LP
between March 11, 2011 and June 14, 2012. NAV did not serve as the
Fund Administrator for MSMB Capital Management LP. GX 806. The
parties also stipulated that from 2007 through 2014, Rothstein, Kass &
Company were not retained by, and did not act as auditors for, MSMB
Capital or MSMB Healthcare. GX 809.
-9-
great amount of time researching biopharmaceutical stocks and sending
his stock picks and research to his potential investors. One investor,
Darren Blanton, testified that Defendant had given him valuable stock
tips before he invested with Defendant, and that he continued working
with Defendant because those tips made Blanton money. Blanton: 1703;
see also Rosenwald: 2001-02 (noting that Defendant had “lots more ideas”
and would send “a lot more stuff than other people would” and was
promotional about his ideas); Hassan: 926-27 (describing Defendant’s
regular stock recommendations).
Another investor, Schuyler Marshall, testified that when he
had first met Defendant, he found Defendant “unique” because Defendant
“shared his ideas about specific companies and the reasons why he
thought they were under-valued; and therefore, he was long, or over-
valued and he was short.” Marshall: 2429. Defendant continued to share
his ideas, which Marshall followed closely. Marshall “was frankly quite
impressed because [Defendant] was right on all of his ideas.” Id.
Oftentimes, potential investors would trade and make money off
Defendant’s stock picks without any of this profit going to Defendant.
-10-
Blanton: 1702.
It was thus clear from the start that most investors found
Defendant intellectually bright, but oftentimes off or odd. As one investor,
Lindsay Rosenwald, described him at trial: Defendant was “different” --
when looking “at a bell curve of people, he’s on the far side of either one.”
Rosenwald: 2001-2.
Although every investor and potential investor who met
Defendant often viewed him as “smart,” see S. Hassan: 923; F. Hassan:
1310; Blanton: 1525, 1559, 1724; Rosenwald: 1990; Marshall: 2522
(“[Defendant] impressed me with being smart and highly focused”); Neill:
4051 (describing Defendant as “smart and hard working”), many described
his atypical personality and lack of inter-personal skills as “a little
distracted,” S. Hassan: 923, or “a little bit mercurial.” Stewart: 2039. As
a result, “if [Defendant] was in a bad mood or if he was impatient about
something, he could be quite cutting or nasty . . . [i]t’s all intensity all the
time.” Stewart: 2039. While he was “pleasant,” “respectful,” and
“intimidated,” Defendant was “very much a homework” and “analytical
kind of person.” F. Hassan: 1299. This intensity bled into Defendant’s
-11-
work at MSMB Capital. It was clear that Defendant was working hard to
be a good hedge fund manager. Rosenwald: 1992-93.
Based on this reputation, Defendant solicited investments. For
example, Defendant met Brent Saunders, the former CEO of Bausch &
Lomb, who received tremendous returns on his personal investments from
Defendant’s stock tips. S. Hassan: 915. Saunders was so impressed with
Defendant that he introduced him to Sarah Hassan, daughter of Fred
Hassan -- a giant in the pharmaceutical world. Ms. Hassan testified that,
although Defendant told her MSMB Capital was a $40 to $50 million
hedge fund, S. Hassan: 921-22, 929, she was also swayed by Defendant’s
mentorship and glowing reviews. S. Hassan: 918.
Additionally, Blanton testified he would regularly speak to
Defendant about stocks and Defendant would give advice. Blanton: 1559.
After making significant returns on Defendant’s recommendations,
Blanton considered an MSMB Capital investment.5

5
Before investing, Blanton performed a background check on
Defendant. Blanton: 1582. His investment vehicle, Colt Ventures,
typically does background “on investment managers just to see if
there’s any history of fraud of history of bad activities or behavior.” Id.
This check alerted Colt Ventures to a “trading issue that had been
settled with Lehman” and upon further investigation, Lehman “said
that the issue had been resolved.” Blanton: 1583.
-12-
In December 2010, Blanton sent Defendant an email asking,
“who is your auditor and administrator? What are the current assets
under management or AUM?” Blanton: 1567. Defendant responded
“Auditor Rothstein Kass, administrator NAV Consulting, lawyer
McCormick and O’Brien, AUM 35m.” Id. Blanton testified that he
“probably” would not have invested in MSMB Capital if the fund did not
have an auditor. Blanton: 1568.
Yet, because of Blanton’s enormous returns with Defendant, he
encouraged friends John Neill and Schuyler Marshall to invest by touting
Defendant’s “expertise a lot,” Marshall: 2426, and describing Defendant
as “brilliant.”Neill: 4047. Marshall testified that, although he initially
thought MSMB Capital would not be something his company would be
interested in, “after repeated praises of Defendant and suggestion that
this could be a good investment for Rosewood, I decided to take a
meeting.” Marshall: 2426.
Defendant worked hard to show that his ideas were legitimate
money-makers. He worked all day and night and even slept in a sleeping
bag in his office -- disregarding basic hygiene in order to not stop working.
-13-
See Blanton: 1707; Richardson: 2786. Richardson repeatedly spoke to
Defendant about his health, how to present himself, and to remember to
brush his teeth Richardson: 3007. Neill was swayed by Defendant’s
impressive work ethic. He testified that when evaluating a potential
hedge fund investment he looks at:
Will that person be able to make money going forward? And so

you look at what they’ve done. You look at what they’re doing.
You look at their work ethic. You look at the people who
surround them. And then try to come to a conclusion in your
mind of whether you think that person will be able to produce
better returns than you’ll get just by buying one of the indexes.
Neill: 3992. Defendant gave him that impression.
In February 2011, Defendant engaged in a trade for MSMB
Capital by short selling a stock called Orexigen (“OREX”). As a result of
this trade, Defendant failed to cover his short position and “the fund
imploded,” Stewart: 2063, causing Merrill Lynch, one of MSMB Capital’s
brokerages, significant losses.6 Defendant disclosed this trade to at least
one government witness -- Blanton -- who had personally brought at least
two other investors -- Neill and Marshall -- into MSMB. Blanton: 1766.
6
These losses were due to the fact that Shkreli had claimed he had
located stock to cover the short, but did not have enough stock to cover
his trading losses. Stitch: 1507-22.
-14-
Defendant did not alert any other investors to this significant loss and
MSMB Capital effectively ceased trading activity.7
c. The MSMB Healthcare Scheme

(Counts Four, Five and Six)8
Rather than walking away after the OREX trade, Defendant
focused on starting another hedge fund called MSMB Healthcare and
developing Retrophin, a pharmaceutical company he had already started
researching months before.
1) MSMB Healthcare
The government presented evidence that Defendant recruited
new investors into MSMB Healthcare, also a long-short focused hedge
fund that invested in healthcare stocks, by making a series of similar
misrepresentations and omissions to solicit investments into the fund.
The government presented evidence that these
misrepresentations included inflating the fund’s AUM, omitting the
7
For example, Defendant emailed performance reports to
investors in February 2011 stating that MSMB capital had returned
4.24% beating the S&P 500 index that month and claimed a 41.71%
return since the inception of the fund. See GX 80-1; 77-11; 76-16.
8
Defendant was acquitted of Counts Four and Five.
-15-
Defendant’s record as a hedge fund manager, stating that the fund had an
auditor,9 promising liquidity anywhere from a week, GX 107-11, to 30-
days notice, Geller: 3109, and stating the fund was a long-short fund when
it was instead mostly investing in Retrophin, or paying Defendant’s
debts.10
Unlike MSMB Capital, MSMB Healthcare formally retained
NAV Consulting, but did not retain an auditor.11 Defendant hired
employees Kevin Mulleady and others to bring investors into the fund.
Stewart: 2079; Su: 2130; Geller: 3105. Ultimately, twelve persons invested
$3,402,450 into MSMB Healthcare, but only two testified -- David Geller
and Richard Kocher.
Richard Kocher testified that he invested on the advice of
9
See n.4, supra.
For example, in 2012, MSMB Healthcare investor Michael

10
Lavelle invested $850,000 into MSMB Healthcare. Spaulding: 2658.

Soon thereafter, on February 1, 2012, MSMB Healthcare invested
$900,000 into Retrophin. GX 119-4. In November 2012, the Defendant
reclassified this loan to a $900,000 promissory note to MSMB
Healthcare from Retrophin effectively cancelling the MSMB Healthcare
investment into Retrophin Su: 2200. The Defendant then transferred
this money to Merrill Lynch to satisfy MSMB Capital’s debt to the
company. GX 506-E.
11
See n.4, supra.
-16-
Kevin Mulleady, who praised Defendant’s knowledge of the medical
industry and stated Defendant “was going to take this MSMB to a very
profitable place.” Kocher: 2316, 2359. David Geller was introduced to the
fund by his brother, Alan Geller, 3095, 3115, and Kevin Mulleady, 3105,
and was swayed that MSMB Healthcare was a “liquid fund.” Geller: 3094-
95, 3097, 3109. David Geller was also influenced by his brother, Alan
Geller, who urged David to invest. Geller: 3195. When Alan had “just”
invested in MSMB Healthcare, he told David about Martin’s “brilliance”
and said he’s “a very, very sharp person.” Id.
2) Retrophin
In 2010, MSMB Capital investors, Richardson and Blanton,
inspired Defendant to build his own company “to be behind drugs that
were succeeding and not failing.” Richardson: 3030. Defendant asked
Richardson to give him time to do research and bring ideas back.
Richardson: 3032. Defendant conducted extensive research and evaluated
market opportunities. Id. During this time, Blanton told Defendant about
a child named Joshua Frase, who had died from a disease called Muscular
Myotubular Myopathy. Blanton: 1590. They discussed that finding a
-17-
treatment for this disease “could be a good company idea.” Blanton: 1590.
Defendant was motivated to create the company, called Retrophin.
Blanton: 1591.
At Retrophin’s inception in 2011, it was a “biotechnology
company dedicated to developing drugs for rare and life-threatening
diseases.” GX 122-6. By March 2011, Retrophin’s pipeline included RE-
001, its “main asset in pre-clinical development for Duchenne Muscular
Dystrophy.” Id. Defendant’s research to develop a treatment for this
disease was so extraordinary that Blanton even took Defendant to
Harvard to meet with Dr. Alan Beggs, the leading expert on dystrophin
deficiencies. Blanton: 1732. After speaking with Defendant, Beggs told
Blanton that Defendant was onto something. Id. Richardson also believed
in Retrophins’ ability to find a cure for Duchenne Muscular Dystrophy and
invested in its first round of financing. Richardson: 3036-37.
Retrophin’s valuation grew because it “had a portfolio of drugs
that were addressing different diseases, some further along than others.”
Blanton: 1732. For example, in April 2012, Retrophin licensed its first
drug, DARA, from Ligand Pharmaceuticals. Defendant also patented a
-18-
product, RE-024, to treat a life-threatening disease called PKAN. Aselage:
3467. PKAN is “a particularly nasty disease that impacts young
children...where slowly their body stops operating.” Richardson: 3049.
Until Defendant’s patent, PKAN did not have a cure or meaningful
treatment. Id.
By late 2011, Defendant began to focus more on Retrophin and
effectively ended MSMB Healthcare’s trading activity. During this time,
MSMB Healthcare invested significant sums into Retrophin. When
Retrophin started to become the repository of the hedge funds assets, the
investor statements and the PPM advised investors accordingly. In
October 2011, NAV Consulting issued a revised PPM to MSMB
Healthcare investors which declared the fund’s “intent to invest in illiquid
securities, including venture capital, private equity, limited partnerships
and other hedge funds.” GX 109-6. This disclosure pointed the Limited
Partners to the updated changes on pages 2, 9, 10, 12, 14, 15, 16, 17, 18,
21, 27 and 36. Id. The investor statements, GX 83-1, 91-2, 91-3, 91-4, 91-5,
91-6, all disclose the illiquid nature of the investment.
From April 2011 to 2012, MSMB Healthcare invested over
-19-
$1,500,000 in Retrophin. GX 119-10. MSMB investors such as Richardson,
Sarah Hassan, Brent Saunders, Alan Geller, Steven Rosenfeld, and others
also invested. Id.
d. The Retrophin Misappropriation Scheme

(Count Seven)12
During the fall of 2012, Defendant was preparing to take
Retrophin public via a reverse merger. Defendant sent an email on
September 9th and 10th to the MSMB investors, stating that he was
winding down the funds and the investors could redeem their investments
in cash or in Retrophin shares. GX 103-13; GX 101-11; GX 101-9; GX 109-
9; GX 102-16; GX 107-12. While MSMB Healthcare had invested in
Retrophin since its inception, and would be entitled to receive significant
Retrophin stock when the company went public, the company did not have
enough cash to provide to investors in the event the investors wanted cash
and not stock. Similarly, MSMB Capital did not have any cash in its bank
accounts.
At this point, Defendant owed over a million dollars to Merrill
Lynch in relation to MSMB Capital’s OREX trade in 2011. Stitch: 1522.
12
Defendant was acquitted of Count Seven.
-20-
Furthermore, the SEC contacted Defendant and later subpoenaed him in
connection with an investigation into the MSMB hedge funds. Defendant
advised the SEC that MSMB Capital was active and had $2.6 million
AUM. GX 218. To ensure that MSMB Capital investors had shares of
Retrophin, Defendant transferred shares from himself to MSMB Capital,
ultimately awarding MSMB Capital with 75,000 shares of the company.
GX 119-25.
By the time the reverse merger was finalized in December
2012, MSMB investors became weary that they had not yet received their
redemptions. S. Hassan: GX 103-19; Marshall: 2449; Geller: 3144.
Defendant was mostly unresponsive to their inquiries as he was pursuing
Retrophin’s success in the public market. Marshall: 2449. Finally, after
the reverse merger, Retrophin sent out share certificates to every investor
who held shares in Retrophin when it was a private company, including
the MSMB entities. At the time investors received their share certificates
in February and March, Retrophin’s trading price fluctuated from $3 to $5
per share. GX 630; GX 631.
Although the MSMB investors received their redemptions in
-21-
stock, many investors were irate because the Retrophin shares were
restricted for at least six months. Geller: 3146; Neill: 4026; Rosenwald:
2022; S. Hassan: 1048. Some of these investors threatened to sue
Defendant and Retrophin. Rosenwald: 1981; GX 258; Geller: 3176-77;
Marhsall: 2585. Following months of intense negotiations, the MSMB
investors -- through their attorneys -- and Defendant -- through
Retrophin’s attorney, co-defendant Greebel-- reached agreements to settle
the potential claims against Defendant, the entities, and Retrophin. GX
51, 52, 53, 54, 55, 56, 57-A, 57-B.
With these settlement agreements, Retrophin received
valuable releases that prevented the company from being smothered in
litigation. Id. As a result of both the shares they received in the company
and, in some instances, the settlement and consulting agreements, the
MSMB investors made significant returns on their investment with
Defendant, as illustrated by the chart based on the trial testimony. See p.
70.
When the share restrictions were lifted, in August 2013, the
price per share fluctuated at $7.00. GX 631. The price continued to
-22-
skyrocket into 2014, climbing to $20 per share by March. GX 633. MSMB
investors excitedly watched the price soar, causing some to hold their
stock for years. Richardson: 2987; Neill: 4136 (testifying he was “happy”
with the trending price of the stock); S. Hassan: 1050 (testifying that she
sold her stock in March of 2015). As of the day of testifying, Blanton still
owned 150,000 shares, Blanton: 1695, and Neill still owned 24,000 shares.
Neill: 4142. Considering these enormous returns, one investor, Marshall,
asked Defendant whether the SEC understood the “no harm no foul”
concept. Marshall: 594-95. Marshall stated that although it took a long
time, Defendant ultimately paid back Marshall’s investment “and then
some.” Marshall stated, “I had not been harmed in terms of losing money.
In fact, I made money.” Id.
e. The Retrophin Unrestricted Securities Scheme

(Count Eight)
In the fall of 2012, Retrophin went public via a reverse merger
with a shell company called Desert Gateway. Desert Gateway had 2.5
million unrestricted shares held by its owners, Michael and Troy Fearnow.
Su: 2236. Around 2 million of these “Fearnow shares” were distributed
and bought by seven Retrophin employees and contractors (Marek
-23-
Biestek, Tim Pierotti, Andrew Vaino, Thomas Fernandez, Kevin Mulleady,
Ron Tilles, and Edmund Sullivan) for a nominal amount. Su: 2236-39.
The government presented evidence that Defendant and his
Co-Defendant, Evan Greebel sought to control the price and trading
volume of the Fearnow shares by monitoring the trades of individuals who
received Fearnow shares, GX 120-11, and attempting to prevent the sale
of Fearnow shares. GX 120-17, 120-18, 120-19, 245, 246, 248. The
government sought to prove that Defendant was controlling the Fearnow
shares without properly disclosing his control in order to manipulate
Retrophin’s share price leading up to a private placement investment in
February 2013.
2. The Court’s Charge, Jury Deliberations and Verdict
Because the defense was that Defendant had acted in good
faith and had never intended for any investor ever to “lose a dime,” A150,
the court, at the government’s behest (and following a charging conference
wherein the issue was fully aired), A169-220, instructed the jury with a
“no ultimate harm” charge. Contrary to what had been requested by both
sides, however, the court gave varying versions concerning the securities
fraud-related counts on the one hand, and the wire fraud-related counts
-24-
on the other. A377, 304, 315-16. Then, at the end of its charge, both
disparate versions were incorporated by reference, for a third time, when
the court instructed the jury on Defendant’s good faith defense. A315-16.
During its deliberations, the jury asked for clarification of
“fraudulent intent.” A327. In response, the court directed it to re-read both
its earlier disparate instructions regarding “no ultimate harm.” A341.
Soon thereafter, the jury returned its split verdict.
D. The Motion for Forfeiture
Prior to sentencing, the government moved for forfeiture
pursuant to 18 U.S.C §981(a)(1)(C). A345. For Count Three, the
government requested forfeiture in the amount of $2,998,000; for Count
Six, it requested $3,402,450; and, for Count Eight, it requested $960,000.
Following answering, A360, reply, A368, and sur-reply submissions, A380,
as well as oral argument, A385, the court ultimately ruled in favor of the
Government, relying in significant part on its earlier ruling which had
denied Defendant’s motion pursuant to Fed. R. Crim. P. 29(c).
E. The Sentencing
On March 26, 2018, Defendant was sentenced to a term of
imprisonment of eighty-four months to run concurrently with all counts

-25-
and to be followed by a concurrent term of supervised release of three
years. A fine of $25,000 on each count was imposed for a total of $75,000.
Additionally, restitution in the amount of $388,336.89 and forfeiture of
substitute assets in the amount of $7,360,450.00 were ordered. A timely
notice of appeal was thereafter filed on March 26, 2018. A434.
Summary of Argument
1. The district court’s failure, as both sides had requested,
to instruct the jury on the language discussed in United States v.
Berkovich, when giving the “no ultimate harm instruction” with regard to
both the security fraud counts and the wire fraud counts, was non-
harmless, prejudicial error, causing substantial jury confusion. This is
evident by the fact that it was among the last instructions given, by the
jury’s note, and by the resulting split verdict convicting Defendant of
securities fraud and securities fraud conspiracy counts, while acquitting
him of the wire fraud conspiracy counts.
2. Because large amounts of monies received by Defendant
from several investors were either not proved to have been induced by the
fraudulent representations which supported his conviction, were the direct
-26-
costs of “goods and services,” or were recouped by the investors, all of
whom realized extraordinary profits from their investments, the district
court erroneously failed to offset such amounts from the total of monies
ordered to be forfeited.
Argument
Point I
The District Court’s Failure to Include the Language

Approved in United States v. Berkovich, When
Instructing the Jury on “No Ultimate Harm” With
Respect to the Securities Fraud and Securities Fraud
Conspiracy Charges, Was Unduly Prejudicial, Causing
Jury Confusion Which Resulted in the Split Verdict
Defendant was convicted of the substantive securities Fraud
violations alleged in Counts Three and Six, which were the respective
objects of the two securities fraud conspiracies alleged in Counts One and
Four, of which he was acquitted.13 As to all those those counts, the jury
had been instructed on the limited “no ultimate harm charge” found to
have been highly misleading and prejudicial in United States v.
Rossomando, 144 F.3d 197 (2d Cir. 1998). A277. Defendant was convicted
13
Obviously, while holding him culpable for the substantive
offenses, the jury found that Defendant had not been involved in a
conspiratorial agreement.
-27-
of the conspiracy to commit securities fraud alleged in Count Eight,
which likewise entailed the Rossomando instruction. Id.
Only as concerns the conspiracies to commit wire fraud alleged
in Counts Two, Five, and Seven, of which Defendant was acquitted, was
the jury instructed with the additional language approved in United
States v. Berkovich, 168 F.3d 64, 68 (2d Cir. 1999). Thus, as to those
counts, the jury was cautioned that, to convict Defendant, it must find
that he had “associated himself with the alleged fraudulent scheme for the
purpose of causing loss to another.” A304; emphasis added.
The following chart illustrates the results of the two disparate
versions of the instruction:
Count The “For the Purpose Verdict

of Causing Loss to
Another” Instruction
Pursuant to US. v.
Berkovich
One - Consp. To commit Not given Not guilty
Securities Fraud
in Count Three
Two - Consp. To commit Given Not guilty
Wire Fraud
Three - Securities Not Given Guilty
Fraud
-28-
Four - Consp. To commit Not given Not guilty

Securities Fraud
in Count Six
Five - Consp. To commit Given Not guilty
Wire Fraud
Six - Securities Fraud Not Given Guilty
Seven - Conspiracy Given Not guilty

to Commit
Wire Fraud
Eight - Conspiracy to Not Given Guilty
Commit
Securities
Fraud
A. Background
Before trial, the government moved, in limine, to eliminate
Defendant’s anticipated good faith defense and to preclude any argument
as to “no ultimate harm.” A95. Defendant thereupon responded, A99, to
which the government replied. A101. Following the court’s granting that
request, A141, counsel sought reconsideration, in part, because
[a]t trial, the defendant will show that Mr. Shkreli never, at
any time, intended for a single investor to lose a dime. *** That
is why we believe the so-called No Ultimate Harm charge does
not apply to these facts.
A150; emphasis added. This position was later reiterated in pre-trial
argument, A52, and as trial progressed. A164, 166.
-29-
Nevertheless, because the court was apparently determined to
give that instruction, during the charge conference a protracted discussion
resulted. A174, et seq.14 Responding to the government’s “think[ing] [that]
putting” the “with the purpose of financial loss or property loss to another”
language from Berkovich on “page 70” (i.e. the proposed wire fraud
instruction) “back on page 41” (i.e., the proposed securities fraud
instruction), A173, see also A174, the court agreed to “copy that and just
put it on page 41.” A173. Thus, according to the court, the instruction now
“will state, ‘An intent to defraud for the purpose of the wire fraud statute
means,’ et cetera, that will copied [sic] and pasted into the instruction on
page 41 [i.e. the securities fraud counts]. Right?” Id.
Although the court then advised that Berkovich was a mail
fraud case, which, unlike securities fraud, requires an intent to cause a
victim’s loss, A174, as had the government, defense counsel still pressed
the court to use the Berkovich language “in two places.” A185. Ultimately
ending the discussion, A185-90 (which, to be sure, seems to allow for some
ambiguity), the court appears to have pledged to do so:
References during the charge conference to “page 41” of the

14
proposed jury instructions stayed the same, see A277, but “page 70”
apparently became page 68 in the final version. See A304.
-30-
COURT: I think we can probably use language from Page 41

[i.e., A277, securities fraud instruction], which is
from Berkovich, The defendant knew that his
conduct as a participant in the scheme was
calculated to deceive and nonetheless he associated
himself with the alleged fraudulent scheme for the
purpose of causing loss to another. That part of the
paragraph can be put into the instruction for Count
7 [i.e., A304] without the language that the
Government must prove beyond a reasonable doubt
that is so, right? So...
AGNIFILO: But you're going to keep it in the count on Page 41

[A277, i.e., pertaining to the securities fraud
instructions with respect to Counts Three and Six]?
COURT: Yes.
AGNIFILO: All right. That's fine.
COURT: We'll figure something out to just put that language

in and run it by you.
AGNIFILO: Okay.
A190-91; emphasis added.
Then, over initial defense objection, A208-12, but with later
compromised language, A216, the court also agreed to the government’s
request to include a “no ultimate harm” reference a third time, at the end
of its instructions, with respect to the good faith defense. A207-13. At the
conclusion of the conference, counsel took exception to the correctness of
-31-
this Circuit’s “no ultimate harm” instruction in general. A219-20.
Ultimately, the court only instructed on the additional
Berkovich language with respect to the three wire fraud conspiracies
charged in Counts Two, Five and Seven, A304, of which Defendant was
acquitted. On the other hand, it omitted the additional clause, “for the
purpose of causing financial or property loss to another,” when instructing
on the remaining securities fraud and securities fraud conspiracy charges,
including those alleged in Counts Three, Six and Eight, A277, of which
Defendant was convicted. At the end of its charge, and hence, for the third
time, the court cross-referenced both disparate instructions regarding the
good faith defense. A314-16.
Following the court’s charge to the jury, counsel’s sole
exception was to the “no ultimate harm” instruction. A324. Thereafter,
during its deliberations, when a jury note requested the court to “expand
or elaborate” on the concept of fraudulent intent, A327 (with counsel’s
stating that the court should include “good faith” and reliance of counsel,
A336, 338), the court merely directed the jury to re-read both of the earlier
disparate instructions. A341. Within a day or two, absent further inquiries,
-32-
the jury returned its split verdict.
B. The “No Ultimate Harm” Instruction
In Rossomando, a mail fraud case, the district court charged as
follows:
No amount of honest belief on the part of the defendant that

the scheme would not ultimately result in a financial loss to the
New York City Fire Department or its Pension Fund will
excuse fraudulent actions or false representations by him to
obtain money, provided, of course, that the government proves
beyond a reasonable doubt that the defendant acted with the
specific intent to defraud.
144 F.3d at 199.
Reviewing even under the higher bar of plain error, this Court
reversed the conviction, noting that Rossomando’s defense “was that he did
not intend to deprive the Pension Fund of any such monies because he
believed his income was well below the cap.” On that record, this Court
ruled that
the essence of Rossomando's defense was not that he thought

the Pension Fund would not “ultimately” lose money, but that
he thought it was never going to lose money because his income
was well below the level at which the false information he
provided would become relevant. In the absence of a sufficiently
clear referent for the court's “no ultimate harm” instruction,
there is a substantial risk that the jury could have been
confused into believing that the government was not required
-33-
to prove that Rossomando intended to harm the Pension Fund.

Simply put, the jury could well have been persuaded by
Rossomando's defense that he did not intend to harm the
Pension Fund, but still have believed that it should convict
because “[n]o amount of honest belief on the part of the
defendant that the scheme would not ultimately result in a
financial loss to the New York City Fire Department or its
Pension Fund will excuse fraudulent actions or false
representations by him to obtain money.”
144 F.3d at 202.
Moreover, added the court,
[t]he fact that the “no ultimate harm” instruction came toward
the end of the charge only exacerbated the problem, and the
jury's request that the court clarify the definition of intent is
the surest signal that the jurors were indeed confused.
Id. (Quoting Bollenbach v. United States, 326 U.S. 607, 612 (1946)
(“Particularly in a criminal trial, the judge's last word is apt to be the
decisive word.”)).15
Next came United States v. Gole, 158 F.3d 166 (2d Cir. 1998),
a mail fraud case, where the Court upheld a conviction in the face of a
15
The Court distinguished United States v. Dinome, 86 F.3d 277, 280, 284
(2d Cir.1996), where it had held, in the face of a good faith defense, that
“intentionally supplying false information on mortgage application was proper
basis for mail fraud conviction because it deprived bank of right to control its
assets and ‘diminished the ultimate value of the [mortgage] transaction to the bank
as defined by its standard lending practices’) (internal quotation marks and citation
omitted, alteration in original).” 144 F.3d at 201.
-34-
similar challenge. Distinguishing Rossomando, it was noted that
“[a]lthough Rossomando arose in nearly identical circumstances concerning
income forms completed by another disabled fireman, that case turned on
the defendant's knowledge of the immateriality of the false statements he
made.” 158 F.3d at 168. Conversely, “Gole admitted to knowing that lying
on his income report would affect the NYCFD Pension Fund's calculation
of his pension.” Id. at 168–69. Thus, the Court limited Rossomando to cases
where the defendant clearly had no intent to cause any loss at all, whether
immediate or ultimate.
A year later, the Court decided Berkovich, another mail fraud
case. There, again reviewing under plain error analysis, the Court noted
that the district court had initially instructed in accordance with
Rossomando. See 163 F.3d at 67, n.1. Immediately thereafter, however, the
district court in Berkovich had added:
As a practical matter, then, in order to sustain the charges

against the defendant, the government must establish beyond
a reasonable doubt that he knew that his conduct as a
participant in the scheme was calculated to deceive and,
nonetheless, he associated himself with the alleged fraudulent
scheme for the purpose of causing some loss to another.
168 F.3d at 67; emphasis added.
-35-
Upholding the conviction, this Court distinguished Rossomando
on three grounds: First,
[u]nlike Rossomando, the instruction here clearly informed the

jury that they could not convict appellant unless he intended to
cause loss to someone. That this instruction immediately
followed the “no ultimate harm” language also reduces the
impact of that language. See [144 F.3d] at 202 (fact that
instruction “came toward the end of the charge only
exacerbated the problem”). The possibility of confusion that
troubled us in Rossomando was, therefore, greatly reduced by
this proper restatement of the law.
Id.; emphasis added.
Second, “a factual predicate existed to give a ‘no ultimate harm’
instruction” in that case because “Berkovich was recorded as stating on at
least two occasions that only the insurance company and not the client or
the bank would lose any money.” Id. The court ruled that “[u]nlike
Rossomando, therefore, there was a legitimate reason here for the trial
court to indicate to the jury that some of Berkovich's statements regarding
who would be harmed did not constitute a defense.” Id.
Finally, the Court advised that, unlike in Berkovich, “the jury
in Rossomando was clearly troubled by the issue of intent and requested
the court to clarify its instructions on this point. As we noted in that case,
-36-
this was the ‘surest signal that the jurors were indeed confused.’” Id. “No
such signal was sent in this case.” Id.
Ensuing decisions of this Court, upholding convictions in a)
mail/wire fraud (United States v. Koh, 199 F.3d 632, 641 (2d Cir. 1999);
United States v. Stevens, 210 F.3d 356 (2d Cir. 2000) (summary order);
United States v. Rybicki, 38 F. App'x 626, 628–29 (2d Cir. 2002) (summary
order); United States v. Cartelli, 272 F. App'x 66, 69 (2d Cir. 2008)
(summary order); United States v. Ingram, 490 F. App'x 363, 367 (2d Cir.
2012) (summary order); United States v. Finazzo, 682 F. App'x 6 (2d Cir.
2017)); b) bank fraud (United States v. Marzo, 312 F. App'x 356, 358–59 (2d
Cir. 2008) (summary order)); and c) both mail/wire and securities fraud
cases (United States v. Leonard, 529 F.3d 83 (2d Cir. 2008); United States
v. Ferguson, 676 F.3d 260, 280 (2d Cir. 2011); United States v. Levis, 488
F. App'x 481 (2d Cir. 2012) (summary order); United States v. Lange, 834
F.3d 58, 79 (2d Cir. 2016), cert. denied sub nom. Russell v. United States,
137 S. Ct. 6771 (2017), and cert. denied, 137 S.Ct. 685 (2017)), usually
based on some variation of the Berkovich language, continued to
distinguish Rossomando.
-37-
C. Discussion
This Court will “review [preserved] challenges to jury
instructions de novo, but...will not find reversible error unless the charge
either ‘failed to inform the jury adequately of the law or misled the jury as
to the correct legal rule.” United States v. Henry, 888 F.3d 589, 598 (2d Cir.
2018) (quoting United States v. Alfisi, 308 F.3d 144, 148 (2d Cir. 2002)).
Here, the district court’s ignoring both sides’ requests for it to give the
same Berkovich instruction for securities fraud as it was giving for the wire
frauds fostered significant jury confusion, as in Rossomando. This is best
evidenced by the jury’s note, which did not garner further explanation and
which resulted in a split verdict.
While using the Berkovich “for the purpose of causing some loss
to another,” 168 F.3d at 67, language with respect to the mail fraud
conspiracies, the court gave the following instruction as to the securities
fraud counts, which essentially tracked that earlier condemned in
Rossomando:
In considering whether or not a defendant acted in good

faith,you are instructed that a belief by the defendant, if such
belief existed, that ultimately everything would work out so
that no investors would lose any money does not require a
-38-
finding by you that the defendant acted in good faith. No

amount of honest belief on the part of a defendant that the
scheme ultimately will make a profit for the investors will
excuse fraudulent actions or false representations by him.
A277.
Because “‘[a] jury is presumed to follow its instructions.’” Evans
v. Michigan, 568 U.S. 313, 328 (2013) (quoting Blueford v. Arkansas, 132
S.Ct. 2044, 2051 (2012) (quoting Weeks v. Angelone, 528 U.S. 225, 234
(2000)), the convictions under the securities fraud counts, alone, absent the
added Berkovich language, as in Rossomando, are readily understandable.
The verdict strongly supports the inference that, had the district court
employed the Berkovich language with respect to the securities fraud and
securities fraud conspiracy counts, and as it had indicated it would do,
A190-91, Defendant would likely have been acquitted of those charges as
well.
The district court appears to have ignored counsel’s request to
charge the additional Berkovich language with respect to the securities
fraud-related counts because, in its view, the underlying statute, 15
U.S.C.§§78j(b), unlike wire fraud, 18 U.S.C. §1343, does not contemplate
an intent to harm a victim by obtaining “money or property,” but only
-39-
proscribes an intent to deceive. A174. That is certainly the law. United
States v. Litvak (Litvak I), 808 F.3d 160, 178-79 (2d Cir. 2015) (citing
United States v. Dixon, 536 F.2d 1388, 1398 (2d Cir. 1976); see also Point
II, infra. But if that were a valid reason not to include the additional
Berkovich language, it would also be a valid reason to exclude the “no
ultimate harm” charge in its entirety with respect to all securities fraud
allegations. Indeed, that had been counsel’s position when he stated that,
in this case (as in Rossomando), Defendant had no intent, “at any time,”
for any investor to “lose a dime.” A150.
After all, if intending to cause harm to an investor is not an
element of securities fraud, then neither an “immediate,” see Lange, 834
F.3d at 79, nor an ultimate harm need be contemplated, with the result
that discussion of any harm becomes irrelevant to the jury’s consideration
of the charge. If so, certainly insofar as the securities fraud charges were
concerned, as counsel argued pre-trial, “the so-called No Ultimate Harm
charge does not apply to these facts.” A150.
To be sure, in the past, this court has allowed the “no ultimate
harm” instruction to be given in securities fraud cases, even if intending
-40-
to cause loss is not an element of that crime. See e.g. Lange and Leonard.
But the rationale for not employing it at all with regard to securities fraud,
alone, does not seem to have been earlier raised or addressed. Accordingly,
we initially maintain that, as to securities fraud, because, unlike in
mail/wire fraud cases, intent to cause a loss is not an element of the crime,
a “no ultimate harm” charge is not appropriate.
Were the Court to disagree, and were the instruction, therefore,
to be required in securities fraud cases as well, the Berkovich language
should certainly be given. For that is the only way to ensure that a
defendant who intended that there be no ultimate harm not be convicted
unless it is proved that the charged conduct had the immediate “purpose
of causing some loss to another.” 163 F.3d at 67.
Indeed, even if not an element of 15 U.S.C. §78j(b), the purpose
of protecting investors from deceptive devices is to ensure they do not incur
any unnecessary losses resulting from such fraud -- i.e those not owing to
the vicissitudes of the securities markets which otherwise result from the
risk that any investor, especially in hedge funds, understandably
undertakes. Under such circumstances, absent the Berkovich language in
-41-
the securities fraud context, just as was found to be prejudicial in
Rossomando (especially when that defense was similar to that interposed
in this case where “Mr. Shkreli never, at any time, intended for a single
investor to lose a dime,” A150), here also,
the jury could well have been persuaded by [Defendant’s]

defense that he did not intend to harm the [investers], but still
have believed that it should convict because “[n]o amount of
honest belief on the part of the defendant that the scheme
would not ultimately result in a financial loss to the [investors]
will excuse fraudulent actions or false representations by him
to obtain money.”
Rossomando, 144 F.3d at 202.
So viewed, securities frauds might necessarily envision some
consequential loss on the part of the investors, even if the intent to cause
such harm is not an element of the crime. See e.g. Leonard, supra, 529 F.3d
at 91 (upholding the “no ultimate harm” charge where, because the
defendants “intended to deprive investors of the ‘full information’ they
needed to ‘make refined, discretionary judgments,’ they intended to harm
the investors” [quoting Rossomando at 201 n. 5 and citing Dinome, at 284])
(emphasis added). Thus, “some loss to another,” 167 F.3d at 67, is not
necessarily financial.
The facts in Lange and Leonard stand in stark contrast, where
-42-
similar jury confusion was avoided. Although those cases also involved
both securities and wire fraud charges, the subject instructions appear only
to have been given once in each case, in conjunction with those defendants’
respective good faith defenses -- not with regard to the elements of either
of the charged offenses. See 834 F.3d at 79, n. 9. In upholding the
instruction as it did in B erkovich, Lange emphasized three factors: a) that
there was a factual predicate; b) the instruction required the finding of an
intent to defraud; and c) there was no jury confusion. 834 F.3d at 79.
Here, two disparate sets of “no ultimate harm” instructions
were given to the jury with regard to the substantive offenses, in addition
to the third reference to both disparate instructions, at the end of the
charge -- as in Rossomando -- regarding the good faith defense. In contrast
to the Berkovich instruction, therefore, which was given with regard to the
mail fraud counts and which resulted in acquittals, the court only gave a
deficient Rossomando-like charge on the securities fraud-related counts.
Moreover, just as in Rossomando, and unlike in Berkovich
Leonard, and Lange, there was absent any factual predicate for the
Rossomando charge on the securities fraud counts. Indeed, by acquitting
Defendant of the wire fraud counts, where the Berkovich language was
-43-
given, the jury obviously found no proof beyond a reasonable doubt that
Defendant ever entered an agreement with intent to defraud anyone. Cf.
Lange 834 F3d at 79 (“there was a factual predicate for the instruction,
because there was evidence that Russell's co-conspirators intended to
immediately deprive investors of their capital through fraud, even if they
truly believed that in the long-term HFGI and BSMI would ultimately
succeed, deriving profits for the defrauded investors.”). There were
certainly no inculpating statements by Defendant even approximating
those in Berkovich. See 168 F.3d at 67.
Finally, the challenged charge was among the last given to the
jury, with its cross-references to the two disparate versions earlier given,
in furtherance of the good faith defense. A315-16. And if that was not
enough to hopelessly confuse the jury, and thereby spawn the split verdict
it ultimately returned, the jury was soon referred back to both those same
disparate instructions when, in response to its only substantive note
shortly before returning its verdict, the court simply directed it to read the
original instructions. A341.
As in Rossomando, therefore, “the jury's request that the court
clarify the definition of intent is the surest signal that the jurors were
-44-
indeed confused.” 144 F.3d at 202. Consequently, and similar to
Rossomando, after the jury indicated its confusion by its note, the district
court’s direction to the jury, during its deliberations, to re-read the charge
was the “decisive word.” 144 F.3d at 202 (Rossomando citing Bollenbach)
(emphasis added). To borrow from a parallel context, “[t]elling the jurors
to read an inadequate instruction three more times did nothing to improve
upon it or enlighten the readers.” Waddington v. Sarausad, 555 U.S. 179,
206 (2009) (Souter, J., dissenting).
In the final analysis, for Defendant’s defense as to all counts,
that he had never “intended for a single investor to lose a dime[,]” A150,
to have had any viability, the jury needed to be likewise instructed with
regard to securities fraud to find that he had not “associated himself with
the alleged fraudulent scheme for the purpose of causing some loss to
another.” Berkovich, 168 F.3d at 67. Because it was not so charged on the
securities fraud counts, the jury was erroneously and prejudicially
precluded from making any similar finding.
-45-
Point II
When Determining the Amounts to Be Forfeited, The

District Court Erroneously Applied the Distinct
Materiality Test for Weighing the Evidential Sufficiency
of the Underlying Securities Fraud Count, Which Does
Not Require Any Showing of Ill Gotten Gains
The forfeiture statutes relating to securities fraud penalize the
actual receiver of ill-gotten gains which result directly from the illegal
conduct. In such event, subject to certain offsets, the illegally received funds
-- or substitute assets when such funds are unavailable -- are forfeited to
the government. On the other hand, the materiality test for weighing the
sufficiency of the evidence supporting the underlying securities fraud count
requires neither proof of harm to the victim nor actual receipt of monies by
the defendant. Rather, the government need only prove materially false
representations which a reasonable investor would rely upon in deciding
whether to make the subject investment.
To the extent net ill-gotten gains are not actually realized,
therefore, no forfeiture is owing, even if guilt for the fraud itself is
established. On this record, large amounts of monies received by
Defendant from several investors were not proved to have been induced by
the fraudulent representations which supported his conviction. Moreover,
-46-
Defendant also incurred direct costs, amounting to “goods and services,”
in providing the subject securities which the district court erroneously
failed to deduct from the total of monies ordered to be forfeited. Nor, as it
should have done, did the court factor in the large returns ultimately
realized by each and every investor that mitigated Defendant’s profits.
A. Background
1. Government’s Motion for Forfeiture
In moving for forfeiture, A345, the Government maintained
that, with respect to the MSMB Capital Fund, the basis for the security
fraud charge in Count Three, seven investors -- Lindsay Rosenwald
($100,000), Steven Richardson ($400,000), Brent Saunders16 ($248,000),
Darren Bloanton ($1,250,000), Dynagrow Capital17 ($300,000), Schuyler
Marshall ($200,000), and John Neill ($500,000) -- who had been defrauded
by Defendant, collectively totaled approximately $2,998,000.00. A349, 355.
The Government argued, “[b]ut for these investments and the material
misrepresentations that induced these investments and caused investors
16
Saunders did not testify.
The reference to Dynagrow Capital was later corrected by the

17
Government, following Defendant’s response, A362, n. 1, to have been a

personal investment by Sarah Hassan. A370, n.2.
-47-
to refrain from making redemption requests, the securities fraud scheme
involving MSMB Capital would not have been able to occur.” A349.
Similarly, with regard to Count Six,18 the substantive MSMB
Healthcare fraud count, the Government asserted that “approximately
twelve different investors invested a total of approximately $3,402,450.00
in MSMB Healthcare.” A349, 356. While there were twelve named
investors -- Richard Kocher ($200,000), David Geller ($200,00), Alan Geller
($1,000,000), Molly Tschang ($100,000), Seymour Block ($100,000), Steven
Rosenfeld ($200,000), Robert Johnson ($150,000), Michael Lavelle
($1,050,000), Spencer Spielberg ($25,000), David Geller ($200,000), Patrick
McGowan ($100,000), George Blasko ($177,450), and Diandra Douglas
($100,000) -- only two, David Geller and Richard Kocher, testified at trial
to having relied upon Defendant’s or his co-conspirator’s
misrepresentations when investing.
2. Defendant’s Response
Answering the Government’s motion, Defendant initially noted
that three of the individuals theorized under the substantive MSMB
The amount of forfeiture ordered under Count Eight is not being

18
challenged.
-48-
Capital fraud charged in Count Three had not invested in response to
Defendant’s misrepresentations. Rather, it was claimed that, because the
definition of “proceeds” is the “amount of money acquired through the
illegal transactions resulting in the forfeiture[,]” 18 U.S.C. §981(a)(2)(B),
in reality,
many of the investors did not rely on Mr. Shkreli's

representations in deciding whether to invest in MSMB
Capital. Instead, many had been impressed with Mr. Shkreli's
intellectual prowess and knowledge of the pharmaceutical
industry.
A362. Such persons were said to include Sarah Hassan, Schuyler Marshall,
and John Neill.
Second, it was argued that “there are still no forfeitable
proceeds here, as Mr. Shkreli used the invested funds for their intended
purposes: investment in the stock market.” A363. Thus, “[b]ecause Mr.
Shkreli used the investors' funds to provide the ‘goods,’ i.e., invest funds in
the market, the amount of these investor funds are not forfeitable.” Id.
In furtherance of meeting his burden to prove those “direct costs
incurred in providing the goods or services” by which the amount to be
forfeited must be mitigated under 18 U.S.C. §981(a)(2)(B), Defendant
specified in his sur-reply papers that
-49-
the government alleges that Mr. Shkreli should forfeit

2,998,000 for Count Three--equal to the amount invested by
seven MSMB Capital investors. The bank records for the fund's
investment account at Interactive Brokers demonstrates that
all of this money went into this investment account and was
invested. See GX 502-A, 502-B & 502-2. These bank records
also show that $1,057,807 was disbursed out of this investment
account. See GX 502-C & 502-D. Of these disbursements,
$535,075 went to Interactive Brokers for broker interest,
commissions and fees; only $505,414 was disbursed to MSMB
Capital. See GX 502-C & 502-D. To the extent the $505,414
that went to MSMB Capital could be considered overhead
expenses and cannot be included in direct costs, only that
amount should be forfeitable under Count Three (footnote
omitted).
A384.
In any event, according to Defendant, there should be no
amount of money subject to forfeiture. That is because, “as undisputedly
proven at trial, all MSMB Capital investors received a robust return for
their investments.” A363. Therefore, because
§981(a)(2)(B) “targets the profits that [the defendant] enjoyed,

not net gains or intended losses,” the forfeiture proceeds should
be reduced by the money that was returned to investors, as
these payments are in this case, part of the direct costs
incurred in providing goods and services.
A363 (quoting United States v. Hollnagel, 2013 WL 5348317, (N.D. Ill,
Eastern Div 2013) at *4 (deducting the funds paid back to the investors
from the forfeiture analysis under 18 U.S.C. § 981(a)(2)(B) as these
-50-
payments were “direct costs ‘incurred in providing the goods or services.’”).
Addressing Count Six for the same reasons, Defendant argued
that “only two of the twelve MSMB Healthcare investors (David Geller and
Richard Kocher) testified at trial[,]” A363, with the result that what the
other investors would have relied upon was never established. And as to
the “goods and services” to be deducted under Count Six, Defendant argued
that the government’s request for $3,402,450 in forfeiture was grossly
inflated:
the trial evidence clearly demonstrates, however, that at least

$2,535,000 of this money was used to provide goods and
services, specifically, to purchase Retrophin shares. See GX 214
at 3. Thus, the forfeiture amount for Count Six would be, at
most, $867,450.
A384.
In any event, argued Defendant, as with the investors under
Count Three, and again citing Hollnagel,
whether the Court only considers the $400,000 invested by the

testifying witnesses or the full $3.4 million invested by all
MSMB Healthcare investors, the forfeiture amount for Count
Six is still zero because, as with Count Three, each of these
investors received a robust return for their investments.
A364.
-51-
3. The Court’s Decision
Following argument on February 23, 2018, A418, the court
issued its decision on March 5, 2018, granting the government’s forfeiture
request in full. SPA120. A preliminary order was entered. SPA112.
Addressing Defendant’s forfeiture arguments under Count
Three, “that (1) investors in his MSMB hedge funds did not rely on his
representations in choosing to invest in MSMB Capital and MSMB
Healthcare, and (2) the forfeiture amount should be zero for Counts Three
and Six because ‘each of the[] investors received a robust return for their
investments[,]’” SPA123, n. 1, the district court offered no explanation
beyond stating that it had “considered, and rejected, these arguments in
a prior order.” Id. Yet, in its referenced Rule 29 ruling upholding the
counts of conviction, which it had earlier issued and now incorporated by
reference, the court never analyzed §981(a)(2)(B). Rather, it merely
concluded that
in a criminal securities fraud case, the test for materiality is

objective – whether or not there is “a substantial likelihood that
a reasonable investor would find the omission or
misrepresentation important in making an investment
decision, and not actual reliance.” United States v. Vilar, 729
F.3d 62, 89 (2d Cir. 2013). Thus, whether or not a specific
investor did or did not rely on a specific representation made by
-52-
Mr. Shkreli is not dispositive of whether that representation

was material to a reasonable investor.
SPA75.
As to Count Six, the court earlier ruled in its Rule 29 decision
that
[b]ased on the evidence at trial, the jury could reasonably

conclude that Mr. Shkreli made intentional, material
misstatements and omissions regarding the assets,
performance, and investment strategy of MSMB Healthcare.
SPA82. Again, however, at that time, the court obviously had no need to
address any of the offsets contemplated under 18 U.S.C. §981(a)(2)(B).
With regard to Defendant’s claim that the “direct costs” of the
“goods and services” provided, in the form of security investments, should
have been credited, the court, citing United States v. Contorinis, 692 F.3d
136, 145, n. 3 (2d Cir. 2012), ruled that Defendant
has not provided any detailed analysis or breakdown of MSMB

Capital’s “direct costs” related to such investments, nor
explained how any such costs of MSMB Capital should be
deducted from his own forfeiture obligations. Therefore, he has
failed to carry his burden.
SPA127.
Concerning Count Six, the court added that
[a]s with Mr. Shkreli’s arguments on Count Three, he has failed
-53-
to provide any analysis or detailed explanation of why the court

should deduct $2,535,000 million as “direct costs” from the total
forfeiture amount.
SPA128. Therefore, according to the district court:
the trial evidence showed that (1) Mr. Shkreli improperly used
MSMB Healthcare to funnel money to Retrophin,
notwithstanding his representations that MSMB Healthcare
was a diversified fund; and (2) Mr. Shkreli improperly used
approximately $1.1 million of the money MSMB Healthcare
invested into Retrophin for his own personal and unrelated
professional obligations. (Rule 29 Order, ECF No. 535 at 64-67;
86-88.)
Id.
B. Governing Principles
1. Forfeiture Requires Unlawful Gains
When the Government seeks forfeiture of a defendant’s assets
or substitute assets, “the court must determine whether the government
has established the requisite nexus between the property and the offense.”
Rule 32.2(b)(1)(A). See United States v. Capoccia, 503 F.3d 103, 107 (2d Cir.
2007). The burden is on the Government to establish the precise amount
of money required to be forfeited by a preponderance of the evidence. Id.
at 116.
In the event of a conviction of Securities Fraud, which is an
-54-
“unlawful activity” making the defendant subject to forfeiture pursuant to
18 U.S.C. §§1961(1)(D) and 1956(c)(7)(A), the applicable, and “more lenient
definition of “proceeds,” United States v. McIntosh, No. 11-CR-500 (SHS),
2017 WL 3396429, at *5 (S.D.N.Y. Aug. 8, 2017), is provided in 18 U.S.C.
§981(a)(2)(B):
In cases involving lawful goods or lawful services, that are sold

or provided in an illegal manner, the term “proceeds” means
the amount of money acquired through the illegal transactions
resulting in the forfeiture, less the direct costs incurred in
providing the goods or services. The [defendant] shall have the
burden of proof with respect to the issue of direct costs. The
direct costs shall not include any part of the overhead expenses
of the entity providing the goods or services, or any part of the
income taxes paid by the entity.
18 U.S.C. §981(a)(2)(B); emphasis added. See United States v. Bodouva,
853 F.3d 76, 79 (2d Cir. 2017) (citing Contorinis, supra, 692 F.3d at 145 n.
3).
Because “[c]riminal forfeiture focuses on the disgorgement by
a defendant of his ‘ill-gotten gains[,]’ ...the calculation of a forfeiture
amount in criminal cases is usually based on the defendant's actual gain.”
Id. (citing United States v. Kalish, 626 F.3d 165, 170 (2d Cir.2010) (citing
United States v. Emerson, 128 F.3d 557, 566 (7th Cir.1997); and United
States v. Various Computers & Computer Equip., 82 F.3d 582, 588 (3d
-55-
Cir.1996)). In fact, although “‘[p]roceeds’ can mean either ‘receipts’ or
‘profits[,]” United States v. Santos, 553 U.S. 507, 511 (2008), the statute is
less than precise. Therefore, the Santos Court held that
[u]nder a long line of our decisions, the tie must go to the

defendant. The rule of lenity requires ambiguous criminal laws
to be interpreted in favor of the defendants subjected to them.
553 U.S. at 514 (citing United States v. Gradwell, 243 U.S. 476, 485 (1917);
McBoyle v. United States, 283 U.S. 25, 27 (1931); and United States v. Bass,
404 U.S. 336, 347–349 (1971)). Accordingly, “proceeds” means profits.
Santos at 512; Hollnagel, at *3.
2. Securities Fraud Does Not

Require an Intended Loss
In stark contrast, as explained ante, culpability for the
underlying charge of securities fraud does not require the Defendant’s
intent to actually receive ill gotten gains. Thus, as noted in Litvak I, supra,
for purposes of gauging the legal sufficiency of the requisite materiality of
an allegedly fraudulent representation, rather than examining the
subjective beliefs of an individual investor toward determining such
materiality, an objective test is employed. In such event,
[a] misrepresentation is material under Section 10(b) of the

Securities Exchange Act and Rule 10b–5 where there is “a
-56-
substantial likelihood that a reasonable investor would find the

... misrepresentation important in making an investment
decision.”
Litvak I, 808 F.3d at 175 (quoting United States v. Vilar, 729 F.3d 62, 89
(2d Cir.2013), cert. denied, ––– U.S. ––––, 134 S.Ct. 2684 (2014));
Contorinis, 692 F.3d at 143. Moreover,
“[a] misrepresentation is important if there is “a substantial

likelihood that the disclosure of the omitted fact would have
been viewed by the reasonable investor as having significantly
altered the ‘total mix’ of information made available.”
United States v. Litvak (Litvak II), 889 F.3d 56, 64 (2d Cir. 2018) (quoting
Basic Inc. v. Levinson, 485 U.S. 224, 231-32 (1988)).
As noted in Point I, in Litvak I it was explained that, in a
securities fraud prosecution as opposed to a wire or mail fraud allegation,
“‘the government was under no obligation to prove that [the defendant]
wanted to steal [the victim's] money, only that he intended to defraud her
in connection with his sale of the [securities].’” 808 F.3d at 178 quoting
Vilar, 719 F.3d at 93 (footnote omitted). Thus, “Vilar's holding is consistent
with [the Court’s] earlier observation that ‘the Government's burden with
respect to criminal intent on [ ] Securities Exchange Act counts [is] less
than under [ ] mail fraud counts,’ and forecloses Litvak's argument here.”
-57-
Litvak I, 808 F.3d at 179 (quoting Dixon, 536 F.2d at 1398) (footnote
omitted).
Likewise, to convict someone of securities fraud, as opposed to
determining the amount, if any, of forfeiture to be imposed, the
government need not prove that the victim had been harmed by actually
having invested as a result of the defendant’s false representations.
Rather, all that need be proved is that those misrepresentations were
material, based on the objective test, and accompanied by the defendant’s
mere intent to deceive rather than to harm. In such instance, “[a] finding
of materiality...requires a showing only of importance, not ‘actual
reliance’],]” Litvak II, 889 F.3d at 65 (quoting Vilar, 729 F.3d at 89). In
short, to be guilty of securities fraud, a defendant need not have either
intended or even incurred a forfeitable gain.
Finally, just as the government argued below, the need to
determine or mitigate forfeiture is not an opportunity to re-visit the basis
for evaluating the legal sufficiency of evidence of guilt of the underlying
fraud count. See A369 (citing United States v. Warshak, 631 F.3d 266, 331
(6th Cir. 2010)). A fortiori, given the offsets mandated under 18 U.S.C.
§981 (a)(2)(B), the mere fact of a conviction does not resolve the amount of
-58-
forfeiture. Otherwise stated, under 18 U.S.C. §981 (a)(2)(B), the amount of
that investment cannot alone be considered for the separate and distinct
purpose of determining the total amount of forfeiture to be ordered,
without first considering the appropriate offset of “direct costs incurred.”
C. Discussion
This Court “review[s] a district judge's legal conclusions
regarding forfeiture de novo.” Bodouva, 853 F.3d at 78, citing United States
v. Daugerdas, 837 F.3d 212, 231 (2d Cir. 2016). See also Contorinis, supra,
692 F.3d at 145.
1. Monies Lawfully Acquired
Insofar as it was based on the mere upholding of the
substantive securities fraud counts in response to Defendant’s Rule 29(c)
motion, SPA123, n. 1, the district court’s determination of the amount of
forfeiture improperly conflated the distinct rule for finding materiality
with respect to the substantive charge (which does not require any money
changing hands) with that which is employed in furtherance of calculating
forfeiture (which is based on the actual gains received by virtue of illegal
conduct). Contorinis, 692 F.3d at 146-47. Therefore, even accepting the
district court’s denial of the Rule 29 motion as to Counts Three and Six
-59-
owing to the objective test for materiality, Litvak II, 889 F.3d at 65, still,
the court improperly employed the same precise test to determine the
amount of forfeiture. In doing so, and thereby adding the investment of
each individual investor to calculate the total, the court necessarily ignored
that several of those named individuals, rather than having been induced
by Defendant’s misrepresentations, had actually invested in either MSMB
Capital (Count Three) or MSMB Healthcare (Count Six) solely based upon
Defendant’s reputation in the relevant industry.
In the latter instance, absent any reliance on Defendant’s
misrepresentations, the “reasonable investor standard,” which is normally
utilized to measure a defendant’s alleged wrongdoing on the substantive
charge with respect to the materiality of misrepresentations, Litvak II, 889
F.3d at 64, is not applicable. Rather, only “money acquired through the
illegal transactions,” 18 U.S.C. §981(a)(2)(B), is subject to forfeiture, an
element not necessary to prove the substantive charge. On this record,
therefore, even if the proof in support of Counts Three and Six is
unassailable, the district court’s forfeiture determination, by relying solely
on its Rule 29 decision upholding the evidentiary sufficiency of those
counts, are, perforce, fundamentally overstated.
-60-
a. Count Three
As argued below, Sarah Hassan invested $300,000 in MSMB
Capital because her father's long-time business associate, Brent Saunders,
the CEO of Bausch & Lomb and former Executive Vice President at
Schering-Plough, encouraged her to do so. Hassan testified that Saunders
was impressed with Defendant. 915-917. In fact, according to her
testimony “Brent Saunders ... characterized [Mr. Shkreli] as a brilliant,
young healthcare guy....” 1071.
To be sure, the government argued to the jury, and will surely
counter, that Sarah Hassan had invested, based on Defendant’s
misrepresentations and her consequent reliance on those false claims, such
as the availability of auditors and Defendant’s professing that MSMB
Capital had high assets under management. But, it only takes one victim
on which to premise a conviction for securities fraud. Therefore, we have no
way of knowing whether the jury convicted based on Hassan’s claim at
trial, or whether it relied on other witnesses. The result is that the verdict
could well have been actually premised on witnesses other than Sarah
Hassan who had not noted Defendant’s reputation as the basis for their
investments, but only his misrepresentations.
-61-
Consequently, the district court’s mere incorporation of its Rule
29 decision by reference, in order to defeat Defendant’s forfeiture
arguments, was insufficient to support any such determination. This being
so, putting the conviction aside, it was incumbent upon the district court,
for purposes of forfeiture, to first determine, by a preponderance of the
evidence, that Sarah Hassan was included in that group before her
investment could be factored into the total.
Similarly, Schuyler Marshall also characterized Defendant
Shkreli as “smart and highly focused.” 2522. He testified that Mr. Shkreli
reminded him of the main character from the movie Rainman, and hence,
as “a person who was intensely focused on one small segment of the stock
market and just lived it day and night and was so focused that that was his
investment advantage.” 2521. As with Sarah Hassan, the district court
should have determined whether Marshall invested for those personal
reasons or whether, by a preponderance of the evidence, he had succumbed
as a result of Defendant’s misrepresentations.
The same holds true for John Neill, who admitted having never
read the PPM. 4051. Most probably, Neill also had invested because other
people, like Darren Blanton, “sponsored” Defendant. Id. Neill was likewise
-62-
impressed by how smart he viewed Defendant to be. 4047, 4051. Finally,
the Government failed to call Brent Saunders to testify.
In short, because the initial investments of Sarah Hassan,
Marshall, Neill and Saunders may not have resulted from Defendant’s
misrepresentations, i.e., “illegal transactions,” the factoring of those sums
should not have been so precipitately utilized to increase the amount of
forfeiture until the district court could specifically have found otherwise,
pursuant to the government’s burden. In doing so, the district court -- as
had the Government by its reference to Vilar (which stands for the
independent and unrelated evidentiary proposition that “[c]onspicuously
absent from this list of elements [to prove a criminal violation of Section
10(b) and Rule 10b-5] is ‘reliance’”), A370 (emphasis added by the
government)) -- improperly conflated the two distinct concepts of
evidentiary sufficiency, which requires material misrepresentations but no
money changing hands, and forfeiture, which certainly does.
Based on the foregoing, upon deducting from the government’s
chart, A355, the $300,000, invested by Dynagrow Capital (which is actually
Sarah Hassan as an individual19), the $500,000 invested by John Neill, the
19
Tr. 934; see also A 362, n. 1.
-63-
$200,000 invested by Schuyler Marshall, and the $248,000 by Brent
Saunders, who never even testified, the new total, reduced by $1,248,000,
amounts to $1,750,000.
b. Count Six
As to Count six, as argued below, only David Geller and Richard
Kocher, testified to having invested as a result of Defendant’s claimed
misrepresentations. This is crucial because, as even the government
conceded at trial, it could not “argue that these individuals relied on those
specific misrepresentations that Mr. Shkreli had made...because we not
obviously, we have not heard testimony from them.” 4450-51.
Here, as well, therefore, even if the proof of two investors in
support of guilt under Count Six sustains that charge for evidentiary
sufficiency purposes, for the separate and distinct purposes of forfeiture, it
does not. Instead, all the government and the district court could do is
merely assume that the uncalled investors had likewise relied on
Defendant’s misrepresentations. Accordingly, by its own admission, the
government failed to meet its burden of proving, by a preponderance of the
evidence, Capoccia, 504 F.3d at 116, that Defendant had acquired
“proceeds” from those ten persons though “illegal transactions,” as required
-64-
by 18 U.S.C. § 981(a)(2)(B).
Thus, because the total investments of the two persons who
testified -- David Geller ($200,000) and Kocher ($200,000) -- only amounts
to $400,000, it is that sum alone, rather than the claimed $3,402,450, for
which forfeiture can be upheld. A356.
2. Deduction of Costs in Providing Goods and Services
As argued below, in each instance, rather than utilizing the
monies received for his personal use, Defendant invested in the respective
funds -- precisely as contemplated by the investors. Indeed, in a parallel
context, this Court has held that “the proper measure of forfeiture for each
Broker Defendant is his net, not gross, gain (that is, the gross commissions
paid to him less the significant portion of those commissions that went to
his employer) under § 981(a)(2)(B).” United States v. Mahaffy, 693 F.3d
113, 138 (2d Cir. 2012). The district court, however, ruled that Defendant
“has not borne his burden of proving direct costs because the direct costs
he specifically references in his papers would not be deductible.” SPA125.
We submit, however, the court’s viewpoint is belied by the Government’s
own proof. The reality is that regardless of what motivated the subject
investments by Defendant, because they constitute “direct costs,” the
-65-
amounts of the actual purchases of securities by Defendant are entitled to
be deducted from his gross gain in order to arrive at an adjusted net
amount. 18 U.S.C.§ 981(a)(2)(B).
a. Count Three
Based on such analysis, the forfeiture assigned to the MSMB
Capital fraud must be reduced. As even the Government noted, Defendant
“lost all of the MSMB Capital investors' money in a series of ill-fated
trades in late 2010 and early 2011 ....” A349.
But, the fact that there was a loss does not inure to Defendant’s
detriment for forfeiture purposes. After all, each investor in a hedge fund,
as the testimony demonstrates, was well aware of, and thereby assumed
the risk. So, as long as Defendant invested the money, as promised, he did
what he said he would do and, hence, all that he was obligated to do. The
fact that he was convicted of fraudulent representations is irrelevant to
this result. For that he was sentenced to imprisonment. For purposes of
forfeiture, however, all that is considered is the net gain. Mahaffy, supra.
Thus, because the net gain, after the investment of the received
funds are factored, is a significantly lesser amount, that is all that may be
ordered forfeited. In short, as noted below, “because Mr. Shkreli used the
-66-
investors' funds to provide the ‘goods,’ i. e., invest the funds in the market,
the amount of these investor funds are not forfeitable.” A363. Compare this
case to United States v. Bonventre, 646 F. App'x 73, 90 (2d Cir. 2016)
(affirming the district court's refusal to deduct direct costs because the
investment firm “never purchased any securities on behalf of its [] clients
in exchange for their investments”).
b. Count Six
Similarly, each of the two individuals who testified with regard
to the MSMB Healthcare fraud, David Geller and Richard Kocher, invested
in that fund. And as promised in the private placement memorandum --
which put them on notice of contemplated investments in “illiquid
securities, including venture capital, private equity, limited partnerships
and other hedge funds” (GX 109-6) -- Defendant acted accordingly by
investing these funds in Retrophin. The government’s argument that these
investments were “without the permission or knowledge of the MSMB
Healthcare investors[,]” A350, is belied by the PPM which gave the general
partner limitless discretion concerning where to invest. Hence, they cannot
be included in the forfeiture analysis under 18 U.S.C. §981(a)(2)(B).
-67-
3. Factoring and Thereby Deducting the

Extraordinary Profits Paid to Investors
It was further argued in the district court with respect to Count
Three that
the forfeiture amount in this case should also be reduced to

zero because, as undisputedly proven at trial, all MSMB
Capital investors received a robust return for their
investments. Indeed, because § 981(a)(2)(B) “targets the profits
that [the defendant] enjoyed, not net gains or intended losses,”
the forfeiture proceeds should be reduced by the money that
was returned to investors, as these payments are in this case,
part of the direct costs incurred in providing goods and services.
United States v. Hollnagel, [supra] 2013 WL 5348317, at *4
(deducting the funds paid back to the investors from the
forfeiture analysis under 18 U.S.C. § 981(a)(2)(B) as these
payments were ‘direct costs’ incurred in providing the goods or
services.’”).
A363.
In reply, the Government, seeking to distinguish Hollnagel,20

20
According to the government,
[u]nlike the defendants in Hollnagel, Shkreli has

advanced no specific evidence to meet his burden of
demonstrating the existence of direct costs. Moreover,
in contrast to the defendants in Hollnagel, Shkreli has
not demonstrated that he did not profit from the
offenses in Counts Three and Six; nor could he, given
that the proceeds he obtained as a result of his
misrepresentations enabled him to control millions of
dollars that were used to fund and enable the success
of Retrophin, pay his personal debts and expenses, and
(continued...)
-68-
stated that “to the extent the Hollnagel court ultimately concluded that no
funds were subject to forfeiture -- a conclusion at odds with the Second
Circuit’s holding in [United States v.] Castello [611 F.3d 116 (2d Cir.
2010)]21 -- a survey of the relevant case law has revealed that no other
federal court has followed Hollnagel when addressing forfeiture issues.”
A376. Absent discussion, the district court likewise rejected this argument.
Again, its ruling was solely based on the distinct and inapposite criteria
20
(...continued)
perpetuate additional frauds.
A376. To the contrary, as shown in the chart provided in the text at p.

70, the evidence at trial fully supports the conclusion that “Defendant[]
ha[s] undisputedly returned to each investor all of his or her capital --
plus distributions -- and, therefore, can deduct as costs more money
than the government has proven Defendants obtained as receipts.”
Hollnagel, 2013 WL 5348317, at *4. The unalterable fact remains,
therefore, that “Defendant[] promised that [he] would pay the investors
distributions and return their capital, and [he] undisputedly did.” Id. at
*5.
21
Castello is not at all at odds with Hollnagel. Unlike in our case,
Castello dealt with a violation of the currency reporting statute under
31 U.S.C. §5313(a). Hence, only the forfeiture provision of 31 U.S.C.
§5317 was applicable “which affords no leeway[,]” Castello, 611 F.3d at
120, by providing that “[t]he court in imposing sentence for any
violation of section 5313, 5316, or 5324 of this title, or any conspiracy to
commit such violation, shall order the defendant to forfeit all property,
real or personal, involved in the offense and any property traceable
thereto.” It contains no provision for offsetting costs, as in 18 U.S.C.
§981(a)(2)(B), save for satisfying excessive fine analysis discussed in
United States v. Bajakajian, 524 U.S. 321 (1998).
-69-
upon which it had earlier upheld the counts of conviction, as explained in
its incorporated by reference Rule 29 decision. SPA123, n. 1.
Consequently, as with the investments under Count Three,
whether this Court need only consider the $400,000 invested by Kocher
and Geller, the only testifying witnesses, or the full $3,402,000 invested by
all MSMB Healthcare investors, the forfeiture amount for Count Six
should be zero because the extraordinary profits to the investors also
constitute “direct costs.” Hollnagel, 2013 WL 5348317, at *4. Again,
separate and apart from any issues involving the legal sufficiency of
Defendant’s conviction of securities fraud, as demonstrated in the following
chart, each of these testifying investors received a “robust” return on their
investments with the result that forfeiture is not appropriate:
Investor Amount of Amount of Transcript

Investment in Return Over pages
MSMB and Above
Entities Investment
Sarah Hassan $300,000 in $1.8 million Tr. 1060:7-10
MSMB;
$150,000 in
Retrophin
Steven $400,000 $1.9 million Tr. 2987: 20-23
Richardson
Darren Blanton $1,250,000 $5.8 million Tr. 1696-1697
-70-
John Neill $500,000 $1,570,000 Tr. 4031-4033

Schuyler $200,000 $1 million Tr. 2488
Marshall
Lindsay $100,000 $400,000 - Tr. 1986: 15-16
Rosenwald $600,000
Richard Kocher $200,000 $390,421.14 Dkt. No. 564
at 2
David Geller $200,000 $615,000 Tr. 3172-3173
Finally, the fact that Defendant was admittedly tardy in
returning those profits, while perhaps germane to his culpability under the
substantive securities fraud statute, is irrelevant to the issue of forfeiture.
Indeed, “[t]he forfeiture statute at issue, however, does not view this
timing as material. Rather, Provision B [18 U.S.C. §981(a)(2)(B)] allows
Defendants to deduct any and all direct costs ‘incurred in providing the
goods or services.’ 18 U.S.C. § 981(a)(2)(B).” Hollnagel, 2013 WL 5348317,
at *4.
The unalterable fact remains that “Defendant[] promised that
[he] would pay the investors distributions and return their capital, and [he]
undisputedly did.” Id., at *5. Hence, “Defendant[] still incurred the cost of
paying the investors as promised.” Id. These payments, therefore,
constitute a deductible cost of the fraudulent transactions.
-71-
Conclusion
For the Reasons Stated in Point I, the Conviction Should

Be Vacated and the Matter Remanded for a New Trial;
Alternatively, for the Reasons Stated in Point II, the
Order of Forfeiture Should Be Vacated and the Matter
Remanded for a Recalculation of the Amount of
Forfeiture
Dated: New York, New York

August 31, 2018
Respectfully submitted,
s/ Mark M. Baker
BENJAMIN BRAFMAN
MARK M. BAKER
MARC AGNIFILO
ANDREA ZELLAN
JACOB KAPLAN
TENY R. GERAGOS
BRAFMAN & ASSOCIATES, P.C.
Attorneys for Defendant-
Appellant Martin Shkreli
767 Third Avenue, 26th Floor
New York, New York 10017
212 750-7800
-72-
Certificate of Compliance
(FRAP 32[a][7][C])
I, Mark M. Baker, an attorney at law duly admitted to practice
in the United States Court of Appeals for the Second Circuit, hereby
certifies that the within Appellant’s Brief complies with the word
limitation contained in Fed. R. App. P. 32 (a)(7)(B)(i), in that, according to
the word count in the WordPerfect X7 word-processing system used to
prepare such brief, there are 13,891 words from the Statement of Subject
Matter and Appellate Jurisdiction through the Conclusion.
Dated: New York, New York

August 31, 2018
s/ Mark M. Baker
MARK M. BAKER
-73-
SPECIAL APPENDIX
Special Appendix Table of Contents

Page
Amended Judgment of the United States District Court for
the Eastern District of New York, Filed April 17, 2018,
Appealed From ........................................................................ SPA-1
Memorandum and Order of the Honorable Kiyo A. Matsumoto
Deciding Defendant’s Rule 29 Motion,
Filed February 26, 2018 .......................................................... SPA-16
Preliminary Order of Forfeiture, Filed March 5, 2018 ................ SPA-112
Memorandum and Order of the Honorable Kiyo A. Matsumoto
Deciding Government’s Motion for Forfeiture,
Filed March 5, 2018 ................................................................ SPA-120
15 U.S.C.A. § 78J(b) and 18 U.S.C. § 1343 ............................... SPA-135
SPA-1
UNITED STATES DISTRICT COURT

Eastern District of New York
n n IIJ}
\ l.JL'Vv
I
J'L( 11 r(:
UNITED STATBS OF AMERICA ) AMENDED JUDGME NT IN A C~~A st::JR
v. ) vs IN CLr:nl('s OF I~
OISTfllCTc:ouR:fg_Ny
Date of Original Judgment:

Martin Shkreli
3/9/2018
)
~
)
CIISeNumber: 15CR637[KAMJ
USM Number: 87850-053
Benjamin Brafman.Esq.
*
, ...
Af{( J l 20iB
*· ·
(Or Date o/lmt Amended Judgmer,t) ) Defendant's Attorney B
Reason for Amendment: > ROOl<LYN OFP,
0 Com:ction ofSentence 011 Remand (18 U.S.C. 3742(0(1) and (2)) ) 0 ModirJCalion of Supervision Conditions (18 u.s.c. H 3563(c) or Js~wN
0 Reduction ofScll1Cnee (or Changed Clrcumstanccs (Fed R. Crim. ) D Modillcatlon or Imposed TCIIII of lmprisonrm:111 tbr EXtnlOJdll1l!IY and
P.3S(b)) Compellillg Reasons (18 U.S.C. § 3S82(c}(l})
0 CDmClion ofScntcnce by Senlmcing Court (Fed. R. Crim. P. JS(a)) ) D Modil'lcalicn of Imposed Tenn of Imprisonment for Retroactive Amendmcnt(s)
) to the Senlencing Guidelines (18 U.S.C, § 3582(c)(2))
D Conection of Sentence Cor Cleric:al Mislllke (fell. R. Crim. P. 36) )
0 Din:ct Motion to DlstrictCourtPwsuant D 28 U.S.C. § 225Sor
)
0 I8 u.s.c. § 3S59(c)(7)
)
00 Mcdifieation orRcstitwlon Orclcr (18 u.s.c. §3664)
THE DEFENDANT:
D pleaded guilty to coont(s)
O pleaded nolocontendere to count(s)
which was accepted by the court.
ffl was found guilty on counl(s) Three, Six and Eight of an eight-count superseding Indictment
aftera plea of not guilty.
The defendant is adjudicated guilty of these offenses:
Title & Section Nature of Offense Offense Egded Count
9/30/2014 3&6
15 u.s.c. §§ 78J(b), 7 Securities Fraud, Glass C Ferony
16 u.s.c. § 371 Conspiracy to Commit Securities Fraud, Class D Felony 8
The defendant is sentenced as provided in pages 2 through 7 of this judgment The sentence is imposed pursuant to
the Sentencing Reform Act of 1984.
l!f The defendant has been found not guilty on count(s} 1. 2. 4·5 and 7 of an eight-count superseding Indictment
l?f Count(s) the underlying Indictment l!i' is o are dismissed on the motion.qf oi/i" .,
the United States.
It is ordered that the defendant must notify the United States Attorney for this distr(ct within 30 days of any change of name. residence,
or mailing address until all fines. restitutio'1, co~ and special assessments imposed by this judgment are fully paid. Ifordered to pay restitution,
the defenaant must notify the court and United States attorney of material clianges in economic circumstance s.
3/9/2018
• Date of lm~ition of Judgme!!!,__
Isl USDJ KIYO A. MATSUMOTO

q~afur e of Judge
~yo A. Matsumoto, USDJ
Name and Title of Judge
4/11/2018
Date
SPA-2
Case 1:15-cr-00637-KAM Document 583 Filed N/.11..71//lliJ Page 2 C!lff 71 ~(D)#t: ~

AO WC (Rey. 01/11) Amcllded Jud,8lllClll In a Crfmlnal case
Shoot 2-lmpnsonmont
Jllllpmat-Pap ::L or t
DEPENDANT: Martin Shkreli
CASE NUMBER: 15CR637(KAMJ
IMPRISONMENT
. The defendant is hereby committed to the custody of the Federal Bureau of Prisons to be imprisoned for a
total term of:
Eighty-four months, with aadit for time served, on each Counls Three & Six. Sixty months. wffh cndlt for time
served, on Count Eight. The custodial tenns of all counts are to run concummlly.
l!I' The court mates the following recommcndadons to the Bureau of Prisons:
If appropriate, the mfnfmum-saCUlity camp at USP Canaan, or other sJmlar fac:IUly close to New York City.
Defendant to partlclpa18 In mental health treatrnenL
0 The defendant is remanded to the custody of the United States Marshal
D The defondant shall su"'8nder to Che Unilld States Marshal for dtis district:
D at _ _ _ _ _ _ _ D a.m. D p.m. on
a as notified by the UJlltN swes Marshal.
0 1be defendant shall SUll'ODder for savicc of sentence at the instiludon designated by the Bureau otPrfsons:
D before 2 p.m. on
D as notified by the United States ManhaL
D as notified by the Probation or Pretrial Services Oflt:e.
l have executed Ibis judgment as follows:
Defendant delm:rcd on ------------IO------ -------

_ _ _ _ _ _ _ _ _ _ _ _ with a certified copyoflhlsjudgment.
at
UNITEDSTAiES MARSHAL
By-----------------
DEPUTY UNITED STATES MARSHAL
SPA-3
Ao 24sccRc¥.~fl/~~;~-1~if)~~;~&~nal'c?9ccument 583 Filed 04/17/18 Page 3 of 7 PagelD #: 18317

Sheet 3 -Supervised Release (NOTE: Identify Changes wilh Asterisks(*))
Judgment-Page _3_ of 7
DEFENDANT: Martin Shkreli
CASE NUMBER: 15CR637(KAM)
SUPERVISED RELEASE
Upon release from imprisonment, you will be on supervised release for a tenn of:
Three years on each count, to run concurrently, with special conditions.
MANDATORY CONDITIONS
1. You must not commit another federal, state or local crime.

2. You must not unlawfully possess a controlled substance.
3. You must refrain from any unlawful use ofa controlled substance. You must submit to one drug test within 15 days of release from
imprisonment and at least two periodic drug tests thereafter, as determined by the court.
O The above drug testing condition is suspended, based on the court's determination that you pose a low risk of future
substance abuse. (check Ifapplicable)
4. D You must make restitution in accordance with 18 U.S.C. §§ 3663 and 3663A or any other statute authorizing a sentence of
restitution. (checlt if applicable)
5. I!!' You must cooperate in the collection of DNA as directed by the probation officer. (check ifapplicable)
6. D You must comply with the requirements of the Sex Offender Registration and Notification Act (34 U.S.C. § 20901, et seq.) as
directed by the probation officer, the Bureau of Prisons, or any state sex offender registration agency in the location where you
reside, work, are a student, or were convicted of a qualifying offense. (check Ifapplicable)
7. D You must participate in an approved program for domestic violence. (check ifapplicable)
You must comply with the standard conditions that have been adopted by this coun as well as with any other conditions on the attached
page.
SPA-4
~ l:lS-cr-00637-KAM Document 583 Filed 04/17/18 Page 4 of 1 Pa@:Je!IDl#t.: ~

AO 24SC (Rev, 02/18} Amended Jud~nt In a Criminal Case
Shed lA-SUpcm cd Release
Jud311 l~ __!__ or _ _,._7__
DEFENDANT: Martin ShkreH
CASE NUMBER: 1tiCR637(KAMJ
STANDARD CONDf flONS OF SUPERVISION

As pan ofyour supervised n,lease. you must comply with the following standard conditions of
supervision. These conditions an, imposed
because Chi.I)' alablisb the basic expectations for your behavior while on :supervision and identify the
minimum tools needed by probation
offlcm IO keep informed. report to the court about. ~d bring about improvemen lS in your conduct and condition.
1. You must repon to the probation office in the federal jwllclal district where you ere authorized to reside within
n hours ofyour
probation offlcerinst ruw you lo report to a dlffimmt probation office or within a dfffi:Rmt
release from imprisonment, 1D1less the
timeuame.
officer about how and
2. After lnfllally repordng to the probation office, you will receive Instructions from tbe court or the probation
when you must report to the probation officer. and you must report to the probation officer as inslructecl.
getting permission from
3. You must not knowingly leave the federal judicial distrlel where you are authorized to reside without first
the court or the probation officer.
4. You must 11D$Wer truthfully the questions asked by your proballon officer. about your living
S. You must live at a place approved by the probation officer. Ifyou plan to change where you live or anylhlng the challge. lfno1lf)'lng
arrangements (Sllcll as lhe people you live wlth), you must notify the probalion officer at least 10 days bef'me offic:er wllhfn 72
the probatlon officer In advaace is not possible due to unanticipated circums1Bnces. you must notlly tho probation
hours of becoming aware of 11. chanp or expected cJmnge. the probadon officer
6. You must allow the probation officer to villit you al any limo at your home or elsewhere, and you must permit
to take any liems prohibited by the condilions or your supervlslon that he or she observes In plain view.
officer excuses you from
7. You must work t\111 dme (at least 30 hOUl3 pll' week) at a lawfttl type ofemployment. unlffl Che probation officer excuses
employmen t you must try to flnd lulJ.tfme employmen t, unless tho probation
doing so. If yOII do not llave full-time job
you from doing so. If you plan to change where you wotk or anything about your work (such as your position or your
probation officer at least 10 days before the change. If notl(ying the probation officer at least 10
responsibilities), you must notify the
days in advance is net possiole due to unanticipated circumstanc es, you must notify the probation officer wttllin n hours or
beeomJng awam ofa chanp or expected change. someone has been
8. You must not communicate or Interact with someone you know is engaged in c:rimlnal activity. If you know the penniasfon oftha
c:onvk:ted ofa felony. you must not knowingly communtcaie or interact with that person without first gelt{ng
probalion officer.
Ifyou are arrested or questioned by a law enforcement officer. you must notlf)t the probation officer within (i.e., anything that
72 hours.
9.
You must not own, possea, or have access to a firearm, ammunition , destruclive device, or dangerous weapon
10.
was designed. or was modified for, the specific purpose of causing bodily lnjuiy or dealh to uother
parson such as nunchakus or
tasers). or lnfonnantwilhout
11, You must not act or make any agreement with a law enforcement agency to act as a confidential human sou,ce
fust getting the pennlssfon of the court.
officer may
12. lfthe probation officer dytennines lhat you pose a risk to anolhcr pem>n (Including an organization). the probation may contact the
require you to nodly the~n about lhe risk and you must comply wilh that Instruction. The probadon officer
person and confirm that you have notlfted the person about the risk.
13. You must follow the instructions of the proballon officer related to the conditions of supervision.
U.S. Probatio n Office Use Only

with a written copy of this
A U.S. probation officer has instruded me on the conditions specified by the court and has provided me ofProbation and Supervised
Judgment containing these condllions. For further infonnation regarding these conditions, see Overview
Mease Conditions, available at: www.uscou rts.gov.
Defendant's Signature
Date
---- ---- -
SPA-5
!§i@111 ~@ t#.: ~
~a~ l:l§ ef:f)§a§1=MM f}§@Uffl@flt 5§~ ~Wid @lllf.!!.1/~ ~
0
AO 24$C (ReY. 02/18) Amffldcd Judgmm ln aCrlmlaal ~ (NO'ra: Jdentl% Otan&CS wilb AslJ:mlcs (-))
Slim 3D- Supcrmd Rctellill
DEFENDANT: Martin ShkreU

CASB NUMBER: 15CR637[KAMJ
SPECIAL CONDITIONS OF SUPERVISION
of lhe ProbaUon Department, truthfully disclose Mr.Shkrell's

1. Participate In mental health treatment under the oopervlsfon reasonable costs and contributions for treatment. and
financial condition to enable lhe Probation Department to seek treatment from any ih!rd-party source of tnsurance.
cocperate with lhe Probation Department to secure payment for
, In this
2. Comply with the ffne and forfeiture orders case.
Probation Dep811menl supervlslon.
3. Engage In 20 hours per month of community service, under
to clients' assets, Investments, or money, or
4. Refrain from engaging In self-employment which Involves access on fn verifying any employment thal Mr. Shkrell
sollcltatlon of assets, Investments, or money, and assist probaU
self-employment Includes companies or entitles In
secures While under supervision. For the purposes of this order, or dfreotor, or Is otherwise In a positron to
an officer
whfch Mr.ShkreU rs a contromng or majority stakeholder or
exercise, contro~or direct the operations of the compa ny or enflty.
y's Office wlD, compfete and truthful disclosure of his
5. Provide the Probation Department and 1he United States Atlome and llab!Jltfes, to Include yearly Income tax returns.
financial records, lncludfng co-mfngled Income, expensee1 assets
within lhe presentence rePQrt, defendant Is prohibited
With the exceptton of the ftnanclal accounts reported and noted
ual andlor jofnt checking, savings or other financial accounts for
from maintaining anct/or opening any addnional lndlvld prior fll)proval of the ProbaUon Department. The
either personal or buslnees purposes without the knowledge and aUon of his financlal dealings and shall provide
defendant shall cooperate with the probation officer In the fnvesttg
defendant shall cooperate In the signing of any necessary
truthful monthly statements of his Income and expenses. The ion Department access to his flnancfal Information
lng the US Probat
authorlzatfons to release Information fonns pennllt
and records.
SPA-6
AO 245C (Rev. 02/18) AmedcdJudsmmUn a Criminal O!sc

Shed 5-Crlmlnal Monelmy PenBlde.s

CASE NUMBER: 15CR637[KAM)
CRIMINAL MONETARY PENALTIES
on Sheet 6.
The defendant must pay the following total c;rimlnal monetmy penalties under the schedule of payments
Assessment JVTA AS@Smeni- lin Restitutipn
$ 300.00 $ S 75,000.00 $ 388,336.49
TOTALS
0 The determination of restitution is defened until . An .AmentkdJudgmem In a Criminal Case (AO 24SC) will be
entered after such detennlnation. ---
listed below.
(jf The defendant shall make restitution fmcluding community restitution) to the following payees in Iha amount
approximarelY t>r0~dio11!4 .P..~ent, unless ~ifted Olberwise in
If tho defendant makes a partial payment, eadl payee shall receive anpursuant
the priofh1- order or ~taP. payment column below. HoweYer, to 18-V.S.c. § 3Clb4{tJ, all nonfederal vidJms must be paid
before the United States is paid.
Reslltutipn Ordered Priority or Percentage
NameofPayet; Total Losa**
Richard Kocher $388,336.49 $388,336.49
The govemment shall coordinate

wl1h Iha Clerk of Court regardlng
the Bdl'888 for Mr. Kcchafa payment
S 388,336.49 S 388,336.49
TOTALS
a Restitution amount ordered pursuant to plea agreement s -------

fine ls paid In full before the
if The defendant must pay lntemt on restitution and a fine of more than $2,500, unless the restitution or
options on Sheet 6 may bo subject
fifteenth day after the data of the judgment, pursuant to 18 U.S.C. § 3612(£). All of the payment
to penalties for delinquency and default, pursuant to 18 U.S.C. § 3612(g).
The comt detennined that the defendant does net have the ability to pay interest, and it is ordered
that:
D
a the interest requirement is waived for D fine D restitution.
O the interest requirement for the O rme D restitution is modified as follows:
Act of201S, Pub. L. No. 114-22, 109A, 1to, llOA, and 113A of1itle 18 foroffensescomm!Ued onor
• Justice for Victims ofTrafficlcinf losses
•• Findings for the tCllll amounto &ze~l!ired under Chapters
after September 13, 1994, but before April 23, 1996.
SPA-7
Case 1:15-cr-00637-KAM Document 583 Filed 04/17/18 Page 7 of 7 PagelD #: 18321

A024!C(Rlv. &VII) Anlcndcd Jlldplal IA aOfmfnal C.
or
Sheet &-Sdlel!uti l'llymcnls

Jmlgnicnl-Pap ..J_ or i
CASE NUMBER: 15CR637(KAM]
SCHEDULE OF PAYMENTS
Having assessed the defi:ndant's ability to pay, payment of the tolBI criminal monetary penalties shall lie due as follows:
A l!f Lump smn payment ors 463,636.49 duo immediately, balance due
C notmw•n
C in ....----------·•
acconlanc:e with D C. D D. D F.. or [J F below; or
B O Payment to hgin immediately (may be combined with O C, 0 D, or O F below): or
C D Payim:nt ia equal -..,.....-- (e.g., weekly, D10Dthly, quarterly) lnstallmea1s of S _,......,,...__,,..,.., over a period of
_ _ _ _ (o.g., months oryean). to commence _ _ _ (u.g., 30 orfiOdaya) afterlbe date ofthlsjldgmclll; or
D D Payment in "!ual _ _ _ _ (e.g.. weekly, monthly, qulll1erly) installments of S --,--..,....over a period of
_ _,,___ (e.g.. monthsoryem), to commence _ _ _ (e.g., 30 or 60 days) after release &am imprisonment to a
term of supervision; or
E D Payment dlring Ille tenn of supervised release wlU c:ommenc:e wlthflJ _ _ _ (o.g., 30 or 60 days) aftertelease ttom
imprlsonmellt. The court will set the payment plan bllld on an auea1ment of the defendanf, ahil_, to pay 8l chat time; or
r l!f Spacial lnstrucClons ..,.Sing die payment ofcriminal monetary penalties:
Payment of $75,000 fine, $300 special assessment and $388.336.49 reslftuUon due and payable Immediately.
The govenwnent shall coordinate wfth lhe Clerk of court regardlng Mr. Kccha"a address for payment.
S die '*'od
the c:Glllthas ~lyerdezed oth~ Ift h i s ~ i m p o s e s ~ ~ otcrfminal moneQll'Y penalti1f:! is due
o f ~ . AD criminal monef!li)' l!lll!alties. exc;ept those paymems made through the Federal Blm:aa of Prisons'
f"mimcial Respcinsibllity Program. are made to Ibo clerk ordio eourt.
Tho defendant shall receive credit for all payments pxvlously made towant any criminal monetary penalties Imposed.
D Joint and Saveral

Defendlllt and Co-Defendant Names and Case Numbem {ln,:llldh,g dt,fondanl nlllllbfll'), Total Amount. Joint and Several Amount,
and ~ndlng payee, If appropriate.
0 The defendant shell pa,y the cost of JJIOSCCUtion.
D The defendant shall pay the following COUl'l cost(s}:

l!J The defendant shall forfeit the defendant's imerest in the l'ollowlng properr;y 10 die United Stales:
Substllute asaelll up lo &7,380,450 llp8Clllcally, (1) a S5 mllllon E"Trade BIICCIIIIII ffl11119 In 0258; (2) Dafandanl'a Interest In \/yelll Ph11111111C81111cals.
fonnelly kn-. as Twlng Phannaceullcala: (3) a Picasso palllllng; (4) Iha dlaGor album "Onca Upon a Time fn Shaolln" by Iha Wu Tang Clan: and
(6) Iha cllsc ar alllum •The Car111rV' by LO Wayna. (See Order of FoJfellm9.)
faymeats( shall be applied i]! Iha followjpg_order: (l) ~ Q) mititulion principal, P.) restitution i n ~ (4) fine principa], (S) fine
ln
Interest, 6) community restitUtlon, (7) JVTA assessment. (8) penallies, and (9) costs. mc11dlllg ~ ofprosecution and court caas.
SPA-8
04/17/18 Pago 1 of e PagelD #: 183a~

Caso l:15-cr-00637-KAM Document 583-1 Flied
Filed 03/05/18 Page 1 of a PagelD #: 1586

4
Case l:15-cr-00637-KAM Document 540
SLR.:LDM:CSK
P.il2014R.OOSOI
UNlTSD STATES DISTIUCTCOURT

EASTERN DISTRICT OP NBW YORK
•••• •••• • x
•••• •••• •••• •••• ••••
UNITED STATES OP AMERICA,
PRBLIMINAllY
-agai Mt• ORDBlt OP fORFBITJJRE
MARTIN SHKRBI.J, 15 CR 631 (S-J)(KAM)
•••••••••••••••••••••••••••••x
SHICRBLI (the
WffBRBAS.. on or about Juno 3, 2016, defendant MAR.TIN
") wtth multiple counts
dcfondant") was
11 duqe d In a Superseding Jndlclment (tho "lnotCtment
oommit wilo hod , secwflies laud. and
of conspiracy to c:onunk socurities fi1wd, consplraoyto
wire ft'aud (Counts Ono throush Bight);

tfon aeoklns, pursuant to 18
WHEREAS, 1he Indictment lncludod a fim'i,Ituro aUep
forfeiture ofany and atl
u.s.c. § 98J(a)(J)(C). 28 U.S.C. § 2461(0), aad 21 U.S.C. § 853(p). Che
property constituting or derived from proceeds
obtained dirccdy or indirectly as a result ofthe
coaunisslon ofany of the charged oft"enscs;

by and through counsel, and
WHBREAS, on or about July 26. 2017, the defendant.
the government sdpulated to waive any right to bavo

a jury determine the forfeiture. and agreed
to have sudJ determination made by the Court;

the defilodant guilty of
WHEREAS. on or about August 4,2017, a jury found
al). Count Six (securities ftaud involving
Count Three (securides ft-aud involving MSMB Capit
it securities fiaud lnvoMng Retrophln
MSMB Healthcare) and Count Eight (conspiraoy to comm
iction"');
unrestricted securities) (herein die "Offenses of Conv
SPA-9
1 Filed 04/17/18 Page 2 of 8 PagelD #: 183

ga
Case 1:15-cr-00637-KAM Document 583·
Filed 03/05/18 Page 2 of a PagelO #: 158~5

Case 1:15-cr-00637-KAM Document 540
all proc:eedinp heroin,

WHBREAS. baaed on the submissions of the parties and
United S1*s the amount of Seven MIiiion,
the Courl finds that the defmdant must fintitit to the
rs(S?,360,450.00) (tho
Three Hundred Slxt)'Thousand. Four Hundred and Plfty Dolla
tho total amount of proceeds obtained
"Forfeiture Monoy 1Uc1Jment"), which amouat repnrsents
by the defe ndan t• a result of the Offenses ofCcm
viction.
AND DSCRBJ3D THAT:
NOW, THBREFORE. IT IS ORDBREO, ADJUDOBD
defimdant, pursuant
1. The Porfelmre Money Judgment Is entered against the
U.S.C. §853(p).
1018 U.S.C. § 981(aXt)(C), 28 U.S.C. §246l(c)and21
shall be made by
2. All paymentS towanls die Forfitfture Money JudgmeQt
le to "United States MarshaJs Service,
money order,« cerdfied or official bank check, payab
the face of the check. The defendant shall
BONY" wldl the criminal docket number noted on
CASe said ohocka lO beaent by ovemlpt

mall to the tJnJted States Attomey•s Office, Bastem
lyn, Now York 11201, Attention: Asset
District ofNow York. 21l•A Cadman Plaza Bast, Brook
Porftilure Unit.
nent is not to be
3. 'The entry and payment of the forfeiture Money Judar
amount or a payment of any Income
considered a payment of a fine. penalty, restitution loss
laxes that may be due and shall survive bankruptcy.
tutv assets set forth in
4. Finding that tho conditions fi>r the fortelturo of subsd
lbrteit his inteiest in the following assets
21 U.S.C. § 853(p) have been met. the dt1endant shall
thereto, up to the amount ofthe
(the"Substitute Assets"), es well as all proceeds traceable
8S3(p):
Forfeiture Money Judgment, pursuant to 21 U.S.C. §
brokerage
(a) S5 million In cash that Is currently held in an E•Trado defendant's
a<:e0unt ending in the digits "0258 " as secur ity for the
Unlfed States y. Martin ShtmU. IS CR 637 (S-1)

Preliminary Order of Forfeiture
Page l
SPA-10
#: 183Ql3
-1 Filed 04/17/18 Page 3 of 8 PagelD
Filed 03/05/18 Page 3 of a Page lO

#: 15866
7, 2016,
bond, pursuant to orders of the Court dated J8Jluary
August 24, 2016 and October 19, 2017 ;
s
(b) Vyera Phannaceutlcals (fonnerly known as Turio
Pharmaceuticals);
the album "Once Upon A Time in Shaolln" by

the Wu Tang Clan;
(c)
(d) the album "Tha Carter V" by Lil Wayne; and
(e) a Picasso paindng,

ing the resolution of
S. Upon forfeiture oftbe Substftuto Assets, and follow
titute Assets shall be applied towards
any thltd~party claims, the value of the forfeited Subs
satisfacdon of the Forfeiture Money Judgment,
s Attorney General
6. Subject to the terms oontalned herein. the United State
ts, or any proceeds traceable thereto, to
or his destpeo is authorized to seize 1hc Substiwte Asse
with Fed. R. Crim. P. 32.2(b)(3) and {c),
cotlett the Forfeiture Money Judgment, ill accordance
to conduct any proper discovery. and to comm
ence any applicable proceeding to comply with
ding requisite notice oflhls Order and the
statutes scvemlng third-party rights, including provi
with the provisions of' 21 U.S.C. § 853(n){l),
forfeiture of the Substinate Assets. in accordance
r, in ac:co,dance with
7. The United States shall publish notice of this Orde
nment website www.forfeitwo.gov, and of Its
the custom and practice in this district. on the gover
manner as the Attorney General or bis
Intent to dispose ofthe Substitute Assets in such a
extent practicable, provide diract written
designee may direct. The United States may, to the
Interest in the Substitute Assets.
notice to any person known or alleged to have an
a legal Interest in any of
8. Any person, other than the defendant, asserting
of the final publication of notice or receipt of
lhe Substilute Assets may. within thirty (30) days
for a hearing without a jury to adjudicate
the
notice, whichever is earlier, petition the Court
Untied States Y, Martin Shlqeli. IS CR 637 (S-1)
Page3
SPA-11
#: 18306
-1 Filed 04/17/18 Page 4 of 8 PagelD
540 Filed 03/05/18 Page 4 of a Page

lD #: 15867
Case l:15-cr-00637-KAM Document
validity of his or her alleged interest in tho prope

rty, and for an amendment of the order of
Fed. R. Crim. P. 32.2(c) and (d). Any petition

forfeiture, pursuant to 21 U.S.C. § 853(n)(6) and
of the SubstilUte As.,ets must be signed by the
ftled In re.!J)onse to notice of the forfeiture ofany
thenamreand extontofthe petitioner's
petitioner under penalty ofpeljury and shall set forth
right, title or interest In the property, the time
and circumstan,CCI$ of the petftionets acquisition of
lonat facts supporting the petitioner• s olalm;
the right, title or interest in the property; any addJt
and the relief aoughl

U.S.C. § 853(p), the
9. ln accordancew«b Fed. R. Crim. P. 32.2(e)and2I
time to forfeit additional substitute assets to
government may seek to amend this Order at any
satisfy the Forfeiture Money Judgment

§§ 853(3) and (o), and
10. Pursuant to Fed. R. Crim. P. 32.2(1,)(3), 21 U.S.C.
ts and ensure that any other ftlnds and/or
1n order to preserve the value of the Substitute Asse
)1 Judgment are not diminished, damaged and/o
r
assets avatlable to sadsly the Forfeiture Mon8
nor anyone acdng on his behal~ shall take
dissipated pending any appeal. neither the defendant
. damaging and/or dlssipatJng the Substitute
any action that would have the effect of diminishing
Assets, or any funds and/or assets that may be

used to satisfy the Forfeiture Money Judgment.
. § 853(g), the execution
11. Pursuant to Fed. R. Crim. P. 32.2(d) and 2 r U.S.C
shall be stayed pandlng the final disposition of
of this Order and seizure of the Substitute Assets
ing terms and conditions are fully met to
any appeal by the dofendant, provided all of the follow
eds traceable thereto, up to the amount ofdle
ensure that such Substitute Assets, and any proce
forfeited pending the conclusion of any
Forfeiture Money Judgment. remain available to be
appeal:
above shall remain on
(a) the Substitute Asset listed in subparagraph 4(a)
United States v, Martin Shkreli, 15 CR 637 (S-1)
Page 4
SPA-12
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583-1 Filed 04/17/18 Page 5 of 8 Pag
Case l:15-cr-00637-KAM Document
Filed 03/05/18 Pag es of a PagelD #:

15868
order of this Court;

deposit with the CJerlt ofCo u~ pending further
within ten (10) days of the date of entry of this
Onfer, lhedefenclant shall
(b)
titute Asset listed In subparagraph 4(b), and
provide an accounting of his interest in tho Subs
certlffcates or other dccwnents evfderu:lng sue&
provide the govemment with copies of aJl $leek
Interest;
r, the defendant shall
(c) within ten (I 0) days of the date ofentry of this Onfe
4(c)
&dvlae the govemment of the looat ion of the Substitute Assets listed In subparasraphs
. The defendant must obtain the pem men t's
through 4(e) (the "Albums and the Artwork")
Albums and Artwork are maintained and. if neces
sary,
approval as to where and how the
er, the defendant shalt allow the
trensponed during the pendency of any appeal. Furth
any time;
government to Inspect the Albums end Artwork at
tives, attorneys, and/or
(d) the <lefimdant. his heirs. assigns, agents, representa
as all persons or entities acting Jn concert
anyone authorized and acting on his behalf. as well
ed to as "the defendant and bis
with any ofthom (hereinafter collectively referr
bited from taking any acdon that would
representatives"), are restrained, enjoined and prohi
affect the availability, marketability or value of

the Substitute Assets. Further, the defendant
steps, and bear all costs necessary, to ensure that

and hit representatives shall take all reasonable
tained in good and marketable condition, and
all the Substitute Assets aro preserved and main
by
SR not damaged, diluted or diminished
in value as a result of any actions taken or not taken
the defendant and his rep~ ntati ves;

the Substitute Assets,
(e) any Income or compensation accruing from any of
the defendant's interest Jn Vyera as a result of
including but not limited to any consideration for
placed in a designated interest-bearing. escrow
Its acquisition, merger, or sale of assets, shall be
Unltesl.State., Y, Martins~u. IS CR 637 (S-1)
Pages
SPA-13
elD #: 1830/'.6
583- 1 Filed 04/1 7/18 Pag e 6 of 8 Pag
Cas e 1:15 -cr-0 0637 -KAM Doc ume nt
Filed 03/05/18 Page 6 of a PagelD #: 15869

ture. Further, the defendant shall provide the

account so that it may bo made available for forfei
ensation within ten (10) days of the date
aovemment with an accounting of any Income or comp
nscelved; and
or indlrecdy.
(f) the defendant and his representatives shall nor. directly
lnlnSfl,r, asslgu. license. waste. pledge. encum

ber, h_ypothocate. distribute, dissipate, dilute or
.ssecs. The deftnclam and his
remove fiom the eourt•sjurisdictlon any of the SubstftuteA
entatives, however, may sol) the defendant's Intere
st in the Subslhute Assets, or any
repres
. for f4ir marlcot value. If and only if tmsy
portion there o( pursuant to an arma-lc:agth 1raJIS80tJon
govnment's approval, the deandant
recelvc prior app,oval otthe government. To obtain the
advance ofany proposed arms-length
and his representadves shall, at leut tb1rty (30) days In
sed sale, and provide a copy ofany
sale: (l) advise the government in writing of the propo
proposed contract ofsale and other documentation
requested by the govemmont relatina 10 the
proposed sale; (2) demonslra1e that the proposed sale

Is an 81m$-Jenath 1lllnUGtion fiJr fair
sed sale bavo been provided with a

market value; (3) demonscral8 that alJ panfes to the propo
documents re1atJna to tu proposed
COJ>Y oftbis Order; and (4) confirm the contraet and other
up to tho amount oftho Porteiture Money
sale provide that the proceeds &om the proposed salo,
escrow account so that thoy may be
Judsment. shall be plaoed in a deslgnat.ed Interest-bearing,
t with docwnemary proofof same.
mado availat,le for forfeiture, and provide the govermnen
sale. the defendant and hb representative.,
Further, wfthln ftve (5) business days ofany approved
ing an itemized sraiement orall proceeds
shall provide the government with an accounting, Includ
monies. shares of stock. etc.) from the salo
,enerated (In any form, including but not limited to.
as well as any costs Incurred in connection with the sale.
y Judsment in
12. Jn the event that the defendant pays the Forfeiture Mone
Unjted States v, Martin Shkreli, IS CR 637 (S-1)
Page6
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g
Cas~ 1:15=t:r=00637=KAM Documll!nt 583=
0
Filed 03/05/18 Page 7 of 8 PagelO #: 1587
dant, pursuant to subparag?tphs 11 (e) and (f)

full, as provided in paragraph 2 above, or the defen
i") to satisfy the Forfeiture Money
above, sets aside enough funds (the "Bserowed Fund
Funds is aaserted, such payment by the
Judgment, and no third-party claim to the Escrowed
y the Forfeiture Money Judgment and the
defendant or Escrowed Funds shall be used to satisf
forth in this Order shalt be vacated.
n:malnlng restnlims on the Substitute Assets set
any of the tetms in
13. In the went that the defendant falls to comply with
nt may seize the Substitute Assets, up to the
paragraphs 10 tlwusfi 12, above, the governme
ithstanding the pendency of any appeal.
amount of the Forfeiture Money Judgment. notw
r shall become final as to
14. Pursuatit to .Fed. R. Crim. P. 32.2{b)(4), tbJs Orde
be made part of the defendant's sentence and
the defendant at the time of sentencing, and shall
party files a timely claim. the Substitute
included In the judgment of conviction. If no third
Judgment. shaU bo ~it ed to the United
A~ up to the amount of the Forfeiture Money
States and this Order shall become the Final Orde

r of'Forteituro, as provided by Fed. R. Crim. P.
32.2(e)(2).
Order, and to amend It as
IS. The Court shall retain jurisdiction ro enforce this
necessary, pursuant to Fed. It Crim. P. 32.2(e).
United States Y, Martin Shkrell, 15 CR 637 (S•I)

Page 7
SPA-15
03/05/18 Page 8 of 8 Page ID#: 15871

Case 1:15-cr-00637-KAM Document 540 Filed
three (3)
16. The Clerk of the Court is directed to send, by inter-office mail,
Attorney Claire S. Kedeshian,
certified copies ofthis executed Order to Assistant United States
271-A Cadman Plu.a East, 7th
United States Attorney's Office, Eastern District ofNew York,
Floor, Brooklyn. New York 11201.

Dated: Brookll'9, New York
Jlgdt ~ ,2018
so @U>EUmJ?:'
/S/ USOJ KIYO A MAT SUM OTO
HONbliABLB KIYO A. MATSUMOTO
UNITED STATES DISTRICT JUDOB
EASTERN DISTRICT OP NBW YORK
United States y. Martin Shlcrell. IS CR 637 (S-1)

Pages
SPA-16

EASTERN DISTRICT OF NEW YORK
------------------------------------x
UNITED STATES OF AMERICA MEMORANDUM AND ORDER
- against - 15-cr-637(KAM)
MARTIN SHKRELI,
Defendant.
------------------------------------x
MATSUMOTO, United States District Judge:
On August 4, 2017, a jury convicted defendant Martin
Shkreli of two counts of Securities Fraud (Counts Three and Six)
and one count of Conspiracy to Commit Securities Fraud (Count
Eight). (Verdict Sheet, ECF No. 305.) Before the court is Mr.
Shkreli's motion for a judgment of acquittal, pursuant to
Federal Rule of Criminal Procedure 29 ("Rule 29"). (ECF No. 363
("Def Mem."); ECF No. 397 ("Gov. Mem."); ECF No. 419 ("Def.
Reply").) On February 23, 2018, the court heard argument on
defendant's motion for a judgment of acquittal, and on the loss
amount in this case. (See Defendant's Letter regarding loss
amount, ECF No. 527; Government's Letter regarding loss amount,
ECF No. 532; Defendant's Letter reply regarding loss amount, ECF
No. 534.)
For the reasons set forth below, Mr. Shkreli's motion
for a judgment of acquittal is denied. For purposes of

SPA-17
sentencing, the court will apply a loss amount of $2,998,000 on
Count Three, $3,402,450 on Count Six, and $4,000,000 on Count
Eight.
Background
:I . The Charges
The Superseding Indictment, filed on June 3, 2016,
charged Mr. Shkreli with six counts of securities fraud,
conspiracy to commit securities fraud, and conspiracy to commit
wire fraud in relation to two hedge funds, MSMB Capital and MSMB
Healthcare, and with conspiracy to commit wire fraud and
conspiracy to commit securities fraud in relation to a
pharmaceutical company known as Retrophin. 1 (Superseding
Indictment, ECF No. 60.) The Superseding Indictment described
the charged conduct as follows:
A. Counts One through Three: the "MSMB Capital Scheme"
Count One charged Conspiracy to Commit Securities
Fraud, in violation of Title 18, United States Code Section 371;
Count Two charged Conspiracy to Commit Wire Fraud, in violation
of Title 18, United States Code Section 1349; and Count Three
1 The Superseding Indictment also charged Evan Greebel,

Retrophin's outside counsel, with Count Seven, charging wire
fraud conspiracy in relation to Retrophin, and Count Eight,
charging securities fraud conspiracy in relation to Retrophin
(Id.) The defendants jointly moved for severance, and the
court granted their motion on April 19, 2017. (Order Granting
Motions for Severance, ECF No. 198.) On December 27, 2017, a
jury found Mr. Greebel guilty on both Counts Seven and Eight.
2
SPA-18
charged Securities Fraud in violation of Title 15, United States
Code Sections 78j (b) and 78ff.
These counts related to Mr. Shkreli's solicitation of,
and communications with, investors in a hedge fund he founded,
known as MSMB Capital. 2 At trial, the government submitted
evidence that Mr. Shkreli secured investments in the fund by
misrepresenting, inter alia, the size of the fund, the nature of
its investing approach, Mr. Shkreli's personal investing and
educational background, and the extent of third-party oversight
of the fund's operations. The government also presented
evidence that Mr. Shkreli induced or convinced investors to keep
their money in MSMB Capital by circulating periodic performance
reports to investors that materially misstated the value of
their investments and the fund's performance.
B. Counts Four through Six: the "MSMB Healthcare Scheme"
The Superseding Indictment described the conduct
charged in Counts Four through Six as the "MSMB Healthcare
Scheme." The government alleged that Mr. Shkreli founded MSMB
Healthcare, also a hedge fund, after MSMB Capital lost almost
all of its assets in February 2011. The conduct charged in the
MSMB Healthcare counts was similar to the conduct charged in the
2 "MSMB" was named based on the initials of Martin Shkreli and

the fund's co-founder, Marek Biestek, who later worked with Mr.
Shkreli at Retrophin. (Tr. 2750:1-19 (testimony of Mr.
Richardson).) The Superseding Indictment referred to Mr.
Biestek as Co-Conspirator 1.
3
SPA-19
MSMB Capital counts: that Mr. Shkreli solicited, secured and
retained investments in his hedge fund based on material
misrepresentations relating to various aspects of MSMB
Healthcare's assets, performance, and structure. Counts Four
through Six respectively charged Conspiracy to Commit Securities
Fraud, Conspiracy to Commit Wire Fraud, and Securities Fraud.
C. Count Seven: the Retrophin Misappropriation Scheme
Mr. Shkreli founded Retrophin, a biopharmaceutical
company, in the Spring of 2011. In Count Seven, the Superseding
Indictment charged Mr. Shkreli with a conspiracy to commit wire
fraud, based on three theories: (1) that he caused Retrophin to
transfer Retrophin shares to MSMB Capital even though MSMB
Capital had not invested in Retrophin; (2) that he caused
Retrophin to enter into, and pay for, settlement agreements with
disgruntled MSMB Capital and MSMB Healthcare investors; and
(3) that he caused Retrophin to enter into "sham" consulting
agreements with disgruntled investors in MSMB Capital, MSMB
Healthcare, and Elea Capital (a prior hedge fund founded by Mr.
Shkreli) as a mechanism to settle liabilities the investors
claim were owed to them by defendant or his MSMB and Elea
Capital hedge funds. With regard to the settlement and
consulting agreements, the government argued that Mr. Shkreli
had conspired with others, including Retrophin's outside counsel
Evan Greebel, to cause Retrophin to pay off, with Retrophin
4
SPA-20
funds and shares, MSMB Capital and MSMB Healthcare investors who
were trying to redeem their investments from the MSMB hedge
funds.
D. Count Eight: the Unrestricted Shares Scheme
In Count Eight, the Superseding Indictment charged Mr.
Shkreli with Conspiracy to Commit Securities Fraud. The
Superseding Indictment charged, and the government asserted,
that Mr. Shkreli entered into a conspiracy with Mr. Greebel and
others, the purpose of which was to control the price and
trading of Retrophin stock. Specifically, the government
asserted that when Mr. Shkreli caused Retrophin to go public by
engaging in a "reverse merger" transaction with a shell company
called Desert Gateway, he also conspired with Mr. Greebel and
others to arrange for the distribution of free-trading shares in
the new company to certain Retrophin employees and former
employees of the MSMB funds. The government then argued that
Mr. Shkreli conspired with Mr. Greebel and others, in some cases
successfully, to exert control over the free-trading shares
nominally held by these individuals, but did not disclose that
control on a Form 13D filed with the Securities and Exchange
Commission.
II. The Trial
After a two-and-a-half day jury selection, trial
commenced with opening statements on June 28, 2017. Over the
5
SPA-21
Case l:15-cr-00637-KAM Document 535 Filed 02/26/18 Page 6 of 96 PagelD #: 15463
following five weeks, the government introduced voluminous
documentary evidence, including emails, bank records, and
transactional documents, and called as witnesses former MSMB
Capital and MSMB Healthcare investors and employees, Retrophin
employees and board members, accountants, and summary fact
witnesses. The government rested on July 27, 2017. (Tr.
5149:19-20). Mr. Shkreli did not present a case. (Id. at 23-
24.) After summations, the court instructed the jury on July
28, 2017, and the jury began deliberations on July 31, 2017.
A. The Verdict
The jury returned its verdict on August 4, 2017,
after five days of deliberations. Mr. Shkreli was convicted of
Count Three, Securities Fraud in relation to MSMB Capital; Count
Six, Securities Fraud in relation to MSMB Healthcare; and Count
Eight, Conspiracy to Commit Securities Fraud in relation to
Retrophin. (ECF No. 305, Verdict, at 1-3.) Mr. Shkreli was
acquitted on Counts One, Two, Four, Five, and Seven. (Id.)
B. Evidence at Trial
The following summary is limited to the trial
testimony and documentary evidence necessary to discuss issues
raised in the defendant's Rule 29 motion. The government called
multiple witnesses not specifically discussed below, including
the case agent, who introduced a number of significant
6
SPA-22
documents, including communications between Mr. Shkreli, Mr.
Greebel and others.
Furthermore, in summarizing the evidence, the court is
mindful that "[i]n reviewing a challenge to the sufficiency of
the evidence underlying a guilty verdict [pursuant to Rule 29,
the court] 'must review the evidence in the light most favorable
to the government, drawing all reasonable inferences in its
favor.'" United States v. Cain, 671 F.3d 271, 302 (2d Cir.
2012) (quoting United States v. Gaskin, 364 F.3d 438, 459 (2d
Cir. 2004)).
Sarah Hassan
The government's first witness was Sarah Hassan, who
made investments for herself and for her family's hedge fund,
Dynagrow Capital. (Tr. 912:1-3.) Ms. Hassan is the daughter of
Fred Hassan, a well-known executive in the pharmaceutical
industry. (Tr. 913:11-18.) Ms. Hassan first heard of Mr.
Shkreli in October 2010 through Brent Saunders, who, at the
time, was the CEO of Bausch & Lomb, a health products company.
Mr. Saunders had worked for Ms. Hassan's father, and had told
Ms. Hassan that Mr. Shkreli was "a rising star in the hedge fund
world 11 and was someone who could teach Ms. Hassan about
investing in pharmaceuticals. (Tr. 915:20-916:15.) Mr.
Saunders had also told Ms. Hassan about Mr. Shkreli's excellent
investing returns. (Tr. 917:11-17.)
7
SPA-23
Ms. Hassan met Mr. Shkreli for dinner on December 13,
2010, and they discussed MSMB Capital, Mr. Shkreli's hedge fund.
(Tr. 919:23-920:4.) Mr. Shkreli told Ms. Hassan that MSMB
Capital had $40 to $50 million in assets under management
( "AUM") . (Tr. 921:10-24.) The government introduced a December
27, 2010 email thread between Ms. Hassan and Mr. Shkreli in
which Ms. Hassan referenced their discussion and the $40 million
fund size. (GX 103-38.) In his response, Mr. Shkreli did not
dispute or correct that $40 million AUM figure.
In January 2011, Ms. Hassan invested $300,000 from her
personal funds into MSMB Capital. (Tr. 933:22-934:2-16.) She
explained that this investment represented approximately 30% of
her net worth, a "quite significant" amount from her
perspective. (Tr. 940:24-941:2.) The government introduced
copies of Ms. Hassan's Private Placement Memorandum ("PPM"), the
document describing the MSMB Capital investment. {GX-5, GX 103-
3.) Ms. Hassan testified that, based on the PPM, she understood
that MSMB Capital would make a mix of "long" and "short"
investments, and that she believes it is "important to have a
balance in a portfolio." (Tr. 941:19-942:8.) She testified
that she recognized the risks of investing in a hedge fund, but,
based on the representations made in the PPM, thought there
would be "some diversification or offsetting investments" that
would limit the risk of a total loss. (Tr. 942:23-25.) Based
8
SPA-24
on the PPM, Ms. Hassan testified that she understood the
management fee to be 1% paid quarterly based on AUM, plus 20%
net profits (Tr. 943:16-944:9.) She also explained that, based
on the PPM, she believed that the auditors for the fund would be
a firm called Rothstein Kass, and that it is "important to have
a third party [or] independent party validate all of the
information" in the hedge fund's financial statements. (Tr.
944:13-945:7.)
Ms. Hassan explained that there were "several" factors
that were important to her investment decision, including Mr.
Shkreli's purported investing returns and Mr. Shkreli's
representations that "he was managing a [$]40 to $50 million
fund", which Ms. Hassan considered a "really healthy fund size."
(Tr. 947:7-10.) Ms. Hassan explained that from her perspective,
fund size is important to her investing decision because "[i]f
it's too small, you have a hard time . . getting any movement
or momentum . . . if it's too big, it's hard to get solid
returns." (Tr. 947:12-15.)
Ms. Hassan testified that following her investment in
MSMB Capital, she received periodic performance reports. (See
GX 80-1 - GX 80-19 (performance reports sent from Mr. Shkreli to
Ms. Hassan).) Mr. Shkreli initially emailed these reports on a
monthly basis, but then sent them only sporadically. (Tr.
950:10-14.) Ms. Hassan did not have any reason to question the
9
SPA-25
accuracy of these reports. (Tr. 957:7-9.) As an example of the
performance reports, Ms. Hassan testified about her performance
report for February 2011. (GX 80-1.) This report stated that
MSMB Capital had returned 4.24% in February 2011, beating the
performance of the S&P 500 index in that month. (Tr. 953:1-2;
GX 80-1.) The report also claimed a 41.71% return since the
inception of the fund, on November 1, 2009. (Tr. 954:11-13; GX
80-1.) Based on this email, Ms. Hassan believed that, in one
month, she had earned over $24,000 on her $300,000 investment,
which made her "fairly ecstatic.n (Tr. 955:4-8.) She testified
that she did not request redemption at this point, because "in a
short time there was pretty healthy returns.n (Tr. 956:3-5.)
In April 2011, Mr. Shkreli also pitched Ms. Hassan on
Retrophin, which she understood to be a pharmaceutical company.
(Tr. 963:12-964:7.) Ms. Hassan agreed to invest $150,000 from
her family's investing fund, Dynagrow Capital. (Tr. 962:17-
963:18; 967:14-15; 972:9-11; GX 103-5 (email indicating the
pitch meeting occurred in April 2011.) At this time in 2011,
she was not aware of "any other hedge fundsu Shkreli was
managing. (Tr. 977:8-10.) Ms. Hassan stated that Mr. Shkreli
did not tell her that he had stopped trading stock in MSMB
Capital in 2011, and explained that this news "would have been
surprising, given that there was still such an interesting
fluctuation in the returns.n (Tr. 980:1-2.)
10
SPA-26
On September 9, 2012, Ms. Hassan received two emails
from Mr. Shkreli. The first was a "performance estimate" for
the month of June 2012, suggesting that Ms. Hassan had earned a
$135,000 return on her $300,000 investment in MSMB Capital. (GX
80-19.) Ms. Hassan was "thrilled" by this report because "[i]t
was a very significant return." (Tr. 1003:21-24.) Less than an
hour later, Mr. Shkreli sent an email indicating that he was
going to "wind down" the "hedge fund partnership with the goal
of completing the liquidation of the fund by November or
December 1, 2012." (GX 103-13.) The email stated that
investors would have the choice of redeeming their investment in
cash or in Retrophin shares, such that they would "either be a
Retrophin, LLC unit holder or cashed out by October 31, 2012."
(Id.) Ms. Hassan was "pretty surprised" to receive the "wind
down" email given the positive returns. (Tr. 1007:11-17.)
On September 28, 2012, Ms. Hassan emailed Mr. Shkreli
with a request to "liquidate [her] position and send the cash at
[her account number] at Bank of America." (Tr. 1015:17-20; GX
103-14.) She also indicated that following the return of her
funds, she would invest $100,000 in Retrophin. (Id.)
Ms. Hassan did not receive her redemption in cash and,
in December 2012, began emailing with Mr. Shkreli to check on
the progress of redemption. (GX 103-19.) The government
presented Ms. Hassan's testimony regarding a series of emails
11
SPA-27
she exchanged with Mr. Shkreli, in which he admitted that there
was "no longer any cash at the fund level" but advised that she
could redeem her interest in Retrophin shares. (GX 103-21.)
Several months later, in March 2013, Ms. Hassan and Mr. Shkreli
negotiated an agreement whereby Ms. Hassan would receive
$300,000 in cash and $200,000 in Retrophin stock. (GX 103-23.)
After further email conversations, Ms. Hassan signed a
settlement agreement between Mr. Shkreli individually, Retrophin
Inc., MSMB Capital LLC, and other MSMB entities including MSMB
Healthcare LLC. (GX 52.) Pursuant to the agreement, she
received $400,000 in cash and 58,306 shares in Retrophin. (Tr.
1047:3.)
Josiah Austin
Josiah Austin, a former commercial banker and
investor, invested a total of $4.8 million into Elea Capital, a
hedge fund run by Mr. Shkreli, between 2006 and 2007. (Tr.
1196:4-12.) Mr. Austin testified that on one specific occasion,
at Mr. Shkreli's request, he had agreed to provide Mr. Shkreli
with $500,000 to cover a margin call related to trading in Elea
Capital, but also testified that he did not have a standing
agreement that he would cover losses for Mr. Shkreli. (Tr.
1200:16-1202:16.) On another occasion, in 2007, Elea could not
cover a margin call from Lehman Brothers, which sued Mr. Shkreli
and then Mr. Austin, for $2 million. (Tr . 12 1 6 : 2 1-121 7 : 4 . ) Mr .
12
SPA-28
Austin testified that Lehman Brothers sued him because it had
"come to understandu that Austin would cover "anyn of Mr.
Shkreli's losses, but this was not true and he did not know how
Lehman Brothers came to believe this. (Tr. 1217: 19-1218: 25.)
Subsequent to the Lehman margin call and lawsuit, Mr. Shkreli
revealed that he had lost Mr. Austin's entire investment in
Elea. (Tr. 1219:5-1220:15.) Mr. Austin testified that he
"still thought Martin was an intelligent, smart guy, but []
didn't particularly want to do any more business with him.n
(Tr. 1220:14-16.)
After his experience with Elea, Mr. Austin continued
to receive Mr. Shkreli's recommendations on what stocks to
purchase, and would occasionally act on those recommendations.
(Tr. 1192:2-16.) Mr. Austin testified that he received
investment ideas from a number of people, but ultimately made
his own investment decisions, and that other than his investment
in Elea Capital, Mr. Shkreli never had discretionary trading
authority over Mr. Austin's money. (Tr. 1187:7-17; Tr. 1197:12-
18.) Mr. Austin did not invest in MSMB Capital or in Retrophin.
(Tr. 1222: 12-1223: -23.)
Steven Stitch
In 2011, Steven Stitch was an employee of Merrill
Lynch's electronic trading sales group. (Tr. 1493:9-16;
1495:11-1498:22.) Tillman Ward, a member of Merrill's research
13
SPA-29
sales group, introduced Mr. Stitch to Mr. Shkreli, and Mr.
Stitch met with Mr. Shkreli in April 2010. (Id.; GX 117-11
(email introduction).) Mr. Shkreli told Mr. Stitch that MSMB
Capital "had approximately $35 million under management" and was
"up 53 percent year-to-date". (Tr. 1499:9-17.) Mr. Shkreli
also sent Mr. Stitch an example of a performance estimate dated
April 29, 2010, which reported that MSMB Capital "returned
+58.86 percent since inception". (GX 117-1.) At the time,
Merrill Lynch was not trying to add prime brokerage clients with
under one hundred million dollars in assets, but Mr. Ward raised
the possibility of offering MSMB Capital a prime brokerage
account. (Tr. 1505:4-18.) At a meeting to discuss the fund in
August 2010, Mr. Shkreli "mentioned that the fund was growing"
and Mr. Stitch left with the impression that the fund had
"approximately $125 million in assets under management." (Tr.
1505:21-1506:14.) Although MSMB Capital did not become a prime
brokerage client of Merrill Lynch, it was an "execution client,"
so Merrill Lynch would execute certain trades placed by MSMB
Capital. (Tr. 1500:15-24; 1542:3.)
On February 1, 2011, Mr. Stitch testified that he was
at his office when he "noticed that MSMB Capital was trading in
a security [named] Orexigen, that they were trading in a large
size that increased throughout the day, and that they were
shorting the stock." (Tr. 1507:6-9.) Mr. Stitch explained that
14
SPA-30
shorting a stock meant trying to profit from a decline in the
price of a stock. (Tr. 1508:24-1509:5.) He also explained that
shorting a stock required borrowing a stock from one's prime
broker in order to implement the short trade. (Id.) He was
concerned because in order to short a small stock such as
Orexigen (also known as OREX), which was seeing high trading
volumes, MSMB Capital would need a "locate," or to obtain a
commitment from its prime broker, Interactive Brokers, to set
aside the quantity of shares required to implement the trade.
He explained that because on that day Merrill Lynch "didn't have
the ability to find any [OREX] stock to lend" to its own prime
brokerage clients, he wanted reassurance that Mr. Shkreli had,
in fact, been able to get a "locate" for MSMB Capital from
Interactive Brokers. (Tr. 1510:1-4.) Mr. Shkreli told Mr.
Stitch that MSMB Capital had a "locate" on the stock. 3
(Tr. 1511:10-12.)
Over the course of the day, Mr. Shkreli made "hundreds
of trades" of over 60 million shares of OREX, and then asked for
a commission rate reduction from Merrill Lynch, which charges
commissions on a per trade basis at a per-share rate. (1513:4-
1514:10; GX 117-2 (February 1, 2011 email from Martin Shkreli
3 The jury was instructed that evidence of any misrepresentations

made by Mr. Shkreli in the course of the OREX trade was offered
only for the "limited purpose of providing the background of
the OREX trade," and that "the OREX trade is not charged as a
crime in this case.n (Tr. 1511:23-1512:6.)
15
SPA-31
requesting "a special exception for very high volume commission
on a small priced stock.").) On a call on February 2, 2011 to
discuss the commission rate, Mr. Stitch testified that Mr.
Shkreli stated that he "could not pay for the trade." (Tr.
1519:5-9.) According to Mr. Stitch, on a second call on
February 2nd, Mr. Shkreli claimed that the trade was the result
of some "system issues," that it was a "mistake," and then
apologized to Mr. Stich for "putting [Mr. Stitch] in this
position," while also stating that "he knew people, that he
would try to find ways to pay [Merrill Lynch] back," and that
"it would not be wise to go to legal proceedings to try to get
this back or to make anybody aware of it." (Tr. 1520:5-11.)
Mr. Stitch interpreted this as a threat by Mr. Shkreli. (Tr.
1521: 15-18.)
Mr. Stitch testified that Merrill Lynch had to buy
OREX stock to cover Mr. Shkreli's trade, resulting in a loss of
over $7 million. (Tr. 1522:9-16.) After an arbitration between
Merrill Lynch and MSMSB Capital and Mr. Shkreli, Mr. Shkreli
arranged for payment of $1.3 million in settlement of Merrill
Lynch's claim. (Tr. 1522: 19-1523: 2.)
Darren B1anton
Darren Blanton is a Dallas, Texas based investor, who
invests through an entity known as Colt Ventures. (Tr. 1548:15-
21.) Tillman Ward, the Merrill Lynch employee, introduced Mr.
16
SPA-32
Blanton to Mr. Shkreli. (Tr. 1551:5-12.) Mr. Shkreli told
Blanton that MSMB Capital had "approximately $35 million under
management." (Tr. 1552:10-13.)
In December 2010, Mr. Shkreli travelled to Dallas,
where he met with a number of local investors, including Mr.
Blanton and future MSMB Capital investors Schuyler Marshall and
John Neill. (Tr. 1561:6-1563:22; GX 105-37). On December 2,
2010, Mr. Blanton asked Mr. Shkreli to provide the name of the
fund's auditor, administrator, and AUM. (GX 105-3; Tr. 1566:16-
20.) Mr. Shkreli responded on the same day, stating in the
email that the firm's auditor was Rothstein Kass, the
administrator was NAV consulting, the firm's lawyer was
McCormick and O'Brien, and the firm's AUM was $35 million. (Tr.
1567:7-8; GX 105-3.) Mr. Blanton explained that a fund
administrator "keep[s] the fund accountable to investors and
they're another set of eyes on the money," and that AUM was
important to his investment decision because "it's a sign that
other investors have done due diligence and that they have
committed money to the fund," and that the firm has enough money
to pay its employees and operate on an ongoing basis. (Tr.
1568:3-5, 15-17, 1568:23-1569:5.) Mr. Shkreli also sent Mr.
Blanton a slide deck about MSMB Capital, which also listed
Rothstein Kass as the accountant and auditor and NAV Consulting
as the administrator. (GX 105-1.) Mr. Blanton invested $1.25
17
SPA-33
in MSMB Capital in two investments: $1 million on December
2010, and $250,000 in January 2011. (Tr. 1584:2-11.)
Mr. Blanton testified that Mr. Shkreli represented to
him that he had assets under management from Josiah Austin, and
that Mr. Austin paid Mr. Shkreli to manage his money. (Tr.
1570:1; 1862:4-11.) Mr. Blanton also recalled that Mr. Shkreli
claimed to have "graduated very young from Columbia." (Tr.
1583:8-9.) Mr. Shkreli disclosed the OREX trade to Mr. Blanton,
in part, but claimed that it was a "fat fingeru trading error -
"where you push sell but meant to push buy." (Tr. 1587:25-
1588:8.) Mr. Shkreli told Mr. Blanton that the trade "could
cause the fund to lose a lot of its money". (Tr. 1588:7-8.)
Mr. Blanton received sporadic performance reports from
Mr. Shkreli. (Tr. 1586:25; see GX 79-1 through 79-3.) For
example, the April 10, 2011 performance report for March 2011
reported that "that MSMB has returned 6.7 percent in March 2011"
and that Mr. Blanton's investment of $1.25 million had a net
asset value of $1,324,905. (Tr. 1589:8-1590:4; GX 79-2.) Based
on the March 2011 performance report, Mr. Blanton came to
believe that notwithstanding the OREX trade, "everything was
okay, at least at [the time of the performance report] .u (Tr.
1590:8-10.)
In the summer and fall of 2011, after "questioning
some of the trades and . . . the performance of the fund," Mr.
18
SPA-34
Blanton learned that Rothstein Kass and NAV Consulting were not
actually the auditors and administrators of the fund. (Tr.
1601:8-1602:8.) Mr. Blanton had several conversations regarding
redeeming his funds with Mr. Shkreli, and made a formal request
for redemption on November 17, 2011. (GX 105-6; Tr. 1604:4-24.)
He did not receive the funds by the date he requested, November
30, 2011. (Tr. 1605:14-17). Mr. Blanton stated that it was
difficult to get in touch with Mr. Shkreli (Tr. 1606:4-6), and
the government introduced multiple emails between Mr. Shkreli
and Mr. Blanton and his staff, and Mr. Blanton relating to Mr.
Blanton's redemption request and attempts to receive payment.
(See GX 105-8 through 105-12; GX 105-40). Mr. Shkreli remitted
partial redemption payments to Mr. Blanton starting in February
2012, and blamed banking transfer limits for the pace of
redemption. (Tr. 1623:13-18.) By April 2012 Mr. Shkreli had
sent Mr. Blanton $200,000, and had invested $300,000 of Mr.
Blanton's money into Retrophin. (Tr. 1629:13-22; 1631:23-
1632:4.)
On June 27, 2012, Mr. Shkreli sent Mr. Blanton a
document stating that MSMB Capital would suspend withdrawals.
(GX 105-13.) Mr. Blanton hired a lawyer, who asked for a review
of the fund's books and records. Through this lawyer, Mr.
Blanton received a list of the limited partners and how much
money they had invested. (Tr. 1635:25-1636:1; GX 105-15.) The
19
SPA-35
document listed only seven other investors: Lindsay Rosenwald
($100,000 on October 30, 2009); Steven Richardson ($200,000 on
October 30, 2009, $100,000 on February 9, 2010, and $100,000 on
February 22, 2010); Edmund Sullivan ($30,000 on October 30,
2009); Brent Saunders ($150,000 on August 13, 2010 and $100,000
on January 12, 2010); Dynagrow Capital ($300,000 on January 17,
2011); Schuyler Marshall ($200,000 on January 27, 2011); and
John Neill ($500,000 on January 28, 2011. (GX 105-15; Tr.
1636:24-1637:9.) Mr. Blanton was surprised to see that he was
the biggest investor in MSMB Capital, and that the fund did not
have $35 million in AUM. (Tr. 1637:10-17.) He contacted and
provided the SEC with documents he had been given. (Tr. 1640:1-
17.)
Eventually, following months of communication with Mr.
Shkreli, Mr. Blanton received 160,318 shares in Retrophin on
February 19, 2013. 4 (GX 105-23.) Then, following more than a
year of sporadic discussions about additional redemption
payments (including through an "option agreement" or a
"settlement agreement" with Retrophin), Mr. Blanton entered into
a consulting agreement with Retrophin on March 6, 2014, which
provided him with 200,000 shares of Retrophin stock in exchange
for "consulting services on strategic and corporate governance
4 The stock certificate was for shares of Desert Gateway, the

shell company used in the reverse merger. Following the
merger, Desert Gateway became Retrophin.
20
SPA-36
matters." (Tr. 1678:1-5; GX 61 (consulting agreement); see Tr.
1661:23-1677:25 (describing discussions and negotiations over
repayment).) Mr. Blanton testified that he entered into the
agreement with Retrophin to "get the remainder of [his]
investment out of MSMB Capital." (Tr. 1681:7-13.) Mr. Blanton
testified that with regard to the services he provided
Retrophin, he did not do anything that he would not have done
for any other investment. (Tr. 1683:23-1684:1.)
Lindsay Rosenwaid
Dr. Lindsay Rosenwald, trained as a medical doctor, is
a biotechnology investor who invested in MSMB Capital. (Tr.
1928:3-1930:16.) Mr. Shkreli solicited an investment from Dr.
Rosenwald on September 7, 2009 (GX 101-1), claiming that the
fund would request "small" contributions from limited partners,
in the range of $100,000 to $500,000, but would "probably take
more from" Josiah Austin. (Id.; Tr. 1936:4-19.) Dr. Rosenwald
knew of Mr. Austin as a "big investor" who "invests a lot in
biotech." (Tr. at 1936:23-25.) In an October 15, 2009 email,
Mr. Shkreli claimed that MSMB had $3 million in assets, and had
a $250,000 minimum investment. (GX 101-2.) Dr. Rosenwald
agreed to invest $100,000 on October 27, 2009. (GX 21; Tr.
1954: 11-25.)
On direct examination, Dr. Rosenwald testified about
his MSMB Capital PPM. (GX 1B.) Dr. Rosenwald explained that
21
SPA-37
several of the purported features of the fund were important to
his investing decision: first, the fact that the fund permitted
redemption in cash on short notice, because it showed that the
fund was "highly liquid" (Tr. 1942:16); second that the fund had
accountants and auditors, which Dr. Rosenwald explained were
"standard in the industry," (GXl-B at LR00119; Tr. 1943:19-
1944:18 (stating that he would not have made the investment if
the fund did not have an auditor); Tr. 1952:20-21); and third,
that the firm had legal counsel (identified as Cobb &
Associates), because in Dr. Rosenwald's experience "everybody in
the hedge fund business has lawyers to keep everybody doing
things legally". (Tr. 1945: 15-24.)
Dr. Rosenwald received performance reports from Mr.
Shkreli. (See GX 76-1 through 76-26.) For example, the February
2011 performance report stated that his $100,000 investment was
worth $135,008. (GX 76-16.) Dr. Rosenwald testified that these
reports were important to his continued investment in MSMB
Capital. (Tr. 1957:7-10.)
Like Ms. Hassan, Dr. Rosenwald received the "wind
down" email on September 9, 2012, in which Mr. Shkreli stated
that he was planning to "wind down [the] hedge fund partnerships
with a goal of completing the liquidation of the funds by
November or December 1, 2012." (GX 101-11.) Dr. Rosenwald
requested cash, but instead received a stock certificate in
22
SPA-38
Desert Gateway. (1979:20-1980:8.) After further communication,
Dr. Rosenwald turned the matter over to his legal counsel and
CFO. Dr. Rosenwald reached a settlement on March 13, 2013 with
Mr. Shkreli, MSMB Capital, and Retrophin. (Tr. 1981:24-1982:8;
GX 51 (settlement agreement).) Pursuant to the settlement
agreement, Dr. Rosenwald received 80,000 shares of free trading
Retrophin common stock. (Tr. 1983:21-23; GX 51.)
Jackson Su
Jackson Su started as chief operating officer of MSMB
"and all its entitiesn on January 4, 2012. (Tr. 2123:1-2124:6.)
After he started working for Mr. Shkreli, he learned that there
were "a lot of entities under MSMB,n including "MSMB Healthcare,
MSMB Isotope, MSMB Consumer, and Retrophin LLC." (Tr. 2124:10-
13.) Mr. Su's understanding was that Retrophin was "incubated
by MSMB Healthcare." (Tr. 2124:20-23.) Mr. Su was not
initially aware of MSMB Capital, but came to understand that
"several people had cross duties" between Retrophin and MSMB
Capital. (Tr. 2124:14-16; 2135:11-12.)
Mr. Su testified that he was told during his interview
that MSMB Healthcare had an AUM of "$70 million," but that after
he started the AUM would be described as $70 million or $100
million "depending on who was speaking, Martin [Shkreli] or
23
SPA-39
Kevin [Mulleady] _u 5 (Tr. 2131:11-17.) He heard Mr. Mulleady
"t[ell] people that the fund had $100 million in assets" and
that it "was up 30 percent.u (Tr. 2153: 3-18.)
Mr. Su recalled hearing Mr. Mulleady pitch MSMB
Healthcare to an investor named Michael Lavelle, who was Mr.
Mulleady's cousin. (Tr. 2153:20-25.) Mr. Su recalled that in
January or February 2012, Retrophin was "pursuing a license with
a larger pharmaceutical company and []needed the funds to pay
for that license." (Tr. 2154:5-13.) Mr. Lavelle made a
"sizeable" investment into MSMB Healthcare at that time, and,
thereafter, on February 1, 2012, MSMB Healthcare apparently made
a $900,000 equity investment into Retrophin in order to enable
Retrophin to pay for the license. (Tr. 2154:3-2156:14; Tr.
2168:1-14 (testimony that Government Exhibit 119-4 reflected the
$900,000 February 1, 2012 equity investment from MSMB Healthcare
into Retrophin); GX 119-4 (February 16, 2012 capitalization
table).) Mr. Lavelle's subscription agreement for his $850,000
MSMB Healthcare investment, and the Retrophin capitalization
table, also memorialized the sequence of these transactions.
(Tr. 2168:2-8; GX 119-10 (Retrophin capitalization table
5 Although the jury acquitted Mr. Shkreli of the MSMB Capital and
MSMB Healthcare-related conspiracy counts (that is, Counts One,
Two, Four, and Five) the communications between Mr. Shkreli and
Mr. Mulleady, an alleged co-conspirator, and Mr. Mulleady's
communications with investors, provide important background and
corroboration of the government's evidence against Mr. Shkreli
for Counts Three and Six.
24
SPA-40
reflecting the MSMB Healthcare equity investment for preferred
units).)
In November 2012, Mr. Shkreli "dropped off" a
promissory note on Mr. Su's desk. (Tr. 2199:21-2200:1). Mr. Su
had not seen the note before, but it purported to be a
February 1, 2012 $900,000 promissory note to MSMB Healthcare
from Retrophin. (Tr. 2200:2-12; GX 119-36.) Mr. Su described
the effect of the note as "MSMB loaned $900,000 to Retrophin and
the note says that Retrophin has to pay MSMB Healthcare back the
$900,000, plus interest." (Tr. 2200:19-21.) In Retrophin
capitalization tables, between November and December 2012, the
$900,000 February 2012 equity investment from MSMB Healthcare
into Retrophin "disappeared". (Tr. 2206:3-4.)
Mr. Su also discussed testified regarding specific
freely-tradable Desert Gateway/Retrophin shares, which were
known as the "Fearnow" shares. These shares were so named
because the last name of "[t]he gentleman that had control of
the [Desert Gateway] shell at the time" was Fearnow. (Tr.
2236:7-8.) Mr. Su explained that there were two-and-a-half
million freely trading Fearnow shares. (Tr. 2236:3-5.)
According to Mr. Su, after the reverse merger with Desert
Gateway, some of the Fearnow shares were "distributed amongst
individuals that Martin chose." (Tr. 2237:1-4.) Mr. Su
identified the seven Fearnow share recipients as Kevin Mulleady,
25
SPA-41
Thomas Fernandez, Marek Biestek, Timothy Pierotti, Claridge
Capital LLC, Andrew Vaino, and Edmund Sullivan (together, the
"Fearnow shareholders"). (2239:11-21.) Claridge Capital LLC
was controlled by an individual named Ron Tilles, a fund-raiser
for both MSMB and Retrophin, and Edmund Sullivan was a "friend
of Martin Shkreli." (Tr. 2239:11-2240:13; see GX 119-35.)
Schu2yer Marsha22
Schuyler Marshall, formerly CEO and now Chairman of
the Board of the Rosewood Corporation, met Mr. Shkreli for the
first time in the summer of 2010 after being introduced by
Darren Blanton. (Tr. 2425:4-2426:18.) On January 2, 2011, Mr.
Marshall invested $200,000 into MSMB Capital through his
personal IRA. (Tr. 2434:10; 2439:22; GX 25.) Among the factors
that Mr. Marshall identified as influencing his decision to
invest was the MSMB Capital fund's requirement of only 30 days'
notice for redemptions and the representation that Rothstein
Kass, which Mr. Marshall knew to be "a well-regarded,
independent CPA firm," was MSMB Capital's independent auditor.
(Tr. 2432:5-11 (referencing GX 6); 2433:2-6).)
Mr. Shkreli sent Mr. Marshall performance reports on a
periodic basis. (See GX 81-1 - 81-8.) In addition, Mr.
Marshall spoke to Mr. Shkreli about the fund's performance.
(Tr. 2443:1-5.) Mr. Marshall testified that he did not attempt
to redeem his investment before September 2012 because, based on
26
SPA-42
the performance reports, his investment was performing as he had
hoped. (Tr. 2443:11.)
On September 10, 2012, Mr. Shkreli sent Mr. Marshall
the same "wind down" email he sent to Ms. Hassan and Dr.
Rosenwald. (GX 109-9.) At the time, based on Mr. Shkreli's
performance reports, Mr. Marshall believed that the value of his
$200,000 investment in MSMB Capital had grown to approximately
$282,000. (Tr. 2449:3-4.) For "pretty much the whole spring of
2013," Mr. Marshall attempted to redeem his investment. (Tr.
2449:9.) Mr. Marshall communicated to Mr. Shkreli that he
"wanted to get the cash back in [Mr. Marshall's] IRA" because
Mr. Shkreli "had represented[] that they would be distributing
cash." (Tr. 2449:14-18.) Mr. Shkreli would respond
intermittently, claiming that he was busy. (Tr. 2449:24.)
At some time in the spring of 2013, Mr. Marshall
received a share certificate for 37,809 shares in Retrophin,
although he had not requested any such distribution. (2450:12-
21.) Between February and April 2013, Mr. Marshall and Mr.
Shkreli exchanged emails regarding redemption. (GX 104-4.)
Among other things, Mr. Shkreli claimed that MSMB Capital had
invested in Retrophin, but "the value of Retrophin did fall from
when MSMB invested in it. 11 (Id.) Nevertheless, Mr. Shkreli
promised to give Mr. Marshall the "$265k of value that you
deserve 11 • (Id.) On June 24, 2013, following discussions of a
27
SPA-43
potential settlement and "further delay", Mr. Marshall emailed
Mr. Greebel, indicating that he was still willing to pursue
settlement but requesting the "preservation of documents"
related to his investment in MSMB Capital and Mr. Shkreli's
investment in Desert Gateway/Retrophin. (2462:7-2463:24; GX
104-7.) After additional discussions, on August 29, 2013, Mr.
Marshall entered into two agreements: one between Mr. Marshall
and MSMB entities, including MSMB Capital LP and MSMB Healthcare
LP, for 6,300 shares of Retrophin stock, and the other between
Mr. Marshall and Retrophin, for $300,000. (GX 57A, 57B.) Mr.
Marshall received the $300,000, but never received the 6,300
Retrophin shares. (Tr. 2472:1-4.)
Steven Richardson
Steven Richardson, a former human resources executive
at American Express, invested in both MSMB Capital and
Retrophin, and eventually became Chairman of the Board of
Retrophin. After meeting Mr. Shkreli at a party, Mr. Richardson
invested $200,000 in MSMB Capital at the end of October 2009.
(Tr. 2766:4-9.) Among the factors that appealed to Mr.
Richardson was that Mr. Shkreli represented that MSMB Capital
was a highly liquid fund, which Mr. Richardson thought important
because it enabled the fund to be "very nimble." (Tr. 2759:5).
Mr. Richardson also noted that the engagement of outside counsel
and auditors named in the MSMB Capital PPM was an "important
28
SPA-44
factor" in his investment in MSMB Capital because it
demonstrated the "rigor" with which Mr. Shkreli and Mr. Biestek
were managing the fund. (Tr. 2765:9-17.)
Mr. Richardson became friendly with Mr. Shkreli, and
they discussed the similarities in their backgrounds. Among
other things, Mr. Shkreli told Mr. Richardson that he had not
finished college. (Tr. 2784:3-8.) Mr. Richardson made an
additional investment of $200,000 in MSMB Capital in February
2010. (Tr. 2777:5-2780:3.)
Mr. Richardson also invested in Retrophin. He began
to discuss the idea of a pharmaceutical company with Mr. Shkreli
at the end of 2010 and, in March 2011, Mr. Shkreli sent Mr.
Richardson a presentation concerning a pharmaceutical company
called Retrophin, Inc., of which Mr. Shkreli was listed as
interim CEO. (Tr. 2805:15-2807:9; GX 122-6.) On April 19,
2011, Mr. Richardson invested $50,000 into Retrophin, and in the
same time period also agreed to convert $50,000 of his
investment in MSMB Capital into an investment into Retrophin.
(Tr. 2811:5; GX 122-8.) Mr. Richardson also joined the board of
directors of Retrophin. (Tr. 2812:12-16.)
As an MSMB Capital investor, Mr. Richardson received
performance reports from Mr. Shkreli. (See GX 77-1 through 77-
25.) Based on the emailed performance reports, by May 2012, Mr.
Richardson believed that his $400,000 investment in MSMB Capital
29
SPA-45
was worth $583,482. 6 (Tr. 2830:14-19; see GX 77-25 (May 2012
performance report reflecting an account value of $583,482) .)
On June 14, 2012, Mr. Richardson agreed to exchange his entire
investment in MSMB Capital for units in Retrophin. The
documentation of the exchange agreement reflected that Mr.
Richardson was exchanging his interest in MSMB Capital for
14,631 units of Retrophin. (GX 122-24.)
In March 2013, in connection with his submission of a
Form 4 to the Securities and Exchange Commission, Mr. Richardson
asked Mr. Shkreli about his total holdings in Retrophin. (GX
122-97.) Based on Mr. Shkreli's verbal commitments and the
Retrophin capitalization table, Mr. Richardson believed that he
would be given approximately five percent of the post-merger
Retrophin company stock. (Tr. 2883:17-19.) Following an email
discussion with Mr. Shkreli, Mr. Richardson became concerned
with Mr. Shkreli's description of Mr. Richardson's holdings in
Retrophin. (Tr. 2890:20-2892:5 GX 122-41.) After further
discussion, Mr. Shkreli agreed to give some of his Retrophin
shares to Mr. Richardson to "top up" Mr. Richardson's holdings.
(Tr. 2902:12-14; 2903:18-19.)
Following a February 2014 Retrophin Board meeting at
the Norwood Club in Manhattan, Mr. Richardson raised several
6 This amount purported to include the value of the $50,000 MSMB

Capital investment Mr. Richardson had converted into units of
Retrophin. (GX 77-25.)
30
SPA-46
issues with Mr. Shkreli regarding his conduct that the board
members had previously discussed amongst themselves. The issues
included Mr. Shkreli's treatment of subordinates, specifically
Horatio Plotkin, MD, the company's Chief Medical Research
Officer; Mr. Shkreli's Twitter practices; and Mr. Shkreli's use
of the Retrophin business development group to engage in stock
trading. (Tr. 2937:7-2943:10). After speaking with Mr. Shkreli
about these issues, Mr. Richardson testified that he believed
Mr. Shkreli understood the board's position, and Mr. Shkreli
specifically agreed to limit his trading using company money.
Mr. Richardson testified that by September 2014, Mr.
Shkreli was losing support of the board. Mr. Shkreli had
continued to permit the business development group to conduct
trading, and had even put a commission structure in place,
contrary to what he had told the board. (Tr. 2967:10-17.) At a
dinner in mid-September, however, Mr. Shkreli denied that this
was the case. Mr. Richardson's perception was that Mr. Shkreli
was "lying" about the trading operations. (Tr. 2968:1.)
Stephen Aselage, who had previously stepped down as Retrophin
CEO and was, at the time a member of the board, agreed to the
board's request that he serve as interim CEO, though the board
agreed that Mr. Shkreli should serve on the board in an advisory
capacity. (Tr. 2969:15-16.)
31
SPA-47
On September 29, 2014, Mr. Shkreli, Mr. Aselage, and
Mr. Richardson met at Mr. Shkreli's office, and Mr. Richardson,
as chairman of the company, explained that they wanted Mr.
Shkreli to step down as CEO. He articulated three reasons:
first, Mr. Shkreli's "blatant[]" disregard of the Board's
directions to limit trading by the business development group;
second, that Mr. Shkreli had impermissibly traded in Retrophin
stock outside of the permitted trading periods 7 ; and third, he
had issued stock grants to new employees without keeping track,
with the result that he had exceeded the available pool of stock
for employees. (Tr. 2971:2-9; 2977:6-12.)
David Geller
David Geller, who invested $200,000 in MSMB
Healthcare, testified on July 12 and 13, 2017. Alan Geller, Mr.
Geller's brother, introduced him to Mr. Shkreli in the
"beginning of 2011." (Tr. 3095:20-23; 3115:6-9) Mr. Geller
explained that his prior experience investing in illiquid
investments and hedge funds was not positive, and as a result he
wanted a "liquid fund" with "[l)ow volatility"; based on
representations in the PPM and his discussions with Mr. Shkreli,
he felt that MSMB Healthcare fit that description, as it was a
"long/short balanced fund" which had a 30-day redemption notice
7 The jury was instructed that Mr. Shkreli was not charged with
any offenses relating to this trading in Retrophin stock.
2977:2-4.
32
SPA-48
period. (Tr. 3094:10-3095:23; 3097:2-3098:22; 3109:4-12.) It
was also essential to his investment that the fund had an
auditor and certified public accountant. (Tr. 3110:25-3111:1.)
Mr. Geller received investor statements and relied on
these statements to keep track of his investments in MSMB
Healthcare. (Tr. 3118:5-7.) The September 2011 statement,
which Mr. Geller received on October 27, 2011, showed that his
balance was $210,354, a return of $10,354 since his investment
on June 29, 2011. (GX 91-2; Tr. 3116:2; 3119:7-14.)
On October 31, 2011, Mr. Geller received an email from
NAV Consulting including "an important notice from the fund" and
"a materially revised PPM." (GX 109-6; GX 11B.) A letter
attached to the email explained that MSMB Healthcare had
"expanded its disclosure regarding its ability and intent to
invest in illiquid securities including venture capital, private
equity limited partnerships and other hedge funds" and that
"[i]f you disagree with these changes, we will facilitate your
redemption within our standard parameters." (GX 109-6; Tr.
3124:11-18.) Mr. Geller had a "[v]ery negative reaction" to
this letter, because it was "[i)nconsistent 11 with his investment
objectives. (Tr. 3125:8-14.)
On November 30, 2011, Mr. Geller received a
performance report for October 2011, indicating that his balance
was $199,938. (GX 91-3; Tr. 3120:3-8.) This performance report
33
SPA-49
stated in a footnote that "MSMB Healthcare, LP has accepted the
transfer of 30,000 investment units consisting of Class A common
units of Retrophin, LLC, a Delaware limited liability company
focused on developing biopharmaceutical products . . as a
gift." (GX 91-3.}
On January 24, 2012, Mr. Geller wrote an email to Mr.
Shkreli and Mr. Mulleady asking to redeem his investment,
because his "portfolio already has too much private equity and
illiquid components in it." (GX 109-7; Tr. 3126:14-19.) Mr.
Geller then had a conversation with Mr. Shkreli, and recalled
that Mr. Shkreli claimed that the private securities at issue
would be a "small part of the portfolio and wouldn't
really affect anything." (Tr. 3291:16-20.) This conversation
had a "big influence" on Mr. Geller's decision not to continue
to seek redemption at the time. (Tr. 3295:19.)
On September 10, 2012, Mr. Shkreli sent an email
announcing that he had "decided to wind down our hedge fund
partnerships with a goal of completing the liquidation of the
funds by Nov or December 1st, 2012." (Tr. 3142:23-3143:4; GX
109-9.) The email stated that "[i]nvestors will have their
limited partnership interests redeemed by the fund for cash,
alternatively investors may ask for a redemption of Retrophin
shares or a combination of Retrophin shares and cash." (Tr.
3143:12-15; GX 109-9.}
34
SPA-50
Mr. Geller waited for some contact regarding
redemption procedures, but "did not get any communication at
all." (Tr. 3144:7-21.) On March 14, 2013, he unexpectedly
received a share certificate for 30,154 restricted shares of
Retrophin. (GX 109-10.) Mr. Geller recalled that he was
"bewilder[ed]" by the certificate, which had no letter of
instruction. (Tr. 3146:2.) Following email conversations with
Mr. Shkreli and a conversation with his brother Alan, Mr. Geller
wrote Mr. Shkreli that, based on his understanding, it appeared
that MSMB Healthcare had "put all my fund money into Retrophin
stock at the high valuation," despite assurances that it would
only be a small part of the portfolio. (GX 109-12; Tr. 3149:22-
3150:2.) Mr. Geller discussed his concerns with Mr. Shkreli,
who put Mr. Geller in touch with Mr. Greebel. Mr. Shkreli
agreed that Mr. Geller would receive $300,000 and keep 30,000
shares. (Tr. 3154:5-9.) After additional email communications
with Mr. Shkreli and Mr. Greebel, Mr. Geller received a
settlement agreement from Mr. Greebel on May 22, 2013,
memorializing the terms of his agreement with Mr. Shkreli. (Tr.
3163:6-11; GX 109-22; GX 55.) The parties to the settlement
agreement included MSMB Capital, MSMB Healthcare, and Retrophin.
(GX 55.) Although the agreement was executed on May 30, 2013,
Mr. Geller did not receive the $300,000 in cash until October
13, 2013. (Tr. 3169:25.)
35
SPA-51
Stephen Asel.age
Stephen Aselage is the CEO of Retrophin, Inc. Mr.
Aselage has a background in pharmaceutical sales and in
pharmaceutical startups. Prior to his involvement with
Retrophin, he worked at a company known as BioMarin, leaving in
2012 as an Executive Vice President and Chief Business Officer.
(Tr. 3299:19-3301:25.) In the fall of 2012, Mr. Aselage was
contacted "out of the blue" by Mr. Shkreli, who asked Mr.
Aselage to join Retrophin. (Tr. 3303:12.) Mr. Aselage started
as Retrophin's CEO in October 2012. (Tr. 3298:13-3299:1.) At
the time, Retrophin "did not have really much of anything,"
other than a licensing agreement with the pharmaceutical company
Ligand. (Tr. 3312:2-7.) Based on what he had been told by Mr.
Shkreli, Mr. Aselage though that Retrophin had the money to
complete the deal, but testified that in the fall of 2012, he
had to focus on "trying to raise the money to actually complete"
the licensing transaction. (Tr. 3317:12-16.) Mr. Aselage
decided to step down as CEO in December 2012 because Mr. Aselage
thought that Mr. Shkreli was really running the company, and
because he was alarmed by the company's failure to have paid its
premium for Director and Officer insurance. (Tr. 3337: 3-11;
3339:1-6.)
Mr. Aselage chose to remain on Retrophin's board.
(Tr. 3339:7-8.) Mr. Aselage explained his decision to stay on
36
SPA-52
the board by describing Mr. Shkreli as a "brilliant intellect
and a visionary" who "tells a story, sings a song, and everyone
just wants to follow him." (Tr. 3339:19-22.) He explained that
Mr. Shkreli sometimes "did such a good job that people would
write a check for everything they had," but also noted that
sometimes Mr. Shkreli was" a little bit not as credible as he
could have been in addressing things that didn't seem to be
areas of knowledge but where he was trying to answer questions
anyway." (Tr. 3318:17-25.)
In the spring of 2014, at request of the Retrophin
Board, Mr. Aselage returned to an operating position, becoming
COO until September 2014. (Tr. 3298:23-3299:1.) As with
Mr. Richardson, Mr. Aselage explained that members of the board
became concerned over the summer of 2014 about a number of
issues relating to Mr. Shkreli's behavior as CEO, mentioning
specifically Mr. Shkreli's Twitter usage, the business
development group's trading using company funds, and Mr.
Shkreli's interpersonal style with subordinates such as
Dr. Plotkin. (Tr. 3391:1-18.) Mr. Aselage became interim CEO
when the board removed Mr. Shkreli as CEO, and, after Mr.
Shkreli resigned, Mr. Aselage became permanent CEO in November
2014. (Tr. 3298:13-3299:1; 3412:24-3413:1; 3419:13-20
(describing Mr. Shkreli's agreement to resign).)
37
SPA-53
Corey Massella
Corey Massella, while employed at the accounting firm
Citrin Cooperman, provided accounting services to Retrophin.
Mr. Massella founded his own accounting firm, SEC Solutions,
which merged into Citrin Cooperman in 2009. (Tr. 3871:22-
3873:1.) Mr. Massella explained that Evan Greebel, Retrophin's
outside counsel, was the son-in-law of Niles Citrin of Citrin
Cooperman. (Tr. 3874:1-2.) Retrophin engaged SEC Solutions to
provide accounting services on January 19, 2012. (GX 119-3
(engagement letter).) Mr. Massella described Retrophin's
accounting at the beginning of the engagement as "very chaotic".
(Tr. 3885:4-6.)
In providing accounting services to Retrophin, Mr.
Massella and his team used capitalization tables for the company
to "see that the cash that went through the bank account agrees
to the ownership and what was paid for the ownership in the
company." (Tr. 3889:4-7; 119-4.) Mr. Massella testified
regarding several entries on the Retrophin capitalization
tables. Mr. Massella testified that on February 1, 2012, the
capitalization table showed an equity investment from MSMB
Healthcare into Retrophin; the transaction was $900,000 for
22,500 shares. (Tr. 3891:21-23.) Subsequently, in a November
16, 2012 email, Mr. Massella's associate Susan Chew inquired
concerning a "Secured Promissory Note," because the company's
38
SPA-54
records included two references to $900,000 February 2012
transfers from MSMB Healthcare to Retrophin: the promissory
note and the equity investment. (GX 119-14.) Mr. Massella
explained that Ms. Chew could only locate one $900,000 transfer
from MSMB Healthcare into the relevant Retrophin bank account,
whereas she would have expected $1.8 million if there were two
$900,000 transactions. (Tr. 3902:3-3905:1.)
Mr. Massella also testified regarding a December 3,
2012 email, which attached several share transfers: a transfer
from Mr. Mulleady to Mr. Shkreli of 10,000 Retrophin shares
(dated July 1, 2012), a transfer from Mr. Fernandez to Mr.
Shkreli of 50,000 Retrophin shares (dated July 1, 2012), a
transfer from Mr. Biestek to Mr. Shkreli of 4,167 Retrophin
shares (dated June 1, 2012), and a transfer from Mr. Shkreli to
MSMB Capital of 75,000 Retrophin shares (dated July 1, 2012).
(GX 119-25.) With regard to Mr. Biestek's transfer of shares to
Mr. Shkreli, Mr. Massella testified that based on his
experience, it was "unusual" for a CEO to receive shares from,
as opposed to give shares to, an employee. (Tr. 3911:18-19.)
Mr. Massella testified that Citrin Cooperman resigned
the engagement with Retrophin on May 8, 2013, after the
relationship became "a little contentious". (Tr. 3 9 4 6: 19. ) Mr.
Massella explained that, in his view, Retrophin would not
provide Citrin Cooperman with information required for the
39
SPA-55
audit, and then company employees, including Mr. Shkreli, would
criticize the Citrin Cooperman team. (Tr. 3949:8-19.) Joel
Cooperman, the managing partner of Citrin Cooperman, terminated
the engagement after reviewing a heated email exchange. (Tr.
3946:20-3950:19 (discussing GX 123-12) .)
John Neil.l.
John Neill, a businessman who ran "retirement-related
operations," such as retirement apartments and nursing homes,
invested in MSMB Capital in early 2011. (Tr. 3989:13-16;
3999:11.) Mr. Neill met Mr. Shkreli through Mr. Blanton, and
attended a dinner in the fourth quarter of 2010 at which Mr.
Shkreli discussed MSMB Capital. At this dinner, the discussion
of MSMB's returns "stuck" in Mr. Neill's mind; Mr. Neill
recalled them as "40%-a-year kind of returns." (Tr. 3991: 23-
25.) Mr. Neill invested $500,000 on January 31, 2011, through
his wife's separate property account, which he managed. (Tr.
3999:11-4000:3.) Mr. Neill intentionally invested before
February 1, 2011. (Tr. 4008: 3-24.)
Mr. Neill received and relied on performance updates,
which reflected positive performance by MSMB Capital. (Tr.
4003:15-24; GX 82-1 through 82-17.) For example, Mr. Neill's
September 9, 2012 statement showed returns of approximately
$149,897 on his $500,000 investment. (GX 82-17.) Mr. Neill
also exchanged emails with Mr. Shkreli, including an April 13,
40
SPA-56
2011 email from Mr. Shkreli, who stated that he had just covered
one of the fund's short trades, resulting in a "30 percent
return in 10 days." (GX 102-5; Tr. 4010:23-4011:11.) Mr. Neill
did not recall the names Orexigen or OREX being discussed over
the course of his investment. (Tr. 4008:15-17.)
Mr. Neill received the same September 2012 wind-down
email as Ms. Hassan, Mr. Marshall, and Dr. Rosenfeld. (GX 102-
16.) After email communications with Mr. Shkreli requesting
redemption of his MSMB Capital investment, Mr. Shkreli sent Mr.
Neill an email on January 13, 2013, claiming that the value of
Mr. Neill's investment had declined from $756,162 in July of
2012 to $444,245 in December of 2012. (GX 102-21.) The email
explained that "[t]hrough the partnership, your account owns
94,520 shares of Retrophin" and that the values of Retrophin
stock had dropped over the prior six months. (Id.) On February
19, 2013, Mr. Shkreli sent Mr. Neill 94,521 restricted shares in
Retrophin. (GX 102-22.)
Deborah Orem.land
Deborah Oremland, an attorney at the Financial
Regulatory Authority ("FINRA"), testified as a summary witness.
Among other things, Ms. Oremland testified regarding charts she
prepared that showed Retrophin's share price and trading volume
by date from December 17, 2012 through September 30, 2014. (GX
606 (summary chart); GX 805 (stipulation); Tr. 4157:1-9.) Ms.
41
SPA-57
Oremland described restricted securities to the jury, explaining
that restricted shares were those usually issued by the company
that included restrictions on how long they had to be held
before they could be sold. (Tr. 4167:15-19.) She also
described the process of lifting the restriction on a stock to
make it "free trading." (Tr. 4168:9-13.) The government asked
Ms. Oremland about restrictions on stock arising under SEC Rule
144, and she explained that, pursuant to the rule, "affiliates
are limited in[] how many shares they can sell, even if they are
not restricted." (Tr. 4170:7-8.) She defined an affiliate
under Rule 144 as "someone who can exert a certain amount of
control over a company, either they are an officer or director
or they own a large amount of shares or they are controlled by
someone who is an affiliate." (Tr. 4170:1-4.)
Ms. Oremland prepared charts relating to the
distribution of free trading and restricted shares in Retrophin.
She testified that GX 701 showed the distribution of free
trading shares on December 17, 2012, and that in the aggregate,
the total free trading shares distributed to the Fearnow
shareholders was approximately 80% of the total free trading
shares. (GX 701; Tr. 4172:11-4173:9 (explaining that there were
8.3 million total outstanding shares, of which 2 million of the
2.5 million free trading shares were distributed to the Fearnow
group.) Another chart, GX 702, showed that Edmund Sullivan,
42
SPA-58
Claridge Capital, and Thomas Fernandez, did not trade Retrophin
shares during the period December 17, 2012 through February 28,
2013. (Tr. 4188:4-4189:12.)
Ms. Oremland also testified that Rule 13D of the
Securities Act of 1934 requires that, when one "either directly
or indirectly [owns] five percent or more of a company's stock,
you have to file a disclosure document called a schedule 13D, to
indicate how many shares you own." (Tr. 4171:13-17.) Among
other issues, she explained that Retrophin's December 20, 2012
Form 13D claimed that, prior to the merger, MSMB Healthcare held
Retrophin shares purchased with "working capital," which were
then converted into 473,274 post-merger shares. (GX 603
(December 20, 2012 13D); 4179:3-10.) This Form 13D also stated
that MSMB Capital held 75,000 pre-merger shares, "purchased with
working capital", which "converted into 375,000 shares of [post-
merger] common stock." (GX 603; 4179:18-24.) Ms. Oremland then
testified that a February 19, 2013 amendment to the Form 13D,
showed that MSMB Capital had no shares. (GX 605; Tr. 4183:4-5.)
Timothy Pierotti
Timothy Pierotti is a former employee of a fund known
as MSMB Consumer LP. Mr. Pierotti described his career in
finance, which included employment at the Galleon Group.
(Tr. 4207:1-4209:12.) Mr. Pierotti acknowledged that, while at
Galleon, he had traded using insider information. (Tr. 4209:13-
43
SPA-59
4210:6.) Mr. Pierotti testified that he had provided
information to prosecutors from the United States Attorney's
Office for the Southern District of New York regarding the
circumstances of his insider trade. (Tr. 4210:21-4211:8.) He
received a non-prosecution agreement from the Southern District
of New York, but ultimately did not testify in the case against
Galleon's founder, Raj Rajaratnam. (Tr. 4211:20-4212:9.)
Mr. Pierotti met Mr. Shkreli through a friend, and was
hired to be the consumer portfolio manager for what Mr. Pierotti
understood to be a suite of funds under the MSMB umbrella. (Tr.
4214:9-4215:9.) The hiring entity listed on Mr. Pierotti's
employment agreement, dated April 9, 2011, was MSMB Healthcare
LLC. (GX 120-1.) Mr. Pierotti recalled Mr. Shkreli saying that
the MSMB funds had $80 million in AUM, though he also recalled
Mr. Shkreli using a figure of $100 million. (Tr. 4215:12-15.)
Mr. Pierotti did not start actively trading for MSMB Consumer
until October 2011, and did not recall hearing about Retrophin
until approximately March or April of 2012. (Tr. 4223:15-19.)
Mr. Pierotti testified that MSMB Consumer had
approximately $4.5 million to invest, which, based on what Mr.
Shkreli represented, came from the MSMB Healthcare fund. (Tr.
4224:16-20.) Mr. Pierotti recalled the performance of MSMB
Consumer as being "approximately flat . . . with the market,u
but in the spring of 2012, Mr. Shkreli began pulling money out
44
SPA-60
of the fund. (Tr. 4225:11-17.) The MSMB Consumer fund pursued
a "single-stock strategy,u investing, with Mr. Shkreli's
approval, in a company called Rick's Cabaret. (Tr. 4229:1-11.)
During the summer of 2012, Mr. Shkreli asked Mr. Pierotti to
quickly sell the Rick's Cabaret position because Mr. Shkreli
"need[ed) the money.u (Tr. 4230:2-16.) After MSMB Consumer
stopped investing, in approximately July 2012, Mr. Shkreli
wanted Mr. Pierotti to "look for special projectsu in
healthcare. (Tr. 4232:3-6.) Mr. Pierotti, working with Mr.
Biestek, focused on a company called Garreco, which made dental
gypsum for dentures. (Tr. 4232:7-9.)
Mr. Pierotti was terminated from employment on
November 12, 2012. (See 120-7; 120-9 (severance and termination
agreements).) The termination documents reflected that Mr.
Pierotti was being terminated from Retrophin, but Mr. Pierotti
testified that he had "never worked for Retrophin,u though he
sometimes had received checks from Retrophin or Mr. Shkreli
directly. (Tr. 4241:1-4.) Mr. Pierotti explained that he had
never considered working for Retrophin because he was a
"consumer portfolio manager and Retrophin is [a] biotechu
company. (Tr. 4243:14-15.) After termination, Mr. Pierotti
pursued the Garreco transaction with Marek Biestek, and stated
that this effort was independent of either MSMB or Retrophin,
45
SPA-61
though Mr. Shkreli was a potential investor in the deal. (Tr.
4259:9-13.)
Mr. Pierotti described a December 2012 conversation
with Mr. Shkreli in which Mr. Shkreli offered him the
opportunity to be "part of the group that was buying shares in
Desert Gateway." (Tr. 4260:25-4261:1.) Mr. Pierotti
subsequently purchased 400,000 shares for $400.00 from Troy
Fearnow. (4263:8; 120-10 (Purchase agreement between Troy
Fearnow and Mr. Pierotti).) Mr. Pierotti recalled a conference
call with Michael Fearnow, in which the purchase of Desert
Gateway by Retrophin was discussed. The price was to be
$400,000, but Retrophin did not have sufficient funds, so the
participants on the call discussed adding Retrophin shares to
the price as part of the compensation. (Tr. 4275:13-16.) Mr.
Pierotti testified that although he purchased 400,000 shares
from Troy Fearnow, he actually received 350,000 shares. (Tr.
4275:19.) Mr. Shkreli explained that, for some of the Fearnow
shareholders, "some shares will be held back." (Tr. 4275:25-
4276:1.) Mr. Pierotti testified that each of the Fearnow
shareholders purchased up to 4.9 percent of Retrophin's shares,
because otherwise they would "have to make a filing every time
[they] made a transaction." (Tr. 4264:13-14 (explaining his
belief that exceeding a 5% shareholding threshold would make an
individual an "insider").)
46
SPA-62
Mr. Pierotti testified that following his purchase of
Fearnow's shares, "there were conversations and there were
discussions and there were comments by [Mr. Shkreli] that people
who have trading experience should trade the stock; buy it, sell
it, buy it, sell it.u (Tr. 4264:20-25.) He also testified
regarding an email from Michael Smith, Mr. Shkreli's assistant.
(GX 120-11; Tr. 4238:5-6 (describing Mr. Smith as Mr. Shkreli's
assistant) . ) In the email, Mr. Smith requested a summary of all
of the Retrophin stock holdings every morning from each of the
Fearnow shareholders. (GX 120-11.) The email references a
Scottrade account, and Mr. Pierotti testified Mr. Shkreli had
the idea of opening Scottrade accounts for the Retrophin stock
received in the Fearnow purchase agreements. (Tr. 4279:3-9.)
Mr. Pierotti also testified that he had received the email
identified as GX 120-12, which asked him to confirm, in writing,
that he was not an officer or director of Retrophin. (GX 120-
12.) Mr. Pierotti stated that he felt comfortable affirming
that he was neither an officer or director of Retrophin because
he was not working for Retrophin or Desert Gateway. (Tr.
4281:18-23.)
Mr. Shkreli stated that Mr. Pierotti would at some
point have to stop working out of the Retrophin offices, which
Mr. Pierotti was still occasionally visiting to work with
Mr. Biestek. (Tr. 4259:20-4260:4.) Following Mr. Pierotti's
47
SPA-63
purchase of the Fearnow shares, however, Mr. Shkreli told Mr.
Pierotti to work from the Retrophin offices. Mr. Pierotti
stated that he was concerned about becoming privy to non-public
information, and had no reason to be in the Retrophin office
because he was not employed by either the MSMB entities or
Retrophin. (Tr. 4285:15-24.) At Mr. Shkreli's direction, Mr.
Pierotti discussed his concerns about becoming exposed to non-
public information with Mr. Greebel, who advised Mr. Pierotti to
shut the door of his office; Mr. Pierotti was not satisfied with
that advice and continued not to go in to the Retrophin office.
(Tr. 4286:8-22.) Mr. Pierotti did not use the Scottrade account
that Mr. Shkreli had wanted him to use, but instead slowly sold
his 350,000 shares over time through a smaller company called
MLV & Co. (Tr. 4286:4-15.)
In a December 28, 2012 email, Mr. Shkreli asked to
meet Mr. Pierotti, but Mr. Pierotti declined and told Mr.
Shkreli that they could communicate through Mr. Biestek. (GX
120-16.) In response, Mr. Shkreli offered to buy Mr. Pierotti's
300,000 shares "for the same price you paid for them", and that
if Mr. Pierotti were to agree, "this nightmare will end for
everyone." (Id.) Mr. Pierotti also recalled a phone call from
Mr. Shkreli, involving "[a] lot of screaming and yelling" in
which Mr. Shkreli "demanded" that Mr. Pierotti sell back his
shares for $400. (Tr. 4288:11-4289:8.) On December 30, 2012,
48
SPA-64
Mr. Shkreli sent Mr. Pierotti and the other Fearnow recipients
an email with the subject line "OVER THE WALL: Retrophin
Marketing PIPE". (GX 120-17 (the "over the wall email").) Mr.
Pierotti explained that "[o]ver the wall means that you are
making yourself available to nonpublic, inside
information. . which would make it impossible for them to be
in the market transacting" in the shares. (Tr. 4290:20-25.)
In the December 30, 2012 email, Mr. Shkreli also
wrote:
I must admit . . . that I have been extremely stressed

about Retrophin. The declining stock price is
particularly alarming. Please consider . . . making
[your stock] unshortable - this is obviously in all
shareholders' best interest. As we are contemplating
these financings it is not a [sic] good for the stock
to be declining. Obviously, now that you are "over
the wall" you may not sell any stock until these
transactions are completed.
(GX 120-17.) Mr. Pierotti explained that broker-dealers
compensate shareholders for loaning out stock for the purpose of
permitting short trades, and that Mr. Shkreli's reference to
making shares "unshortable" was effectively a request that the
Fearnow shareholders agree to refuse to lend out shares for this
purpose. (Tr. 4291:16-20.) If the Fearnow shareholders refused
to lend out stock to short-sellers, it would "make[] it less
possible and more expensive for anybody to try to short
[Retrophin stock]_,, (Tr. 4291:21-22.)
49
SPA-65
Subsequently, on January 15, 2013, Mr. Shkreli sent a
letter to Mr. Pierotti's wife, Kristen, accusing Mr. Pierotti of
having stolen money. (GX 120-19.) The letter claimed that
"[w]e recently renegotiated Tim's association with our companies
which would provide him, in exchange for showing up to work
every day and applying his efforts to grow our collective
wealth, 400,000 shares of Retrophin" but that "Tim took the
stock and ran off." (Id.) Mr. Shkreli threatened to "sue both
you and your husband for fraud" and that "I hope to see you and
you four children homeless and will do whatever I can to assure
this." (Id.) Mr. Pierotti stated that "virtually nothing" in
the letter was true. (Tr. 4298:3-4.)
Mr. Pierotti ultimately reached an agreement with Mr.
Shkreli whereby Pierotti relinquished the remaining 50,000 held
in "escrow," in return for $165,000. 8 (Tr. 4304:5-23.)
Standard of Review
I. Ru1e 29 Motion for a Judgement of Acquitta1
"The Due Process Clause protects the accused against
conviction except upon proof beyond a reasonable doubt of every
fact necessary to constitute the crime with which he is
charged." United States v. Glenn, 312 F.3d 58, 64 (2d Cir.
8 Mr. Shkreli referred to the shares he withheld from the Fearnow

shareholders as "escrowed stock," but stated in an email with
Mr. Greebel that there was, in fact, no escrow agreement. (GX
268.)
50
SPA-66
2002) (citing In re Winship, 397 U.S. 358, 364 (1970)).
Consequently, a "mere modicum" of evidence is insufficient to
meet the Due Process requirement of proof of guilt beyond a
reasonable doubt. See Jackson v. Virginia, 443 U.S. 307, 320
(1979), superseded on other grounds by 28 U.S.C. § 2254(d).
In resolving Rule 29 motions, a court should "avoid
usurping the role of the jury." United States v. Guadagna, 183
F.3d 122, 129 (2d Cir. 1999). A court must "defer to the jury's
assessment of witness credibility and the jury's resolution of
conflicting testimony." United States v. Bala, 236 F.3d 87, 93-
94 (2d Cir. 2000). Moreover, a court cannot "substitute its own
determination of the weight of the evidence and the reasonable
inferences to be drawn for that of the jury." Guadagna, 183
F.3d at 129 (citation and quotation omitted). Therefore, the
jury's verdict will be upheld even when it is based entirely on
inferences from circumstantial evidence. Glenn, 312 F.3d at 64.
Furthermore, "the task of choosing among permissible competing
inferences is for the jury, not a reviewing court," United
States v. Salmonese, 352 F.3d 608, 618 (2d Cir. 2003) (citation
omitted), and "in assessing whether the government has met its
burden, [the court must] view pieces of evidence 'not in
isolation but in conjunction.'" United States v. Torres, 604
F.3d 58, 67 (2d Cir. 2010) (quoting United States v. Maldonado-
Rivera, 922 F.2d 934, 978 (2d Cir. 1990)). In addition, the
51
SPA-67
court "must draw all favorable inferences and resolve all issues
of credibility in favor of the prosecution." United States v.
Jespersen, 65 F.3d 993, 998 (2d Cir. 1995) (quoting United
States v. Khan, 787 F.2d 28, 34 (2d Cir. 1986)).
In order to grant a motion for a judgment of acquittal
pursuant to Rule 29, the court must find that "the evidence that
the defendant committed the crime alleged is nonexistent or so
meager that no reasonable jury could find guilt beyond a
reasonable doubt." Guadagna, 183 F.3d at 130 (internal
quotation marks and citations omitted); see also United States
v. Jackson, 335 F.3d 170, 180 (2d Cir. 2003) (district court may
grant Rule 29 motion for judgment of acquittal on grounds of
insufficient evidence only "if it concludes that no rational
trier of fact could have found the defendant guilty beyond a
reasonable doubt"). Accordingly, a conviction must be upheld
if, "after viewing the evidence in the light most favorable to
the prosecution, any rational trier of fact could have found the
essential elements of the crime beyond a reasonable doubt."
Jackson, 443 U.S. at 319. Consequently, "[a] defendant bears a
heavy burden in seeking to overturn a conviction on grounds that
the evidence was insufficient." United States v. Aleskerova,
300 F.3d 286, 292 (2d Cir. 2002) (citing United States v.
Samaria, 239 F.3d 228, 233 (2d Cir. 2001)).
52
SPA-68
II. Loss Amount
Mr. Shkreli has challenged the Probation Department's
calculation of loss in his Presentence Report ("PSR"). For
purposes of sentencing, the Base Offense Level calculation in a
fraud case is dependent in part on the loss resulting from the
fraud offense. "The district court's factual findings relating
to loss must be established by a preponderance of the evidence."
United States v. Finazzo, 682 F. App'x 6, 13 (2d Cir. 2017)
(quoting United States v. Uddin, 551 F.3d 176, 180 (2d Cir.
2009)). "A sentencing court is not required to compute the loss
resulting from a fraud offense with precision . Moreover,
because the district court occupies a unique position to assess
the evidence and estimate the loss based upon that evidence, the
court's loss determination is entitled to appropriate
deference." United States v. Kumar, 617 F.3d 612, 632 (2d Cir.
2010) (internal quotation marks omitted and citing, inter alia,
United States v. Jacobs, 117 F.3d 82, 95 (2d Cir.1997)).
Subject to exclusions not relevant here, "loss is the
greater of actual loss or intended loss." U.S.S.G. § 2B1.1
comment n.3(A). "'Actual loss' means the reasonably foreseeable
pecuniary harm that resulted from the offense," whereas
"'[i]ntended loss' means [] the pecuniary harm that the
defendant sought to inflict," including "intended pecuniary harm
that would have been impossible or unlikely to occur." Id.
53
SPA-69
"The court need only make a reasonable estimate of the loss."
Id. at n.3(C). The Sentencing Guidelines application notes
suggest several possible factors for the court's consideration
in determining loss, such as "[t]he approximate number of
victims multiplied by the average loss to each victim" or "the
reduction that resulted from the offense in the value of equity
securities . II
Id.
The Second Circuit repeatedly has held that "loss in
fraud cases includes the amount of property taken, even if all
or part has been returned." United States v. Lyttle, 460 F.
App'x 3, 10 (2d Cir. 2012) (quoting United States v. Coriaty 300
F.3d 244, 251 (2d Cir. 2002); see United States v. Komar, 529 F.
App'x 28, 29 (2d Cir. 2013) (Rejecting the defendant's argument
that the value of his fraud victim's equity in his partnership
should be subtracted from the loss amount, and holding that
"[t]he 'loss' was the money that the investors were fraudulently
induced to invest . irrespective of the value of the
[property].").
The Sentencing Guidelines provide for specific
"Credits Against Loss," whereby loss calculations may be reduced
by, inter alia, "[t]he money returned. . by the defendant to
the victim before the offense was detected." U.S.S.G. § 2B1.1,
comment n.3(E). The Guidelines define "time of detection" for
purposes of credit against loss as "the earlier of (I) the time
54
SPA-70
the offense was discovered by a victim or government agency; or
(II) the time the defendant knew or reasonably should have known
that the offense was detected or about to be detected by a
victim or government agency.u 9 Id.
Discussion
I. The Sufficiency of the Evidence on Counts Three and Six
The court heard oral argument on defendant's Rule 29
motion on July 26, 2017 and February 23, 2018. At the July 26,
2017 Rule 29 hearing, the defense argued, with regard to Counts
One through Six, that "the specific statements and the specific
omissions that the Government is alleging . . are . . . not
material. And . . . not things that a reasonable investor would
rely on and, in fact, not things that the individual investors
who ended up investing, in fact, relied on.u (Tr. 5046:7-13;
see id. at 5042:25-5043:4 (making a similar argument with a
particular reference to Counts One through Three); 5045:12-
5046:13 (arguing that MSMB investors did not rely on
representations made in the Private Placement Memorandums, but
instead invested due to their own experience investing with Mr.
9 The Sentencing Guidelines also provide that, "[i]n a case

involving a fraudulent investment scheme . . . loss shall not
be reduced by the money or the value of the property
transferred to any individual investor in the scheme in excess
of that investor's principal investment (i.e., the gain to an
individual investor in the scheme shall not be used to offset
the loss to another individual investor in the scheme). Id. at
n.3 (F).
55
SPA-71
Shkreli or because of Mr. Shkreli's reputation.)) Defense
counsel acknowledged, however, that there was sufficient
evidence on these counts to send them to the jury. (Tr.
5050:22-25 ("with Counts 1 through 6, I fully expect that - that
given the burden that we have and the light most favorable to
the Government, Your Honor's going to let those counts go to the
jury").)
In its charges, the court explained that for the jury
to find Mr. Shkreli guilty of Securities Fraud as charged in
Counts Three and Six, the government would have to prove, beyond
a reasonable doubt, that: Mr. Shkreli (i) employed a device,
scheme, or artifice to defraud or made an untrue statement of a
material fact; (ii) omitted to state a material fact necessary
in order to make the statements made in the light of the
circumstances under which they were made not misleading; or
(iii) engaged in an act, practice or course of business that
operated or would operate as a fraud or deceit upon a purchaser
or seller of any security. (Tr. 5551:2-15.) The court also
instructed the jury that the government had to prove, beyond a
reasonable doubt, that Mr. Shkreli acted knowingly, willfully,
and with the intent to defraud, and that he used an
instrumentality of interstate commerce. (Tr. 5555:5-9; 5558:5-
14.) Consistent with Second Circuit precedent, see United
States v. Rommy, 506 F.3d 108, 119 (2d Cir. 2007), the court
56
SPA-72
instructed the jury that the government had to prove venue for
Counts Three and Six by a preponderance of the evidence. (Tr.
5560:5-24.}
Neither party has discussed Counts Three and Six in
their briefing for the instant motion. Nonetheless, the court
has undertaken a comprehensive review of the record and
concludes that the evidence is more than sufficient to support
the jury's guilty verdicts on Counts Three, Six and Eight.
A. Count Three
With regard to the conduct at issue in Count Three, a
substantive count of Securities Fraud charged as part of the
"MSMB Capital Scheme," the government argued that Mr. Shkreli
not only lied in the course of soliciting investors to join MSMB
Capital, but also continued to make material misrepresentations
and omissions to investors after they had invested in order to
prevent the redemptions of their MSMB Capital investments.
(E.g. Tr. 5164:7-25 (describing the performance reports Mr.
Shkreli provided to Ms. Hassan as a "lie"}.} The government
argued that the trial evidence established that Mr. Shkreli made
material misrepresentations relating to his educational
background, 10 the names of his investors, his successful
10 The government argued that Mr. Shkreli told prospective

investors what he thought they might wish to hear with regard
to his educational background. (Tr. 5198:14-5199:5.) Mr.
Shkreli told Mr. Blanton and Mr. Neill, among others, that he
57
SPA-73
experience in the financial sector, and the size and performance
of the MSMB Capital fund, and that he lied about the fund's use
of a third-party auditor, accountant, law firm, and
administrator. 11 For the purposes of the instant motion, the
court will focus on the evidence concerning misrepresentations
of MSMB Capital's size (as measured by its AUM) and performance.
1. Fund Size
The evidence at trial, including investor testimony,
bank records, and emails, established that Mr. Shkreli
repeatedly represented to prospective investors that MSMB
had attended Columbia. (Tr. 1583: 8-9 (Mr. Blanton's

testimony); Tr. 3992:4-8 (Mr. Neill's testimony that he
"thought [Mr. Shkreli] graduated Columbia at 16") .) Mr.
Richardson, who had not completed college for financial
reasons, recalls that Mr. Shkreli stated that he also had not
completed college. (Tr. 2784:1-8.) In fact, Mr. Shkreli
attended Baruch College, and the government elicited testimony
from Barry Kane, Columbia University's Associate Vice President
and University Registrar, that Mr. Shkreli had never "enrolled
in or graduated from any school affiliated with Columbia
University." (Tr. 4451:20-24 (testimony of Mr. Kane); GX 903
(testimony from an arbitration between Mr. Shkreli and Merrill
Lynch, in which Mr. Shkreli states that he attended "CUNY
Baruch") . )
11 Mr. Shkreli represented to various MSMB Capital investors that
the fund received auditing services from Rothstein, Kass & Co.,
administration services from NAV Consulting, Inc., and legal
services from Cobb & Assocs. (E.g., GX-lB (Dr. Rosenwald's
PPM); GX 5 (Ms. Hassan's PPM); GX 105-3 (email from Mr. Shkreli
to Mr. Blanton stating that the fund's administrator was NAV
Consulting and the auditor was Rothstein, Kass & Co.).) The
defendant stipulated that none of these organizations provided
services to MSMB Capital. (GX 80 6 ( Stipulation regarding NAV
Consulting, Inc.); GX 807 (Stipulation regarding Cobb &
Assocs.); GX 809 (Stipulation regarding Rothstein, Kass &
Co.).)
58
SPA-74
Capital's AUM was in the tens of millions of dollars. (E.g. Tr.
921:10-24. (testimony of Sarah Hassan); Tr. 1499:9-11
(testimony of Steven Stitch); GX 103-38 (email between Mr.
Shkreli and Ms. Hassan); GX 105-3 (email from Mr. Shkreli to Mr.
Blanton claiming a $35 million AUM) .) The fund, however, never
had more than approximately $1.13 million at one time, and only
approximately $3.04 million in total investments. (GX 520 (bank
records); Tr. 4776:17-4777:4 (testimony of case agent).)
Multiple investors testified that fund size was an
important consideration for their investment decision. For
example, Ms. Hassan explained that if a fund was "too small" it
was difficult for it to get "movement or momentum", whereas if
it were "too big" it was difficult to achieve "solid returns."
(Tr. 947:12-15.) Mr. Blanton testified that a significant AUM
was "a sign that other investors have done due diligence and
that they have committed money to the fund," and also that it
ensured that the fund could pay staff appropriately and maintain
operations. (Tr. 1568: 3-17; 1568: 23-1569: 5.) From this
testimony, the jurors could reasonably have determined that Mr.
Shkreli's statements about AUM would have been material to a
reasonable investor.
Mr. Shkreli's counsel argued that specific investors
did not in fact rely on Mr. Shkreli's representations regarding
fund size in making their investment decision. (E.g., Tr.
59
SPA-75
5343:20-5344:1 ("Martin Shkreli didn't fool Sarah
Hassan . . Brent Saunders told her Martin Shkreli is making me
rich, go with him[,] and she did. There was nothing Martin
Shkreli said to her that made her want to invest."); Tr. 5382:1-
5 ("[Shuyler Marshall's] not relying on what Martin Shkreli said
in the [PPM]. He's relying on what Martin Shkreli is telling
him about stock tips; what Blanton is telling him. . ") . ) The
jury had sufficient evidence to the contrary to reject this
defense argument. As a threshold issue, in a criminal
securities fraud case, the test for materiality is objective -
whether or not there is "a substantial likelihood that a
reasonable investor would find the omission or misrepresentation
important in making an investment decision, and not actual
reliance." United States v. Vilar, 729 F.3d 62, 89 (2d Cir.
2013). Thus, whether or not a specific investor did or did not
rely on a specific representation made by Mr. Shkreli is not
dispositive of whether that representation was material to a
reasonable investor. Furthermore, the jury was entitled to
credit the testimony of those investors who in some cases
specifically sought information regarding the fund's AUM and who
testified that they relied on Mr. Shkreli's representations.
(E.g., GX 105-3 (Mr. Blanton's email, sent prior to investing,
requesting information on the fund's AUM) .) See Bala, 236 F.3d
at 93-94 (the court must "defer to the jury's assessment of
60
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witness credibility and the jury's resolution of conflicting
testimony").
2. Fund Performance
The government's evidence also showed that Mr. Shkreli
had in fact lost almost all of the fund's capital in a series of
trades on February 1, 2011, when he bet against the stock of
Orexigen Therapeutics. Notwithstanding this sequence of losing
trades - referred to as "the OREX trade" at trial - Mr. Shkreli
continued to provide his investors with performance reports
reflecting positive returns.
Mr. Shkreli's counsel argued in his summation that Mr.
Shkreli's representations about the performance of the MSMB fund
were not fraudulent, because they reflected MSMB Capital's
interest in Retrophin. (Tr. 5429:1-3 ("MSMB got Retrophin
shares and they were Martin's shares and they had a right to be
part of the valuation .") .) There was ample evidence at
trial that, even assuming that a jury could find that MSMB
Capital had a financial interest in Retrophin, such interest did
not, and could not, explain Mr. Shkreli's claims about MSMB
Capital's AUM or performance. Even assuming that Mr. Shkreli
gifted shares in Retrophin to MSMB Capital on July 1, 2012, 1: the
1: The nature of MSMB Capital's interest in Retrophin was also at

issue in Count Seven, on which the jury acquitted Mr. Shkreli.
The government argued that in November 2012, faced with an SEC
inquiry prompted by Mr. Blanton's SEC complaint, Mr. Shkreli
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fund had essentially no assets between the date of the OREX
trade through June 2012. Nevertheless, the performance
statements Mr. Shkreli sent to MSMB Capital investors during
this period showed positive returns. (See GX 704 (summary chart
comparing MSMB Capital performance reports from February, March,
and November 2011 to the fund's actual bank balances).)
B. Count Six
Count Six charged Securities Fraud in relation to MSMB
Healthcare. The government's theory and evidence on Count Six
was similar to its theory on Count Three: that Mr. Shkreli had
secured investment in the fund through material
misrepresentations, and then lied to investors about positive
needed to "fabricateu an MSMB interest in Retrophin to justify

his claims to the SEC about MSMB Capital's assets. (5255:16-
20.) In December 2012, Mr. Shkreli caused several individuals,
including Mr. Biestek, to transfer him their Retrophin shares
in return for an opportunity to purchase the Fearnow shares,
and then backdated those transfers to the summer of 2012. (GX
119-25.) The government alleged that Mr. Shkreli then
transferred those shares to MSMB Capital, also pursuant to an
agreement backdated to July 1, 2012. (Id.) The government
supported its arguments concerning backdating with a variety of
evidence, including Retrophin capitalization tables that did
not list MSMB Capital as a shareholder until December 2012, and
email exchanges showing that the share transfer was actually
initiated in November 2012. (GX 213-214 (July and September
2012 capitalization tables that do not list MSMB Capital as an
investor); GX 221, 223-224 (emails in November 2012 regarding
initiation of transfers to Mr. Shkreli, including a November
30, 2012 email in which Mr. Shkreli offers Mr. Fernandez the
opportunity to purchase shares from Troy Fearnow in exchange
for surrendering all of his Retrophin shares to Mr. Shkreli);
GX 225 (December 2012 capitalization table listing MSMB Capital
as a shareholder).)
62
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returns in order to ensure that they did not seek to redeem
their funds. (Tr. 5208:15-18.) The primary difference between
MSMB Capital and MSMB Healthcare was that it is uncontested that
MSMB Healthcare had a financial interest in Retrophin. (Tr.
5209: 22-24 (government acknowledging "MSMB Healthcare did in
fact invest in Retrophin") .) The government's theory was that
unbeknownst to its investors, MSMB Healthcare was primarily used
to "funnel" money to Retrophin despite Mr. Shkreli's claims that
it would be a diversified, balanced hedge fund. (Tr. 5213:7-
22.)
As with MSMB Capital, the government's evidence
regarding the charged fraud concerning MSMB Healthcare was
sufficient for a jury to find that the government proved, beyond
a reasonable doubt, that Mr. Shkreli made material
misrepresentations and omissions concerning the valuation and
investments of MSMB Healthcare in order to secure investor funds
for MSMB Healthcare. For example, Mr. Pierotti testified that
Mr. Shkreli claimed that the "MSMB funds" had between $80
million and $100 million. (Tr. 4215:12-15.) In December 2011,
a prospective investor contacted Mr. Mulleady requesting, among
other things, the AUMs of MSMB's "consumer and health funds" to
"see if they fit in with what we are looking at in the sector
specific space." (GX 211.) Mr. Mulleady asked Mr. Shkreli for
the "AUM of healthcare"; Mr. Shkreli responded that it was "45",
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or "80 . . . if you count full value of Retrophin which I
sometimes do." (Id.)
The evidence also supports the jury's conclusion that
Mr. Shkreli did not manage MSMB Healthcare for the benefit of
investors, but instead used it to fund his own personal or
unrelated professional debts and to support the development of
Retrophin. For example, although Darren Blanton had invested in
MSMB Capital, Mr. Shkreli used $200,000 from MSMB Healthcare to
partially satisfy Mr. Blanton's demands for redemption. (GX
503-C (showing $200,000 payment from MSMB Healthcare to Colt
Ventures, Mr. Blanton's investing vehicle).) After March 2012,
MSMB Healthcare did not make the diversified investments as
represented in the PPMs, but instead funneled money into
Retrophin. (GX 521 (bank accounts showing funding flows); 521A
(summary chart showing a generally declining or flat bank
balance after March 2012) .)
Of particular note is the sequence of transactions
following MSMB Healthcare's investment of $900,000 into
Retrophin on February 1, 2012, following Mr. Lavell's investment
of $850,000 into MSMB Healthcare. 13 (GX 126-5; 505-E at 26-27.)
This transaction resulted in MSMB Healthcare owning $900,000
13 The MSMB Healthcare bank account records track Mr. Lavelle's

investment and the $900,000 transfer to Retrophin by the
transaction's "clear date", which in both cases was February 3,
2012.
64
SPA-80
worth of equity units in Retrophin, as reflected on
capitalization tables in the subsequent months. (E.g. GX 213,
GX 214 (capitalization tables from July and September 2012
recording a $900,000 February 1, 2012 investment by MSMB
Healthcare for 22,500 shares of preferred units).) In November,
however, Mr. Massella's associate, Ms. Chew, noticed that
Retrophin's files listed two $900,000 transactions for February
1, 2012 between Retrophin and MSMB Healthcare: the MSMB
Healthcare equity investment, resulting in 22,500 Retrophin
preferred units, and a promissory note by Retrophin to MSMB
Healthcare. (GX 119-14.) The bank accounts, however, listed
only one $900,000 transfer. (Tr. 3902:3-3905:1.) On December
3, 2012, Mr. Shkreli sent Mr. Su a capitalization table that
effectively cancelled MSMB Healthcare's $900,000 investment for
22,500 Retrophin shares. (GX 119-24 (showing the $900,000
investment followed by a line indicating that the same amount
should be subtracted from the table); Tr. 2206:3-4 (testimony of
Mr. Su).) Effectively, Mr. Shkreli retroactively transformed
the $900,000 equity investment by MSMB Healthcare into a loan
from MSMB Healthcare to Retrophin, which Retrophin would need to
repay.
MSMB Healthcare never received the benefit of its
$900,000 investment in, or an equivalent loan to, Retrophin.
Over five transactions in January to early March of 2013, Mr.
65
SPA-81
Shkreli caused Retrophin to pay approximately $1 million to MSMB
Healthcare, but then transferred $900,000 from MSMB Healthcare
to Merrill Lynch. (Tr. 506-E at 13-16.) Through this sequence
of transactions, Mr. Shkreli used a significant portion of MSMB
Healthcare's investment funds to satisfy debts owed as a result
of his failed OREX trade with MSMB Capital.
David Geller's testimony, and the investment documents
and performance reports Mr. Shkreli sent Mr. Geller, demonstrate
that Mr. Shkreli misstated the nature of MSMB Healthcare's
holdings. 14 As Mr. Geller explained, his prior investing
experience made him wary of illiquid investments, and Mr.
Shkreli's representations regarding the purportedly liquid and
balanced nature of the fund and 30-day redemption notice
appealed to his investing goals. (Tr. 3094:10-3095:23; 3097:2-
3098:22.) In October 2011, MSMB Healthcare issued a revised PPM
warning that the composition of the fund could change to include
more illiquid investments, prompting Mr. Geller's initial
request to redeem his funds. Mr. Shkreli dissuaded Mr. Geller
14 Inrelation to MSMB Healthcare, the government also called

Richard Kocher, a construction executive who invested in MSMB
Healthcare on the advice of Kevin Mulleady. Because Mr. Kocher
mostly interacted and communicated with Mr. Mulleady, not Mr.
Shkreli, the court does not generally rely on Mr. Kocher's
evidence in evaluating the sufficiency of the evidence against
Mr. Shkreli on this count. Importantly, however, Mr. Kocher's
testimony about what he was told by Mr. Mulleady is consistent
with Mr. Geller's testimony about what he was told by Mr.
Shkreli.
66
SPA-82
from doing so, by reassuring Mr. Geller in approximately January
2012 that "the private securities would be a very small
part of the portfolio." (Tr. 3291:16-20.) Despite Mr.
Shkreli's reassurance, as MSMB Healthcare's transaction records
show, the fund did little else after March 2012 than invest in
Retrophin, an illiquid, high-risk startup. (See GX 505, 506.)
Based on the evidence at trial, the jury could
reasonably conclude that Mr. Shkreli made intentional, material
misstatements and omissions regarding the assets, performance,
and investment strategy of MSMB Healthcare.
II. The Sufficiency of the Evidence on Count Eight
Count Eight charged a conspiracy to commit securities
fraud in relation to Retrophin. The government argued that Mr.
Shkreli conspired with Mr. Greebel and Mr. Biestek, along with
others, to "control the price and trading volume of Retrophin
stock. . by concealing Mr. Shkreli's ownership of the Fearnow
shares and his control of them." (Tr. 5296:25-5297:4.) The
court instructed the jury on the law of securities fraud
conspiracy. (Tr. 5568:6-5569:9.)
In his motion, Mr. Shkreli attacks the sufficiency of
the government's evidence, arguing that the evidence did not
establish an illegal agreement to control the price and trading
of Retrophin stock. Mr. Shkreli focused in particular on Mr.
Pierotti's testimony, which he argues was insufficient to
67
SPA-83
support a conviction on a conspiracy count, and on the
government's use of the word "affiliate" in its summation. (See
Def. Mem.) The court respectfully disagrees. There is ample
evidence in the record to support Mr. Shkreli's conviction on
Count Eight.
A. The Fearnow Shares
At trial, the government used the term "Fearnow
shares" to refer to Troy Fearnow's sale of 2.5 million free-
trading shares in the Desert Gateway shell company. Troy
Fearnow sold the shares, for a nominal amount, to the seven
individuals and entities chosen by Mr. Shkreli and Mr. Greebel.
Mr. Su identified the Fearnow share recipients as follows: Kevin
Mulleady, Thomas Fernandez, Marek Biestek, Timothy Pierotti,
Claridge Capital, Andrew Vaino, and Edmund Sullivan. (GX 701.)
The government argued that Mr. Shkreli conspired with Mr.
Greebel to hand-pick these Fearnow shareholders, and then sought
to exert control over their shares. The evidence at trial
supported the government's arguments and the jury's verdict.
1. Choosing the Fearnow Shareholders
On November 22, 2012, weeks before the reverse merger,
Mr. Greebel asked Mr. Shkreli if there was "any reason other
than the 2.5m that you want this shell? A new 'clean' shell
will definitely be cheaper ive told you I have some
capitalization concerns." (GX 220; see Gov. Opp. at 8-9.) Mr.
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SPA-84
Shkreli responded that "[t]he 2.5m help a lot(.]" (Id.) Based
on Ms. Oremland's testimony regarding the distribution of free-
trading and restricted shares, it is evident that the "2.5m"
referenced in this email thread is the 2.5 million free-trading
Fearnow shares. (Tr. 4172:11-4173:9) Mr. Shkreli was making
clear that one reason for choosing and paying for Desert Gateway
- despite the fact that, as Mr. Greebel wrote, there were
"cheaper" shell companies available - was because he would have
access to free-trading shares. 15
There is sufficient evidence for the jury to have
found that, after being advised of Mr. Shkreli's purpose in
acquiring the Desert Gateway shell, Mr. Greebel conspired with
Mr. Shkreli and others to distribute and to control the Fearnow
shares. The Fearnow share purchases were ostensibly independent
of Retrophin, which was not a party to the purchase agreements
between Fearnow and the seven designated purchasers. (See GX
234 (email attaching executed purchase agreements).)
Nevertheless, Mr. Greebel - Retrophin's outside counsel -
15 The Fearnow shares originated from a suit between Troy Fearnow

and Desert Gateway, in which Troy Fearnow had received shares
of Desert Gateway "pursuant to the conversion of a promissory
note." (See GX 125-4 (attaching legal opinion describing
origin of the Fearnow shares).) In a December 7, 2012 email,
Mr. Greebel explained his plan: Troy Fearnow was to convert
the note into 2.5 million free trading Desert Gateway shares
which would be sold to "certain buyers" - the Fearnow
shareholders - prior to the closing of the reverse merger. (GX
228.)
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facilitated the purchase of the Fearnow shares. (E.g. id.
(requesting that the transfer agent "send all stock
certificates" for the Fearnow shareholders to Mr. Greebel) .) In
reference to the Fearnow stock and prospective Fearnow
shareholders, Mr. Greebel explained to Mr. Shkreli that "[u]nder
the securities laws, stockholders can act by written consent (ie
not have a meeting) as long as no more than 6 stockholders
represent 50% of the outstanding equity. I want to confirm that
the numbers work so that you +5 = at least 50% (ie a
majority) [.]" (GX 229.) In the same email, Mr. Shkreli also
confirmed to Mr. Greebel that each Fearnow shareholder would
purchase just under five percent of the company's shares. (id;
see Tr. 4264:13-14 (Mr. Pierotti's testimony that each Fearnow
shareholder received just under 5% of the shares so they did not
have to "make a filing" when they transacted).) As Ms. Oremland
explained, shareholders of over five percent of a company's
shares are subject to Rule 13D's disclosure requirements. (Tr.
4171:13-17 (Ms. Oremland's testimony that concerning disclosure
requirements for shareholders who hold over five percent of the
shares in a company)).
Mr. Shkreli then purportedly terminated the employment
of all of the Fearnow shareholders by email on December 17,
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2012. 16 (GX 242.) Mr. Greebel directed each Fearnow shareholder
to confirm that among other things, they were not an "officer, a
director, or holder of 10% or more of the outstanding equity
securities of Desert Gateway and do not, alone or together with
any other person, exercise control over Desert Gateway". (GX
236 (emphasis added).) These facts, combined with the nominal
prices paid for the free trading Fearnow shares by the select
group, and Mr. Greebel's involvement in receiving and
distributing the share certificates, show that Mr. Greebel, Mr.
Shkreli and others acted in concert to distribute 80% of the
free-trading shares in the company to select recipients, and
then took steps to conceal the relationship between the Fearnow
shareholders, Retrophin, and Mr. Shkreli.
2. Control of the Fearnow Shares
The evidence established that, after distributing the
Fearnow shares, Mr. Shkreli, Mr. Greebel and others conspired to
16 The government showed that at least some of the Fearnow

shareholders who received Mr. Shkreli's termination email were
not, in fact, terminated from Retrophin. Thomas Fernandez was
employed at Retrophin both before and after this email was
sent. (See e.g. Tr. 3308:17-3309:5 (Mr. Aselage describing Mr.
Fernandez as "vice president of investor and corporate
communications of Retrophin", and stating that, in September of
2012, Mr. Fernandez was "making the transition from MSMB to
Retrophin" and remained at Retrophin until "late [2015]") .)
Similarly, Mr. Massella testified that Ron Tilles, and then Mr.
Biestek, became Citrin Cooperman's "point person" at Retrophin
after Mr. Su left Retrophin in late December 2012. (Tr.
3909:22-25 (Mr. Massella's testimony); Tr. 2243:15-16 (Mr. Su's
testimony that he left MSMB Capital in "December 2012,
approximately a week prior to the holidays 11 ) . )
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control trading in the shares. First, in the course of
arranging the distribution of Fearnow shares purchased by the
select group, Mr. Shkreli decided to hold back between 50,000
and 100,000 of each individual's shares. 17 Pursuant to the
Fearnow purchase agreements, all of these shares should have
been the property of the respective purchasers, but as discussed
below Mr. Shkreli and Mr. Greebel later used these shares to
satisfy investors in the MSMB entities.
Second, after Mr. Shkreli became concerned that Mr.
Pierotti was selling the Fearnow shares, he began to take
actions intended to prevent Mr. Pierotti and the other Fearnow
shareholders from trading, including sending the Fearnow
shareholders the "over the wall" email to restrict their ability
to trade or sell their Fearnow shares. 18 (GX 245 (email on
17 On December 11, 2012, Mr. Mulleady, Mr. Fernandez, Mr.

Pierotti, and Mr. Tilles's Claridge Capital each purchased
400,000 shares; Mr. Biestek purchased 350,000 shares, Mr. Vaino
purchased 300,000 shares, and Mr. Sullivan purchased 150,000
shares. (GX 234. (see attachments).) On December 13, 2012,
Mr. Greebel sent Mr. Shkreli an email listing this
distribution. (GX 233.) Mr. Shkreli responded with an email
revising the number of shares listed for each purchaser - for
example, showing that Mr. Pierotti should receive only 350,000
shares. (Id.) Mr. Greebel then sent an email to request that
the transfer agent issue the Fearnow share certificates in the
amounts actually purchased, but asked that the certificates be
sent directly to Mr. Greebel's office. (GX 234.) Mr. Pierotti
confirmed that he only received 350,000 shares, and eventually
settled with Mr. Shkreli for the outstanding 50,000 that were
part of his purchase agreement. (Tr. 4304:5-23; Tr. 4275:19.)
18 The email discussion between Mr. Shkreli and Mr. Greebel
reveals that the goal of the "over the wall" email was to stop
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SPA-88
December 28, 2012 in which Mr. Shkreli tells Mr. Greebel that he
thinks Mr. Pierotti is "selling"); see GX 248 (December 30, 2012
email between Mr. Shkreli and Mr. Greebel discussing Mr.
Shkreli's plan to send the "over the wall" email and Mr.
Shkreli's theory that the subject line of the email was "enough
to put everyone [over the wall]").) This email included a
request that the Fearnow shareholders make their shares
"unshortable," which, as Mr. Pierotti explained, would "make[]
it less possible and more expensive for anybody to try to short
[Retrophin stock]." (Tr. 4291: 21-22 (discussing GX 120-17) .)
Consistent with the government's theory of Mr.
Shkreli's control, certain Fearnow shareholders - Edmund
Sullivan, Ron Tilles's Claridge Capital, and Thomas Fernandez -
did not trade their shares, constraining the supply of available
free trading shares and ensuring that the shares remained in
control of Retrophin insiders. (Tr. 4188:4-4189:12 (Ms.
Oremland's testimony.) Mr. Shkreli did not disclose his control
and attempts to control the Fearnow shares to the marketplace.
For example, he did not list any of the Fearnow shares on the
Form 13D filed with the SEC. (GX 603 (December 20, 2012 Form
130); GX 604 (February 19, 2012 amended Form 130) .)
Mr. Pierotti and others from selling by forcing them "over the
wall." (See GX 248.) Mr. Greebel provided Mr. Shkreli
feedback on the email, commenting that it was an "[i]nteresting
idea," and asking what would happen if Mr. Pierotti did not
read the email. (Id.)
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Mr. Shkreli's intent to control the Fearnow shares is
further exemplified by his email discussions with Mr. Greebel in
the months that followed the December 2012 reverse merger.
Their emails in March 2013 reveal that they were focused on
using some of the Fearnow shares to compensate MSMB investors,
but were concerned about "a Pierotti problem" - that is, a
Fearnow recipient not doing what he was told to do with the
shares. (GX 271.) Mr. Shkreli described a "plan" to "[g]et as
many people to forgo their holdings as possible", transfer some
of those shares through Troy Fearnow to Lindsay Rosenwald and
Sarah Hassan, and "others if necessary," and then "transfer the
rest" to Mr. Shkreli. (GX 268 (emails of March 7, 2013) .) Mr.
Greebel responded "[t]he plan works" but described his concern
that Mr. Fearnow could "screw the back-end people." (Id.) Mr.
Shkreli then made his intent even more explicit, writing "I
don't care how you protect me on the fearnow thing just make
sure that after they agree to give up their 'escrowed stock'
(despite there being now [sic] escrow agreement), that we can
still access the fearnow stock." (Id.) On March 8, 2013, Mr.
Greebel proposed to have the Fearnow shareholders amend their
purchase agreements to direct that the stock be delivered to
specific MSMB investors. (GX 271.) Mr. Shkreli responded that
"what I would prefer is that the marek et al group would just
reassign their stock to fearnow and he would then assign/sell it
74
SPA-90
to the partiesn, explaining that he thought this was "bestn as
"its anonymous and the 5 people doing it don't know exactly
where its going"; Mr. Greebel replied "[y]our idea may work,
although there may be a tax issue for troy [Fearnow.]" 19 (Id.)
B. The Testimony of Timothy Pierotti
Mr. Pierotti's testimony supplements the foregoing
evidence of Mr. Shkreli's attempts to control the Fearnow
shares. Mr. Pierotti explained that Mr. Shkreli sought to track
the Fearnow shareholders' trading by directing the opening of
and monitoring of their Scottrade accounts. (Tr. 4279:3-9; GX
120-11 (email from Mr. Shkreli's assistant regarding daily
reporting of Scottrade balances); see GX 237 (email from Mr.
Biestek to Mr. Greebel, requesting "some sort of supporting
letter each of us could provide to Scottrade to ease the deposit
of the certificatesn) .) Mr. Pierotti also testified in detail
as to Mr. Shkreli's attempts to cause Mr. Pierotti to sell his
shares to Mr. Shkreli. (E.g., GX 120-16 (Mr. Shkreli's email
stating, "I would like to buy the 300,000 shares from youn); GX
19 Mr. Shkreli argues in his motion that, to the extent Fearnow

shareholders transferred some of their holdings to satisfy MSMB
investor settlements, they did so because, as investors in and
employees of Retrophin, they had an interest in helping settle
potential litigation against the company. (Def. Mem. at 21.)
The email conversations from March 2013 show, however, that it
was Mr. Shkreli and Mr. Greebel who arranged the distribution
of Fearnow shares as compensation to disgruntled MSMB
investors, and that Mr. Shkreli specifically expressed his
intention to avoid letting the Fearnow shareholders know how
their shares would be redistributed. (See, e.g., GX 271, 272.)
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SPA-91
120-19 (a letter Mr. Shkreli sent to Mr. Pierotti's wife
claiming both that Mr. Pierotti had "stolen 1.6 million from my
organization" and that he had "stolen $1.6 million from me," and
threatening "legal action to get it back"); Tr. 4289:7-8
(describing a phone conversation in which Mr. Shkreli "demanded
that I sell the shares to him")).
The defense attacks Mr. Pierotti's credibility by
arguing that Mr. Shkreli arranged for Mr. Pierotti to receive
Fearnow shares as compensation for pursuing the Garreco
transaction under the "Retrophin umbrella." (Def. Mern. at 20.)
Not only is the jury to resolve conflicting views of the
evidence, the court finds that the jury had sufficient evidence
to conclude otherwise. First, Mr. Pierotti purchased the shares
from Troy Fearnow in a nominally arms-length transaction,
without any monetary contribution from Retrophin and without any
indication that the opportunity to purchase Fearnow shares was
intended as a form of compensation. (GX 234 (attaching Mr.
Pierotti's purchase agreement).) Second, further undermining
Mr. Shkreli's claim that Mr. Pierotti's Fearnow shares were
unearned corporate compensation, Mr. Shkreli asked Mr. Pierotti
to sell the shares to Mr. Shkreli personally, not to return the
shares to Retrophin. (GX 120-16; Tr. 4288:11-4289:8.) Third,
Mr. Pierotti's testimony that he was not affiliated in any way
with Retrophin by late December 2012 is corroborated by his
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SPA-92
separation paperwork, executed in November 2012, and Mr.
Shkreli's own purported termination of all of the Fearnow
shareholders from Retrophin on December 17, 2012. (Tr. 4281:18-
20; GX 120-7 (email regarding severance checks, sent on October
25, 2012); 120-9 (severance and termination agreement); GX 242
(termination email).)
Far from exculpating Mr. Shkreli, the record evidence
discussed above was sufficient for the jury to find that the
Fearnow shares were not a form of compensation, and that Mr.
Shkreli's claims to the contrary were pretextual and part of his
plan with Mr. Greebel to gain control over the shares.
C. The Advice of Counsel Defense
Mr. Shkreli argues that his correspondence with Mr.
Greebel reveals only that he relied on "advice of counsel" and
does not provide evidence of criminal agreement. (Def. Mem. at
12.) The jury was instructed on the advice of counsel defense
(Tr. 5597:17-5598:21), and rejected that defense in finding Mr.
Shkreli guilty. On a review of the record, including the emails
between Mr. Shkreli and Mr. Greebel discussed above, the court
concludes that there was sufficient evidence to support the
jury's determination that Mr. Shkreli and Mr. Greebel together
planned the scheme to control the Fearnow shares, and that Mr.
Shkreli did not necessarily rely on the advice of Mr. Greebel.
(E.g. GX 220 (Mr. Shkreli explaining to Mr. Greebel why he chose
77
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the Desert Gateway shell); GX 233 (Mr. Shkreli instructing Mr.
Greebel on how much should be held back from each Fearnow
shareholder's allocation); GX 248 (Mr. Shkreli's draft of an
email to Mr. Pierotti and other Fearnow shareholders, which
intentionally included inside information in the subject line,
to prevent the recipients from being able to trade their
Retrophin stock); GX 298 (Mr. Greebel asking Mr. Shkreli if the
shares that would be provided to satisfy MSMB Healthcare
investor Richard Kocher should come "from the Fearnow block").)
In addition, the jury could find, based on testimony
at trial, that Mr. Greebel, far from offering professional
advice to Retrophin, operated to assist Mr. Shkreli personally
and often took direction from Mr. Shkreli. (Tr. 3394:10-3395:10
(Mr. Aselage's testimony that between Mr. Shkreli and Mr.
Greebel, "Mr. Shkreli was the dominant personality" and that
Retrophin terminated Katten Muchin in part because "Mr. Greebel
[was] functioning not as responsive to the entire Board but only
to Mr. Shkreli.").)
D. The Definition of "Affiliate"
Mr. Shkreli contends that certain references in the
government's summation to the term "affiliate" created a
"prejudicial misimpression" for the jury. The dispute over the
definition of "affiliate" relates to Mr. Greebel's December 13,
2012 email requesting that the Fearnow shareholders confirm that
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SPA-94
they were not "affiliate [s] (as such term is defined in the
Securities Act of 1933) ." (GX 236.)
In summation, the government made several statements
relating to whether certain of these individuals were, in fact
Retrophin affiliates:
[A]s you heard Deb Oremland testify, if you're

an affiliate of the company, if you work
there, if you own a certain amount of stock,
you actually can't get free trading shares,
they're going to be subject to a restriction. 20
(Tr. 5300:1-5.)
[S]ome of the people who were affirming that

they had nothing to do with Desert Gateway or
Retrophin were, in fact working there at the
time .
So Mulleady was working for Retrophin, when he

received Fearnow shares . . . he get[s] the
Fearnow shares, he's an affiliate .
Vaine was a Retrophin employee through 2015.
So when he gets the Fearnow shares, he's an
affiliate.
Fernandez was a Retrophin employee through

2015. When he gets the Fearnow shares, he's
also an affiliate.
And Ron Tilles was a consultant for Retrophin,

so when he got shares of Retrophin, he was
also considered an affiliate.
(Tr. 5301:24-5302:12.)
20 Ms. Oremland defined an affiliate under Rule 144 as "someone

who can exert a certain amount of control over a company, either
they are an officer or director or they own a large amount of
shares or they are controlled by someone who is an affiliate."
(Tr. 4170:1-4.)
79
SPA-95
Counsel for Mr. Shkreli did not object at the time,
but, following the government's summation, the defense raised a
concern with the court that the government's definition of the
term "affiliate" was inaccurate. (Tr. 5316:9-13.) The parties
submitted a joint definition of "affiliate" for inclusion in the
court's jury charges. (See ECF No. 293.} On the following day,
during the defense summation, defense counsel told the jury:
[O]ver and over and over again [the

prosecutor] told you that the employees of
Retrophin are affiliates under the
law . That's not accurate. Her Honor
will tell you under Rule
144 . . . affiliates don't include
employees. Affiliates include officers and
directors but they don't include garden
variety employees . . . And you listen to
the Court's instruction and I promise you
will hear some clarification.
(Tr. 5460:18-5461:9.)
In their reply, the government stated that:
Mr. Brafman . . misled you. He talked

about the definition of an affiliate. You
will hear from the Judge that what Mr.
Brafman told you is not the law.
(Tr. 5514:14-16.)
Following summations, the court incorporated the
parties' proposed definition of "affiliate", which was based on
Rule 144, into its charge. (Tr. 5596:15-20 (The instruction
read to the jury provided in relevant part: "An affiliate of an
issuer under the law means a person that directly or indirectly
80
SPA-96
through one or more intermediaries controls or is controlled by
or is under common control with such issuer. Whether a person
is an affiliate of Retrophin is a question of fact for the
jury.")); see 17 C.F.R. § 230.144. In addition, the court
instructed the jury that counsel's summations are not evidence
and that the court's instructions must be followed whether or
not counsel states a different proposition of law. (Tr. 5150: 2-
7; Tr. 5528:7-9; 5519:9-12.)
The defense now contends that, notwithstanding the
court's instruction on the definition of "affiliate", the
government's closing argument created a "prejudicial
misimpressionu with the jury that certain Retrophin employees
were "affiliates" of Retrophin. Mr. Shkreli does not contend
that this is the "rare" case requiring a new trial on the basis
of some form of prosecutorial misconduct. See United States v.
Caracappa, 614 F.3d 30, 41 (2d Cir. 2010) ("Flaws in the
government's summation will require a new trial only in the rare
case in which improper statements-viewed against the entire
argument to the jury-can be said to have deprived the defendant
of a fair trial."). Instead, he argues that "the balance of the
evidence of guilt on Count 8 was remarkably weak, leading to the
conclusion that the jury convicted [Mr.] Shkreli based [on] its
fundamental misunderstanding of 'affiliate,' as created by
Government." (Def. Mem. at 4.)
81
SPA-97
The court concludes that the evidence against Mr.
Shkreli - aside from any evidence relating to the "affiliaten
email - was more than sufficient to support the jury's verdict.
Furthermore, in light of the "wide latituden given to both
parties during summation, and the court's jury instructions, the
court disagrees that the government's summation prejudiced Mr.
Shkreli. See United States v. Knox, 687 F. App'x 51, 53 (2d
Cir.), cert. denied, 138 S. Ct. 224, 199 L. Ed. 2d 145 (2017)
("the prosecution and defense are entitled to wide latitude
during closing arguments, so long as they do not misstate the
evidence . [e]ven if a remark is deemed improper, it must
cause substantial prejudice to result in a new trial.n
(internal quotation marks and citations omitted)).
Mr. Shkreli correctly notes that the definition of
affiliate is not based solely on an employment relationship.
The fact that certain individuals were employees (or, in the
case of Mr. Tilles, a consultant) of Retrophin would not by
itself make them affiliates of Retrophin. To the extent the
government's summation incorrectly broadened the definition of
"affiliate" to include mere employees, however, the court
provided the correct definition of the term in its charges,
copies of which were also provided to the jury for their
deliberations. (See Court Exhibit 5 (jury instructions).)
Moreover, both parties told the jury that the judge would
82
SPA-98
instruct the jury on the meaning of "affiliate." (See Court
Exhibit 5 (jury instructions); Tr. 5461:7-9; 5514:14-16.)
Furthermore, whether or not the intended Fearnow share
recipients were in fact "affiliates" is a collateral issue. Mr.
Greebel sent the December 13, 2012 email to Marek Biestek, who
subsequently sent it to others, seeking confirmation that no
Fearnow shareholder was an affiliate of Retrophin because Mr.
Fearnow's legal counsel required such confirmations in order to
write the opinion letter directing the transfer agent to issue
free trading shares. (GX 125-4; Tr. 4548:5-14.) Thus, by
sending the December 13, 2012 email, Mr. Greebel triggered the
distribution of the Fearnow shares. (Tr. 5315:3-6 (in the
government's summation, listing as one of the "overt acts"
charged in the Superseding Indictment "the affiliate email[]
that was sent by Evan Greebel to Marek Biestek.") .) The
government did not contend, however, and did not need to prove,
that all of the Fearnow recipients were affiliates. Indeed, the
government elicited testimony that Mr. Pierotti was not an
affiliate, because he had no connection to Retrophin at the time
that he received the Fearnow shares. (Tr. 4281:18-23.)
Notwithstanding any error in its summation relating to
the term "affiliate," the government clearly stated, and proved,
that the illegal conduct charged in Count Eight was that Mr.
Shkreli fraudulently agreed to control the price and trading of
83
SPA-99
Retrophin stock. The court then clearly defined "affiliate"
using a definition supported by the law and jointly proposed by
the parties. Thus, to the extent any juror may have been
briefly confused by the government's argument, Mr. Shkreli was
not prejudiced.
III. Loss Amount
A. Loss Amount Calculations for Counts Three and Six
The Probation Department and the government assert
that the appropriate loss amount for Counts Three and Six is the
amount of money respectively invested in MSMB Capital
($2,998,000) and MSMB Healthcare ($3,402,450). (Government
Letter, ECF No. 532 at 5-6.) Mr. Shkreli contends that
investors in Mr. Shkreli's MSMB Capital and MSMB Healthcare
funds did not suffer any actual losses, "because they all made
significant returns on their investments." (Defendant's Letter,
ECF No. 527 at 1.) Mr. Shkreli further argues that the MSMB
funds were both invested in Retrophin, and that because
"Retrophin's payments to the MSMB investors were not paybacks
for losses" but rather were "redemptions," "the Guidelines
'credit against loss' provision" does not apply. (Id. at 4.)
The evidence does not support, and indeed contradicts, Mr.
Shkreli's position. Consequently, the court will apply the
84
SPA-100
actual loss amounts calculated by the Probation Department and
the government. 21
1. Count Three
With regard to Count Three, relating to MSMB Capital,
Mr. Shkreli contends that evidence from his co-defendant Mr.
Greebel's separate trial shows that MSMB Capital had invested in
Retrophin in April 2012, such that Retrophin's payments to MSMB
Capital investors in 2013 were simply redemptions for invested
capital. Not only is Mr. Shkreli's contention based on double
hearsay by Mr. Shkreli to an investor's attorney elicited at
another trial, 22 but it is wholly contradicted by the record
evidence, which showed, as discussed in Section I.A above, that
MSMB Capital did not have any funds to invest after the total
losses sustained in the OREX trade in February 2011.
Furthermore, as discussed, Retrophin capitalization tables did
not reflect any investment from MSMB Capital until after the
allegedly backdated investment in June 2012. See supra, n.12.
21 Because the court will use the actual loss amount, it will not
address the parties' arguments regarding intended loss which,
pursuant to Sentencing Guideline Section 2B1.1, is an
appropriate alternative measure of loss.
~~ Specifically, at Mr. Greebel's trial, Mr. Greebel's attorneys
confronted Mr. Blanton with a document purporting to be an MSMB
Capital balance sheet from April 2012, reflecting a $3,480,000
investment in "Level III securities.u (GX 105-15.) Mr.
Blanton testified at Mr. Greebel's trial that Mr. Shkreli
represented to Mr. Blanton's attorney that the referenced
"Level III securities" were shares of Retrophin. (Greebel Tr.
3620:6-7.)
85
SPA-101
Consistent with Second Circuit precedent, the
appropriate calculation of loss for Count Three is $2,998,000,
which is amount "that the investors were fraudulently induced to
invest" and keep invested in MSMB Capital, based on Mr.
Shkreli's many misrepresentations relating to the size,
investing strategy, and performance of his MSMB Capital fund.
See Komar, 529 F. App'x at 29. By the time Mr. Shkreli began to
funnel money from Retrophin to his MSMB Capital investors, many
of the investors, as well as the Securities and Exchange
Commission, had detected the fraud. Thus, even if Mr. Shkreli
were to claim a credit for payments to MSMB Capital investors in
2013, pursuant to Sentencing Guideline Section 2B1.1 Application
Note 3(E), no such credit would be appropriate.
2. Count Six
The court's analysis with regard to the loss amount
for Count Six is similar to the foregoing analysis of Count
Three. As discussed in Section I.B above, the key distinction
between MSMB Capital and MSMB Healthcare was that the latter
fund did in fact invest in Retrophin. Contrary to Mr. Shkreli's
contentions, however, this investment does not give rise to
"redemptions" that reduce the loss amount, because MSMB
Healthcare's investment in Retrophin was an element of the
fraudulent scheme charged in Count Six: the government's trial
evidence established that Mr. Shkreli used MSMB Healthcare funds
86
SPA-102
to funnel money to Retrophin. Komar, 529 F. App'x at 29 (noting
that the Sentencing Commission comments "significantly omit any
direction to apply the value of an equity stake as a credit
against actual loss"); Lyttle, 460 F. App'x at 10 ("For
sentencing purposes, however, 'loss in fraud cases includes the
amount of property taken, even if all or part has been
returned.'" (citations omitted)). After transferring money from
MSMB Healthcare into Retrophin, Mr. Shkreli used some the funds
to satisfy both personal and unrelated professional obligations.
See supra, pp. 62-67. For example, on February 3, 2012, Mr.
Shkreli transferred $200,000 from MSMB Healthcare to Retrophin's
bank account, and then back to an MSMB Healthcare account,
before transferring those funds to Mr. Blanton, who had invested
in MSMB Capital, not MSMB Healthcare. (Tr. 2699:19-2700:23.)
In addition, the government presented evidence that Mr. Shkreli
converted a $900,000 MSMB Healthcare investment into Retrophin
on February 1, 2012 into a loan in which Retrophin was to repay
MSMB Healthcare. Mr. Shkreli then used the $900,000 to pay a
personal debt to Merrill Lynch, which arose from the OREX
trading loss. (Tr. 506-E at 13-16.)
The court will not credit Mr. Shkreli with any
payments made by Retrophin to MSMB Healthcare investors in the
spring of 2013, for the following additional reasons. First,
these payments were made after various investors grew suspicious
87
SPA-103
of Mr. Shkreli, over the five months following Mr. Shkreli's
September 2012 notification of his decision to wind down the
MSMB funds and to falsely claim that the funds were in a
position to make cash redemptions for any investor who so
requested. David Geller, for example, wrote that Mr. Shkreli
had "put all my money into Retrophin stock at a high valuationn
despite assurances to the contrary (GX 109-12), and only after
protracted delays by Mr. Shkreli did Mr. Geller receive a
settlement agreement. Second, Mr. Blanton and Mr. Su had
already reported Mr. Shkreli's MSMB-related activity to the SEC
prior to Spring 2013. Finally, the court will not consider any
credits against loss resulting from payments made by Retrophin
because such payments are at the heart of the conduct charged as
Count Seven.
B. Count Seven
As the court explains below, it will not, in its
discretion, include Mr. Shkreli's acquitted conduct charged in
calculating the total loss amount. Nor will the court give Mr.
Shkreli credit for engaging in that conduct. The jury acquitted
Mr. Shkreli of Count Seven. The government asserts that it "has
established by a preponderance of the evidence that [Mr.]
Shkreli was guilty" of conspiring with Mr. Greebel to "employ[]
settlement and sham consulting agreements to steal money and
shares from Retrophin to repay defrauded MSMB investors.n (Gov.
88
SPA-104
Letter at 18.) The government also notes, correctly, that the
court may consider acquitted conduct at sentencing. 23 United
States v. Ulbricht, 858 F.3d 71, 128 (2d Cir. 2017) ("A district
court may consider as part of its sentencing determination
uncharged conduct proven by a preponderance of the evidence as
long as that conduct does not increase either the statutory
minimum or maximum available punishment."); United States v.
Vaughn, 430 F.3d 518, 527 (2d Cir. 2005).
The court concludes that the government did prove, at
least by a preponderance of the evidence, that Mr. Shkreli
conspired with Mr. Greebel to engage in the conduct charged in
Count Seven. Nevertheless, mindful of its obligation to impose
a sentence on convicted conduct charged in Counts Three, Six and
Eight, that will address the sentencing objectives of
punishment, deterrence, and rehabilitation, see 18 U.S.C. §
3553(a), the court in its discretion will not include the PSR's
loss amount calculation for the acquitted conduct in Count Seven
in its Sentencing Guidelines calculation, for two reasons.
First, in calculating loss amounts for Count Three and
Six, the court has not given Mr. Shkreli any credit for
Retrophin's payments to the defrauded MSMB Capital and MSMB
Healthcare investors. Thus, Mr. Shkreli will not benefit from
: 3 The court is not persuaded by Mr. Shkreli's arguments that

Nelson v. Colorado, 137 S. Ct. 1249 (2017), precludes the use
of acquitted conduct for sentencing purposes.
89
SPA-105
his decision to use Retrophin assets to repay defrauded
investors in his hedge funds. Second, the court notes that
pursuant to Sentencing Guideline Section 2B1.l(b) (1) (kl, the
applicable Base Offense Level, and therefore the Sentencing
Guidelines range, will be the same whether or not the court
includes the conduct charged in Count Seven. Cf. U.S.S.G.
§ 1B1.3, comment n.1 (in "determining the applicable guideline
range," the "the focus is on the specific acts and omissions for
which the defendant is to be held accountable").
C. Count Eight
In contrast to Counts Three and Six in which the court
determined actual loss, both the government and the Probation
Department urge the court to consider the intended, as opposed
to the actual, loss amount. See U.S.S.G. § 2B1.1 comment n.3(A)
("loss is the greater of actual loss or intended loss."). As
discussed in Section II above, Mr. Shkreli's plan to control the
Fearnow shares was not completely successful - he was not, for
example, able to control Mr. Pierotti's allocation of Retrophin
shares. For that reason, the court concludes that it is
appropriate to apply an "intended," as opposed to an "actual,"
loss calculation. For the reasons that follow, the court finds
that Mr. Shkreli had the subjective intent to cause loss to the
investing public by fraudulently controlling the price and
trading volume of Retrophin's shares. See U.S.S.G. § 2B1.1,
90
SPA-106
comment n.3(A) (ii) (I) ("Intended loss" [] means the pecuniary
harm that the defendant sought to inflict.").
Mr. Shkreli argues that he did not "intend" any loss
to the market (Def. Letter at 12). The court finds, based on
the trial evidence, that Mr. Shkreli conspired with Mr. Greebel
and others to manipulate the price and trading volume of
Retrophin stock, and thereby attempted to cause the share-buying
public to overpay for the stock. The court further finds that a
reasonable measure of the loss Mr. Shkreli sought to inflict is
the difference between the price that the unsuspecting investing
public would have paid for Retrophin stock had the conspiracy
been successful, and the value of the shares absent the fraud.
The Probation Department calculates the loss amount for Count
Eight as $4 million dollars, or $2 multiplied by the two million
free-trading Fearnow shares that Mr. Shkreli sought to control.
Specifically, the government and Probation contend
that Mr. Shkreli did not want Retrophin's share price to fall
below $3.00, because between December 2012 and mid-February 2013
Mr. Shkreli was soliciting private investment in Retrophin (the
PIPEs) at a $3.00 per-share price. If the stock price had
fallen below $3.00, common sense supports the position of the
government and Probation that the private investors would not
have invested in the PIPE, and would have instead purchased
shares on the open market. (Gov. Letter at 14 (describing PSR
91
SPA-107
calculations) . ) Probation then calculated a $5.00 artificial
high price based on the stock's approximate highest price during
the relevant period, December 17, 2012 and February 14, 2013. 24
(See GX 606 (chart showing closing prices, reflecting that
Retrophin closed at or slightly above $5 on four occasions, and
below $3.00 on one occasion, from December 17, 2012 to February
14, 2013); GX 702 (reflecting the same data in graphical form).)
The court finds that Probation's calculation of the
intended loss is reasonable and appropriate. See U.S.S.G.
§ 2B1.1, comment n.3(C) ("The court need only make a reasonable
estimate of the loss."). From December 17, 2012 through
February 14, 2013, Mr. Shkreli took numerous actions to try to
limit and control trading in the Fearnow shares when the share
price fell below $5.00. In particular, after the Retrophin
share price fell from $7.69 on December 17, 2012 to $2.90 on
December 28, 2012, Mr. Shkreli sent the "over the wall" email to
the Fearnow shareholders, expressing his concern at the low
share price, and requesting that the Fearnow shareholders make
their shares "unshortable." (GX 120-17 (sent on December 30,
2012) .) This email was but one instance of Mr. Shkreli's
:, The PSR states that the applicable period ended February 28,
2012, but the second PIPE occurred on February 14, 2012. (See
PSR at~ 43; GX 702.) For that reason, the court will apply an
end date of February 14, 2012. Between December 17, 2012 and
February 14, 2012, Retrophin's highest closing price was $5.15
on December 18, 2012. (GX 606; GX 702.)
92
SPA-108
efforts to stop Mr. Pierotti, in particular, from trading away
the 350,000 Retrophin shares that Mr. Pierotti had purchased
from Troy Fearnow. See supra n.18. By January 9, 2013, the
share price had climbed back to $5.10, but declined again over
the following week. On January 15, 2013, Mr. Shkreli sent Mr.
Pierotti's wife, Kristen, a threatening letter. (GX 120-19.) A
$5.00 artificial high share price is therefore a reasonable
estimate of the price that Mr. Shkreli would have been able to
sustain, had all of his attempts been successful. 25
In addition to being a reasonable estimate of the
intended loss, Probation's proposed loss calculation results in
a more conservative loss amount than the alternatives the court
has considered. First, the court notes that the $3.00 per share
price is itself a relatively high basis from which to calculate
intended loss, resulting in a lower loss calculation. Evidence
at trial showed that during the relevant period, Retrophin was
~5 At oral argument on February 23, 2018, the government

referenced an email between Mr. Shkreli and Mr. Greebel in
which Mr. Shkreli referenced a $5.00 share price target.
Although the government did not cite to a specific exhibit, the
record evidence includes a November 1st and 2nd, 2012 series of
emails between Mr. Shkreli and Mr. Greebel, in which Mr.
Shkreli states that he "[n]eeds the price of DGTE to be $5 and
then it should be easy," explaining in response to a question
from Mr. Greebel about the $5.00 per-share target that "[l]ess
shares out, better optics/comfort from investors there will not
be 500 million shares out[.]" (GX 217.) Absent additional
context for this email exchange, and given the other trial
evidence weighing in favor of a $5.00 artificial high price,
however, the court does not rely on this exhibit.
93
SPA-109
close to failure, with approximately $11,000 in its accounts.
(Tr. 4805:9-16 (discussing GX 609, Retrophin's 2012 10-K) .)
Indeed, Mr. Shkreli had drafted a "Liquidation Press Release" on
December 29, 2012, informing the public that Retrophin had
decided to declare bankruptcy. (GX 247.) As a result of the
charged conspiracy, investors were unaware that what purported
to be a public company with over two million free-trading shares
was, in fact, a company on the brink of financial disaster that
was closely controlled by Mr. Shkreli and his co-conspirators,
after Mr. Shkreli and Mr. Greebel carefully secured and then
allocated free-trading shares in Retrophin in order to ensure
control. (GX 220; GX 229.) There is, therefore, a plausible
argument that the loss amount charged in Count Eight should be
based not on a floor of $3 per share, but rather on a lower
figure, because - but for Mr. Shkreli and Mr. Greebel's
concealment of the ongoing fraud - the investing public would
reasonably have valued Retrophin at less than $3 per share.
Second, Probation limited its calculation of loss to
the two million shares Mr. Shkreli allocated to the Fearnow
group. Probation, therefore, did not include in its calculation
the 400,000 shares nominally sold to the Fearnow shareholders
but in fact held in "escrow" for the benefit of Mr. Shkreli, and
used by Mr. Shkreli and Mr. Greebel to compensate defrauded MSMB
investors. Because Mr. Shkreli controlled these "escrowed"
94
SPA-110
Fearnow shares, and these otherwise free-trading shares did not
trade during the relevant period, the restricted supply of free-
trading shares was consistent with Mr. Shkreli's efforts to
maintain Retrophin's share price at artificially high levels.
Third, because Mr. Shkreli's attempt to manipulate the
price and trading of Retrophin stock would have affected the
price of all shares in the market, the court also considered
applying the $2.00 per share loss figure across all trading
shares, rather than simply limiting its calculations to the two
million shares held by the Fearnow shareholders.
Had the court based its calculations on a lower price
"floor," included the 400,000 "escrow" shares in its
calculations, or sought to apply the $2.00 per share loss amount
to the total volume of trading shares, the loss amount for Count
Eight would have been significantly higher. Nevertheless, in
order to fashion a sentence that is "appropriate and practicable
under the circumstances," U.S.S.G. § 2B1.1 comment n.3(C), the
court will adopt Probation's proposed calculation for the
intended loss by Mr. Shkreli in Count Eight.
Conclusion
For the reasons set forth above, the court
respectfully denies defendant's motion for a judgment of
95
SPA-111
acquittal. 26 For the purposes of sentencing, the court will
apply a loss amount of $2,998,000 on Count Three, $3,402,450 on
Count Six, and $4,000,000 on Count Eight.
SO ORDERED.
Dated: February 26, 2018

Brooklyn, New York
Isl
KIYO A. MATSUMOTO
United States District Judge
26 Mr. Shkreli did not move for a new trial pursuant to Federal
Rule of Criminal Procedure 33, and, based on the trial record,
the court would in any event deny such a motion.
96
SPA-112
SLR:LDM:CSK
F.#20 l 4ROOSO 1

----------------------- ------X
PRELIMINARY
- against - ORDER OF FORFEITURE
MARTIN SHKRELI, 15 CR 63 7 (S- I )(KAM)
Defendant.
------------------------ -----X
WHEREAS, on or about June 3, 2016, defendant MARTIN SHKRELI (the
"defendant") was charged in a Superseding Indictment (the "Indictment") with multiple counts
of conspiracy to commit securities fraud, conspiracy to commit wire fraud, securities fraud, and
wire fraud (Counts One through Eight);
WHEREAS, the Indictment included a forfeiture allegation seeking, pursuant to 18
U.S.C. § 98l(a)(l)(C), 28 U.S.C. § 2461(c), and 21 U.S.C. § 853(p), the forfeiture of any and all
property constituting or derived from proceeds obtained directly or indirectly as a result of the
commission of any of the charged offenses;
WHEREAS, on or about July 26, 2017, the defendant, by and through counsel, and
the government stipulated to waive any right to have a jury determine the forfeiture, and agreed
to have such determination made by the Court;
WHEREAS, on or about August 4, 2017, a jury found the defendant guilty of
Count Three {securities fraud involving MSMB Capital), Count Six (securities fraud involving
MSMB Healthcare) and Count Eight (conspiracy to commit securities fraud involving Retrophin
unrestricted securities) (herein the "Offenses of Conviction");

SPA-113
WHEREAS, based on the submissions of the parties and all proceedings herein,
the Court finds that the defendant must forfeit to the United States the amount of Seven Million,
Three Hundred Sixty Thousand, Four Hundred and Fifty Dollars ($7,360,450.00) (the
"Forfeiture Money Judgment"), which amount represents the total amount of proceeds obtained
by the defendant as a result of the Offenses of Conviction.
NOW, THEREFORE, IT IS ORDERED, ADJUDGED AND DECREED THAT:
I. The Forfeiture Money Judgment is entered against the defendant, pursuant
to 18 U.S.C. § 981(a)(l)(C), 28 U.S.C. § 246l(c) and 21 U.S.C. § 853(p).
2. All payments towards the Forfeiture Money Judgment shall be made by
money order, or certified or official bank check, payable to "United States Marshals Service,
EDNY" with the criminal docket number noted on the face of the check. The defendant shall
cause said checks to be sent by overnight mail to the United States Attorney's Office, Eastern
District ofNew York, 271-A Cadman Plaza East, Brooklyn, New York 11201, Attention: Asset
Forfeiture Unit.
3. The entry and payment of the Forfeiture Money Judgment is not to be
considered a payment of a fine, penalty. restitution loss amount or a payment of any income
taxes that may be due and shall survive bankruptcy.
4. Finding that the conditions for the forfeiture of substitute assets set forth in
21 U.S.C. § 853(p) have been met, the defendant shall forfeit his interest in the following assets
(the "Substitute Assets"), as well as all proceeds traceable thereto, up to the amount of the
Forfeiture Money Judgment, pursuant to 21 U.S.C. § 853(p):
(a) $5 million in cash that is currently held in an E*Trade brokerage

account ending in the digits "0258" as security for the defendant's
United States v. Martin Shkreli, 15 CR 637 (S-1)

Page2
SPA-114
Case 1:15-cr-00637-KAM Documen t 540 Filed 03/05/18 Page 3 of 8 PagelD #: 15866
bond, pursuant to orders of the Court dated January 7, 2016,

August 24, 2016 and October 19, 2017;
{b) Vyera Pharmaceuticals (formerly known as Turing

Pharmaceuticals);
(c) the album ''Once Upon A Time in Shaolin" by the Wu Tang Clan;
(d) the album ''Tha Carter V" by Lil Wayne; and
(e) a Picasso painting.
5. Upon forfeiture of the Substitute Assets, and following the resolution of
any third-party claims, the value of the forfeited Substitute Assets shall be applied towards
satisfaction of the Forfeiture Money Judgment.
6. Subject to the terms contained herein, the United States Attorney General
or his designee is authorized to seize the Substitute Assets, or any proceeds traceable thereto, to
collect the Forfeiture Money Judgment, in accordance with Fed. R. Crim. P. 32.2(b)(3} and (c),
to conduct any proper discovery, and to commence any applicable proceeding to comply with
statutes governing third-party rights, including providing requisite notice of this Order and the
forfeiture of the Substitute Assets, in accordance with the provisions of21 U.S.C. § 853(n}{l).
7. The United States shall publish notice of this Order, in accordance with
the custom and practice in this district, on the government website www.forfeiture.gov, and of its
intent to dispose of the Substitute Assets in such a manner as the Attorney General or his
designee may direct. The United States may, to the extent practicable, provide direct written
notice to any person known or alleged to have an interest in the Substitute Assets.
8. Any person, other than the defendant, asserting a legal interest in any of
the Substitute Assets may, within thirty (30) days of the final publication of notice or receipt of
notice, whichever is earlier, petition the Court for a hearing without a jury to adjudicate the
Page3
SPA-115
validity of his or her alleged interest in the property, and for an amendment of the order of
forfeiture, pursuant to 21 U.S.C. § 853(n)(6) and Fed. R. Crim. P. 32.2(c) and (d). Any petition
flied in response to notice of the forfeiture of any of the Substitute Assets must be signed by the
petitioner under penalty of perjury and shall set forth the nature and extent of the petitioner's
right, title or interest in the property, the time and circumstances of the petitioner's acquisition of
the right, title or interest in the property; any additional facts supporting the petitioner's claim;
and the relief sought.
9. In accordance with Fed. R. Crim. P. 32.2(e) and 21 U.S.C. § 853(p), the
government may seek to amend this Order at any time to forfeit additional substitute assets to
satisfy the Forfeiture Money Judgment.
10. Pursuant to Fed. R. Crim. P. 32.2(b)(3), 21 U.S.C. §§ 853(g) and (o), and
in order to preserve the value of the Substitute Assets and ensure that any other funds and/or
assets available to satisfy the Forfeiture Money Judgment are not diminished, damaged and/or
dissipated pending any appeal, neither the defendant nor anyone acting on his behalf, shall take
any action that would have the effect of diminishing, damaging and/or dissipating the Substitute
Assets, or any funds and/or assets that may be used to satisfy the Forfeiture Money Judgment.
11. Pursuant to Fed. R. Crim. P. 32.2(d) and 21 U.S.C. § 853(g), the execution
of this Order and seizure of the Substitute Assets shall be stayed pending the final disposition of
any appeal by the defendant, provided all of the following terms and conditions are fully met to
ensure that such Substitute Assets, and any proceeds traceable thereto, up to the amount of the
Forfeiture Money Judgment, remain available to be forfeited pending the conclusion of any
appeal:
(a) the Substitute Asset listed in subparagraph 4(a) above shall remain on
Page4
SPA-116
#: 15868
Case 1:15-cr- 00637-K AM Docume nt 540 Filed 03/05/18 Page 5 of 8 PagelD
deposit with the Clerk of Court, pending further order of this Court;
{b) within ten ( I 0) days of the date of entry of this Order, the defendant shall
and
provide an accountin g of his interest in the Substitute Asset listed in subparagr aph 4(b},
g such
provide the governme nt with copies of all stock certificates or other document s evidencin
interest;
(c) within ten (10) days of the date of entry of this Order, the defendant shall
advise the governme nt of the location of the Substitute Assets listed in subparagraphs
4(c)
nt's
through 4(e) (the "Albums and the Artwork" ). The defendant must obtain the governme
,
approval as to where and how the Albums and Artwork are maintained and, if necessary
transported during the pendency of any appeal. Further, the defendan t shall allow the
governme nt to inspect the Albums and Artwork at any time;
(d) the defendant, his heirs, assigns, agents, representatives, attorneys, and/or
concert
anyone authorized and acting on his behalf, as well as all persons or entities acting in
with any of them (hereinafter collectively referred to as "the defendant and his
representatives"), are restrained, enjoined and prohibited from taking any action that would
affect the availability, marketability or value of the Substitute Assets. Further, the defendant
that
and his representatives shall take all reasonable steps, and bear all costs necessary, to ensure
, and
all the Substitute Assets are preserved and maintained in good and marketab le condition
taken by
are not damaged, diluted or diminished in value as a result of any actions taken or not
the defendant and his representatives;
(e) any income or compensa tion accruing from any of the Substitute Assets,
a result of
including but not limited to any consideration for the defendan t's interest in Vyera as
escrow
its acquisition, merger, or sale of assets, shall be placed in a designated interest-bearing,
United States v. Martin Shkreli, I 5 CR 63 7 (S-1)
Page5
SPA-117
account so that it may be made available for forfeiture. Further, the defendant shall provide the
government with an accounting of any income or compensation within ten (10) days of the date
received; and
(f) the defendant and his representatives shall not, directly or indirectly,
transfer, assign, license, waste, pledge, encumber, hypothecate, distribute, dissipate, dilute or
remove from the Court's jurisdiction any of the Substitute Assets. The defendant and his
representatives, however, may sell the defendant's interest in the Substitute Assets, or any
portion thereof, pursuant to an arms-length transaction, for fair market value, if and only if they
receive prior approval of the government. To obtain the government's approval, the defendant
and his representatives shall, at least thirty (30) days in advance of any proposed arms-length
sale: (l) advise the government in writing of the proposed sale, and provide a copy of any
proposed contract of sale and other documentation requested by the government relating to the
proposed sale; (2) demonstrate that the proposed sale is an arms-length transaction for fair
market value; {3) demonstrate that all parties to the proposed sale have been provided with a
copy of this Order; and (4) confirm the contract and other documents relating to the proposed
sale provide that the proceeds from the proposed sale, up to the amount of the Forfeiture Money
Judgment, shall be placed in a designated interest-bearing, escrow account so that they may be
made available for forfeiture, and provide the government with documentary proof of same.
Further, within five (S) business days of any approved sale, the defendant and his representatives
shall provide the government with an accounting, including an itemized statement of all proceeds
generated (in any form, including but not limited to, monies, shares of stock, etc.) from the sale
as well as any costs incurred in connection with the sale.
12. In the event that the defendant pays the Forfeiture Money Judgment in
United States v. Martin Shkreli. 15 CR 637 (S-1)
Page 6
SPA-118
full, as provided in paragraph 2 above, or the defendant, pursuant to subparagraphs 11 (e) and {t)
above, sets aside enough funds (the "Escrowed Funds") to satisfy the Forfeiture Money
Judgment, and no third-party claim to the Escrowed Funds is asserted, such payment by the
defendant or Escrowed Funds shall be used to satisfy the Forfeiture Money Judgment and the
remaining restraints on the Substitute Assets set forth in this Order shall be vacated.
13. In the event that the defendant fails to comply with any of the tenns in
paragraphs 10 through 12, above, the government may seize the Substitute Assets, up to the
amount of the Forfeiture Money Judgment, notwithstanding the pendency of any appeal.
14. Pursuant to Fed. R. Crim. P. 32.2(b)(4), this Order shall become final as to
the defendant at the time of sentencing, and shall be made part of the defendant's sentence and
included in the judgment of conviction. If no third party files a timely claim, the Substitute
Assets, up to the amount of the Forfeiture Money Judgment, shall be forfeited to the United
States and this Order shall become the Final Order of Forfeiture, as provided by Fed. R. Crim. P.
32.2(c)(2).
15. The Court shall retain jurisdiction to enforce this Order, and to amend it as
necessary, pursuant to Fed. R. Crim. P. 32.2(e).

Page 7
SPA-119
16. The Clerk of the Court is directed to send, by inter-office mail, three (3)
certified copies of this executed Order to Assistant United States Attorney Claire S. Kedeshian,
United States Attorney's Office, Eastern District ofNew York, 271-A Cadman Plaza East, 7th
Floor, Brooklyn, New York 11201.
Dated: Brooklyl], New York

~" 5 ,2018
SO tRDER.E)?:,
I~~ V\._ - -- - - ~
HO BLE KIYO A. MATSUMOTO
UNITED STATES DISTRICT JUDGE

Page 8
SPA-120

------------------------------------x
UNITED STATES OF AMERICA MEMORANDUM AND ORDER
- against - 15-cr-637(KAM)
MARTIN SHKRELI,
Defendant.
------------------------------------x
MATSUMOTO, United States District Judge:
Before the court is the government's post-trial motion
for forfeiture in this criminal securities fraud case, pursuant
to Federal Rule of Criminal Procedure 32.2, Title 18 United
States Code Section 981(a) (1) (C), Title 28 United States Code
Section 2461(c), and Title 21 United States Code Section 853(p).
(Government's Motion ("Gov. Mot."), ECF No. 464; Defendant's
Response ("Def. Resp."), ECF No. 515; Government's Reply ("Gov.
Reply"), ECF No. 523; Defendant's Sur-Reply ("Def. S.R."), ECF
No. 523.) The court heard argument on the motion on February
23, 2018. (February 23, 2018 Transcript ("Tr.").) This order
presumes familiarity with this court's prior orders in this
case, in particular the February 26, 2018 Memorandum and Order
denying Mr. Shkreli's Motion for Judgment of Acquittal and
discussing the loss amount in this case. (Memorandum and Order
("Rule 29 Order"), ECF No. 535.)

SPA-121
I. Standard of Review
A. Criminal Forfeiture
Pursuant to Title 18, United States Code Section
981 (a) (1) (C), a court may order the forfeiture of "[a]ny
property . which constitutes or is derived from proceeds" of
criminal securities fraud, through what the Second Circuit has
described as a "roundabout statutory mechanism 11 :
18 U.S.C. Section 981(a) (1) (C) allows a court to order

forfeiture for 'any offense constituting 'specified
unlawful activity' as defined in 18 U.S.C.
§ 1956 (c) (7).' Section 1956 (c) (7) (A) incorporates 'any
act or activity constituting an offense listed in 18
U.S.C. § 1961(1).' And§ 1961(1)(0) lists 'any offense
involving . . fraud in the sale of securities.'
While § 981 (a) (1) (C) is a civil forfeiture provision,
it has been integrated into criminal proceedings via
28 u.s.c. § 2461(c).
United States v. Contorinis, 692 F.3d 136, 145 n.2 (2d Cir.
2012) (alterations in the original). "In cases involving
illegal goods, illegal services, unlawful activities, and
telemarketing and health care fraud schemes," the term
"proceeds 11
is defined to include "property of any kind obtained
directly or indirectly, as the result of the commission of the
offense giving rise to forfeiture." 18 U.S.C. § 981 (a) (2) (!1.).
For cases involving "lawful goods or lawful services that are
sold or provided in an illegal manner . proceeds means the
amount of money acquired through the illegal transac ions
resulting in the forfeiture, less the direct costs incurred in
2
SPA-122
providing the goods and services." 18 U.S.C. § 981(a) (2) (Bl.
Such "direct costs "shall not include any part of the overhead
expenses of the entity . . . or any part of the income taxes
paid by the entity." Id.
The government has the burden of establishing that
forfeiture is warranted by a preponderance of the evidence.
United States v. Finazzo, 682 F. App'x 6, 14 (2d Cir. 2017)
(citing United States v. Daudergas, 837 F.3d 212, 231 (2d Cir.
2016)); United States v. Capoccia, 503 F.3d 103, 116 (2d Cir.
2007) (citing United States v. Fruchter, 411 F.3d 377, 383 (2d
Cir. 2005)). In cases involving "lawful services . . provided
in an illegal manner," the defendant has the burden of proving
"direct costs" which may be deducted from the amount to be
forfeited. 18 U.S.C. § 981(a) (2) (B).
B. Substitute Assets
The procedures in Title 21 United States Code Section
853 apply to criminal forfeitures. 28 U.S.C. 2461(c); United
States v. Capoccia, 402 F. App'x 639, 641 (2d Cir. 2010)
(citing, inter alia, United States v. Kalish, 626 F.3d 165 (2d
Cir. 2010)). Pursuant to Section 853(p), if, because of acts or
omissions of the defendant, property subject to forfeiture
"cannot be located," "has been transferred," "has been placed
beyond the jurisdiction of the court," "has been substantially
diminished in value," or "has been commingled with other
3
SPA-123
property which cannot be divided without difficulty," "the court
shall order the forfeiture of any other property of the
defendant, up to the value of [the forfeitable] property." 21
u.s.c. § 853(p).
:I:I. Discussion
A. Counts Three and Six
The government requests forfeiture of $2,998,000 on
Count Three and $3,402,450 on Count Six. These amounts
represent the total investments by defrauded investors into Mr.
Shkreli's MSMB Capital and MSMB Healthcare hedge funds. (Gov.
Mot. at 5.) Mr. Shkreli argues that no forfeiture is
appropriate on either count. 1 In the alternative, Mr. Shkreli
argues that any forfeiture amount for Counts Three and Six
"should [] be significantly reduced by the amount of
[investors'] money used to provide goods and services - i.e.
purchase securities." (Def. S.R. at 5.) In support of this
argument, he provides only bare citations to various government
exhibits, with minimal analysis.
1 In opposing the government's motion for forfeiture, Mr. Shkreli

also argues that (1) investors in his MSMB hedge funds did not
rely on his representations in choosing to invest in MSMB
Capital and MSMB Healthcare, and (2) the forfeiture amount
should be zero for both Counts Three and Six because "each of
the(] investors received a robust return for their investments."
(See Def. Resp. at 5.) The court has considered, and rejected,
these arguments in a prior order. ( Rule 29 Order.)
4
SPA-124
The court agrees with the parties 2 that the applicable
definition of "proceeds" for this case is set forth in Title 18
United States Code Section 981(a) (2) (B), which governs
forfeiture for "lawful goods or lawful services . . sold or
provided in an illegal manner." 18 U.S.C. § 981(a) (2) (B). For
such transactions, "the term 'proceeds' means the amount of
money acquired through the illegal transactions resulting in the
forfeiture, less the direct costs incurred in providing the
goods or services." Id. The Second Circuit has explained that
Section 981 (al (2) (Bl "supplies the definition of 'proceeds' in
cases involving fraud in the purchase or sale of securities,"
whereas Section 981(al (2l (Al is reserved for cases involving
"inherently unlawful" activity, such as "the sale of
~In their opening briefs, the parties agreed that the court
should apply Section 981(a) (2) (Bl. (Gov. Mot. at 3 ("as the
Second Circuit has held in the context of insider trading
securities fraud cases, the applicable definition of proceeds is
set forth in 18 U.S.C. § 981(a) (2) (B)"); Def. Resp. at 2.l
Although the government acknowledged that the court should apply
Section 98l(a) (2) (Bl, the government noted in its reply brief
and during oral argument that Mr. Shkreli's conduct was "more
like the fraud and inducement cases where the Second Circuit has
held no costs or expenses should be deducted." (Tr. 42:10-11
(Section 981(a) (2) (B) is the "definition of proceeds to be
applied here"); id. at 42:12-15 (contrasting this case with
insider trading cases); Gov. Reply at 6 n.5; ("it is far from
clear that [Section 981 (a) (2) (B) 's] more limited definition[,]
as opposed to the gross definition of 'proceeds' set forth in
Section 981(a) (2) (A) should apply to . . . fraud cases[] such as
this") . )
5
SPA-125
foodstamps[] or a robbery." United States v. Contorinis, 692
F.3d 136, 145 n.3 (2d Cir. 2012).
Although the court will apply the definition of
"proceeds" set forth in Section 981(a) (2) (B), the court
concludes that Mr. Shkreli is not entitled to deduct "direct
costs" from the forfeiture amounts in Counts Three and Six, for
two related reasons: First, he has not borne his burden of
proving direct costs, and, second, the few purported direct
costs he specifically references in his papers would not be
deductible.
With regard to Count Three, Mr. Shkreli argues that
MSMB Capital's trading losses, brokerage fees and trading
commissions constitute "direct costs" under Title 18 United
States Code Section 981(a) (2) (B), such that they reduce the
forfeitable amount to, at most, $505,414. (Def. S.R. at 5.) As
support, he cites MSMB Capital's bank records, without any
detailed analysis. (Id.) At oral argument, defense counsel
also referenced MSMB Capital's loss resulting from conduct in
the OREX trade (see Rule 29 Order at 15-16 (testimony of Steven
Stitch, describing the OREX trade)), as an example of the
"direct costs" Mr. Shkreli incurred at MSMB Capital. (Tr.
45:16-23.)
Not only does the defense fail to provide any detailed
analysis of the various government exhibits Mr. Shkreli now
6
SPA-126
proffers in support of his argument on direct costs, but the
defense also ignores the jury's verdict in this case. By the
time Mr. Shkreli lost MSMB Capital's investment capital in the
OREX trade, he had repeatedly lied to his investors regarding
the size, nature, and performance of his fund. (See, e.g., Rule
29 Order at 58-62 (describing investor testimony).) Investors
believed, based on Mr. Shkreli's representations, that MSMB
Capital had tens of millions of dollars in assets, with a
diversified investing strategy and third-party oversight. (See
id.) Although MSMB Capital investors recognized the risks of
investing in a hedge fund, they believed, also based on Mr.
Shkreli's representations, that the fund was diversified in
long/short investments and had a record of positive performance.
(See, e.g., id. at 8 (testimony of Sarah Hassan); 40-41
(testimony of John Neill).)
With regard to the OREX trade in particular, Mr.
Shkreli falsely claimed to his execution broker, Merrill Lynch,
that MSMB Capital's prime broker, Interactive Brokers, had been
able to obtain the necessary "locate" on OREX shares to enable
the short trade. (Id. at 15 (testimony of Steven Stitch
explaining the purpose of a "locate").) In part as a result of
Mr. Shkreli's failure to follow the proper procedures in
executing the trade, MSMB Capital suffered a multiple-million
dollar loss, in excess of its assets. Far from being a "direct
7
SPA-127
cost" of "lawful services" within the meaning of Section
981(a) (2) (B), the costs related to the OREX trade are the result
of the fraudulent conduct for which Mr. Shkreli was convicted:
he deceived investors into believing that they were invested in
a sophisticated and diversified hedge fund, but chose instead to
gamble the money entrusted to him on a series of improperly-
conducted trades in a single stock.
To the extent Mr. Shkreli's other investments on
behalf of MSMB Capital could be characterized as "lawful
services" within the meaning of Section 981(a) (2) (B), he has not
provided any detailed analysis or breakdown of MSMB Capital's
"direct costs" related to such investments, nor explained how
any such costs of MSMB Capital should be deducted from his own
forfeiture obligations. See Contorinis, 692 F.3d at 145 n.3
(Noting that because the defendant's employer, and not the
defendant himself, bore "all direct costs" in an insider trading
case, "any money that [the defendant] can fairly be considered
as having 'acquired' as a result of his [illegal] activities may
be subject to forfeiture under§ 981.") Therefore, he has
failed to carry his burden. See United States v. Mandell, 752
F. 3d 544, 554 ( 2d Cir. 2014) (holding that a defendant who
"failed to present any evidence and no more than cursory
argument" regarding direct costs "failed to meet his burden")).
8
SPA-128
As to Count Six, Mr. Shkreli argues that MSMB
Healthcare invested $2,535,000 million into Retrophin, such that
"the forfeiture amount would be, at most, $867,450.u (Id.) As
with Mr. Shkreli's arguments on Count Three, he has failed to
provide any analysis or detailed explanation of why the court
should deduct $2,535,000 million as "direct costsu from the
total forfeiture amount. Indeed, as the court has already
explained, the trial evidence showed that (1) Mr. Shkreli
improperly used MSMB Healthcare to funnel money to Retrophin,
notwithstanding his representations that MSMB Healthcare was a
diversified fund; and (2) Mr. Shkreli improperly used
approximately $1.1 million of the money MSMB Healthcare invested
into Retrophin for his own personal and unrelated professional
obligations. (Rule 29 Order, ECF No. 535 at 64-67; 86-88.)
Even if Mr. Shkreli were to have made a more detailed submission
regarding direct costs of MSMB Healthcare for Count Six, he
would not be able to establish that his acts of improperly
funneling investor money into Retrophin resulted in "direct
costsu of providing a "lawful service[) .u Furthermore, as with
Count Three, Mr. Shkreli has failed to provide any analysis to
establish that any other trading activity in MSMB Healthcare
resulted in legitimate "direct costs" to him. See Mandell, 752
F.3d at 554; Contorinis, 692 F.3d at 145 n.3.
9
SPA-129
B. Count Eight
With regard to Count Eight, the evidence at trial
showed that Mr. Shkreli conspired with Retrophin's attorney,
Evan Greebel, and others, to control the price and trading of
shares in Retrophin. (Rule 29 Order at 67-78.) In order to
achieve this control, Mr. Shkreli and Mr. Greebel directed the
distribution of the Fearnow shares to various Retrophin
insiders. (Id. at 68-71 (describing the "Fearnow shares").) In
addition to using his control over some of the Fearnow shares to
attempt to increase the trading price of Retrophin shares in the
market, Mr. Shkreli used the shares to mollify frustrated
investors in his MSMB Capital and MSMB Healthcare hedge funds.
(Id. at 71-75.)
The government now seeks forfeiture of $960,000, which
it argues is the amount of the benefit Mr. Shkreli received,
both indirectly and directly, from having his co-conspirators
transfer Fearnow shares held in their names to two MSMB
investors (Dr. Lindsay Rosenwald and Richard Kocher), to a
Retrophin investor (Thomas Koestler), and to Mr. Shkreli
himself. (Gov. Mot. at 7.) Mr. Shkreli argues that the
government's request is improper, because it has "nothing to do
with the alleged conduct in Count Eightu and is instead related
to the alleged conduct in Count Seven, of which the jury
acquitted Mr. Shkreli. (Def. Resp. at 5-6.) Mr. Shkreli also
10
SPA-130
argues that Mr. Shkreli's co-conspirators transferred their
Fearnow shares to the dissatisfied MSMB investors for their own
legitimate reasons. (Id. at 6 ("these three Fearnow recipients
had their own financial interests in mind when they helped
settle [the MSMB] claims as they stood to gain handsomely if
Retrophin succeeded . . . and was not smothered in its infancy
with lawsuits by MSMB investors."))
The court concludes that the Fearnow shares used to
satisfy the demands of Dr. Rosenwald, Mr. Kocher, Mr. Koestler
and Mr. Shkreli constituted property which "derived from" the
transactions at issue in Count Eight. See 18 u.s.c.

§§ 981(a) (1) (C), (a) (2) (B) . 3 The court has previously described
in detail how Mr. Shkreli and Mr. Greebel obtained the Fearnow
shares and distributed them to Retrophin and MSMB insiders.
(Rule 29 Order at 68-71.) As this court has also explained, Mr.
Shkreli and Mr. Greebel extensively discussed how to use the
Fearnow shares to compensate MSMB investors, and took action to
try and prevent another "Pierotti problem" - a Fearnow share
recipient refusing to accede to Mr. Shkreli's directives
regarding trading or not trading their Fearnow shares. (Id. at
74-75.) Indeed, Mr. Shkreli specifically wrote in an email to
3 For substantially the reasons stated in its discussion of

Counts Three and Six, the court concludes that the definition of
"proceeds" for Count Eight is determined by the application of
Title 18 United States Code 981(a) (2) (B). See Contorinis, 692
F.3d 145 n.3.
11
SPA-131
Mr. Greebel that he wanted to make the transfers from the
Fearnow shareholders "anonymous" if possible, so that the
Fearnow shareholders "don't know exactly where [their shares]
are going." (Id. (quoting GX 271.)) Mr. Shkreli wrote to Mr.
Greebel that after the Fearnow shares held in "escrow" were used
to satisfy dissatisfied MSMB investors, "the rest" should be
transferred to him. (Id. (discussing GX 268); see id. at 50 n.8
(describing the shares held in "escrow").) The government also
introduced documentary evidence demonstrating that Mr. Shkreli
and Mr. Greebel specifically directed the transfer of Retrophin
shares to Mr. Koestler. In February 2013, Mr. Greebel asked Mr.
Shkreli whether to use "Fearnow stock or new restricted grant
from company" to provide Mr. Koestler with the shares he should
have received for investing in Retrophin in 2012. (GX 370.)
Mr. Shkreli responded "combo would be great." (Id.)
The trial evidence, therefore, supports the
government's position that Mr. Shkreli and Mr. Greebel - not the
Fearnow shareholders themselves - made the decision to transfer
the shares to Dr. Rosenwald, Thomas Koestler, Richard Kocher,
and Mr. Shkreli. The evidence also establishes that Mr. Shkreli
used these transfers to stave off lawsuits or government
investigations which may have targeted him personally, or which
might have resulted in government investigations of the various
improprieties in the MSMB hedge funds. (See, e.g., id. at 22-23
12
SPA-132
(describing testimony of Dr. Rosenwald, in which he stated that
prior to settlement he had involved his legal counsel).) Mr.
Shkreli thereby received a personal benefit from the
distribution of these shares.
II. Substitute Assets
The government asks the court to approve the seizure
of substitute assets, pursuant to Federal Rule of Criminal
Procedure 32.2(e) and Title 21 United States Code Section
853 (p). (Gov. Mot. at 9.) The government provides the sworn
declaration of FBI Special Agent Sean Sweeney to support its
position that Mr. Shkreli has "transferred," "substantially
diminished," or "commingled" the forfeitable assets, and thus
mandating that "the court shall order the forfeiture of any
other property of the defendant, up to the value of the
[forfeitable property]," here $7,360,450.00. (See Declaration
of Special Agent Sean Sweeney, ECF No. 464-2 at~~ 8-9 (stating
that Special Agent Sweeney and other agents "have made a
diligent effort to locate traceable proceeds to the offenses
subject to forfeiture" but that such assets "appear to have been
dissipated or otherwise disposed of.") The evidence at trial
shows that direct proceeds of Mr. Shkreli's criminal conduct
were either dissipated (i.e. the OREX trade) or transferred to
Retrophin or the MSMB investors, or Mr. Shkreli.
13
SPA-133
Mr. Shkreli has opposed the forfeiture of substitute
assets, in part because he owes significant amounts of money to
New York State, the Internal Revenue Service, his accountants,
and his attorneys. 4 (Def. Mot. at 7.) Mr. Shkreli has provided
no authority, however, for the proposition that otherwise
forfeitable proceeds should not be subject to forfeiture because
the defendant owes money to other potential creditors.
4 Mr. Shkreli also noted that one of the substitute assets listed
in the government's initial proposed preliminary order of
forfeiture had already been seized by New York State. (Def.
Mot. at 7.) The government has addressed this issue in its
revised proposed preliminary order of forfeiture. (See Revised
Proposed Preliminary Order of Forfeiture, ECF No. 539-1.) To
address Mr. Shkreli's concerns about a premature "fire sale" of
his stake in Vyera Pharmaceuticals (formerly known as Turing
Pharmaceuticals), the government has also indicated that it does
not oppose a stay of "that portion of a [preliminary order of
forfeiture] authorizing the seizure of substitute assets .
until completion of the appeal that [Mr.] Shkreli intends to
file," on the condition that the substitute assets be preserved
pending any final decision on appeal. (Gov. Reply at 10.)
14
SPA-134
Conclusion
For the foregoing reasons, the court concludes that
the government has established that forfeiture of substitute
assets, up to $7,360,450.00, is warranted in this case. As the
government has requested, the court will so-order the
government's proposed preliminary order of forfeiture, which
includes provisions ensuring the preservation of assets and
appropriately staying seizure of assets pending appeal. (See
Revised Proposed Preliminary Order of Forfeiture at i i 10-11.)
SO ORDERED.
Dated: March 5, 2018

Brooklyn, New York
/s/
KIYO A. MATSUMOTO
United States District Judge
15
SPA-135
15 U.S.C.A. § 78j(b) ("manipulative and deceptive devices.")
It shall be unlawful for any person, directly or indirectly, by the use

of any means or instrumentality of interstate commerce or of the
mails, or of any facility of any national securities exchange-***
(b) To use or em ploy, in connection with the purchase

or sale of any security registered on a national
securities exchange or any security not so registered, or
any securities-based swap agreement any manipulative
or deceptive device or contrivance in contravention of
such rules and regulations as the Commission may
prescribe as necessary or appropriate in the public
interest or for the protection of investors.
18 U.S.C. §1343 ("Fraud by wire, radio, or television")
Whoever, having devised or intending to devise any scheme or

artifice to defraud, or for obtaining money or property by
means of false or fraudulent pretenses, representations, or
promises, transmits or causes to be transmitted by means of
wire, radio, or television communication in interstate or
foreign commerce, any writings, signs, signals, pictures, or
sounds for the purpose of executing such scheme or artifice,
shall be fined under this title or imprisoned not more than 20
years, or both. If the violation occurs in relation to, or
involving any benefit authorized, transported, transmitted,
transferred, disbursed, or paid in connection with, a
presidentially declared major disaster or emergency (as those
terms are defined in section 102 of the Robert T. Stafford
Disaster Relief and Emergency Assistance Act (42 U.S.C.
5122)), or affects a financial institution, such person shall be
fined not more than $1,000,000 or imprisoned not more than
30 years, or both.

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Case 18-1084, Document 27, 08/31/2018, 2380471, Page1 of 218

UNITED STATES OF AMERICA,

BRIEF and SPECIAL APPENDIX

Statement of Subject Matter

Statement of the Issues Presented for Review . . . . . . . . . . . . . . . . . . . . 3

Statement of the Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

1. The Government’s Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

a. Defendant’s Career in Finance . . . . . . . . . . . . . . . . . . . 7

b. The MSMB Capital Scheme

c. The MSMB Healthcare Scheme

d. The Retrophin Misappropriation Scheme

e. The Retrophin Unrestricted Securities Scheme

2. The Court’s Charge, Jury Deliberations

D. The Motion for Forfeiture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

E.. The Sentencing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

B. The “No Ultimate Harm” Instruction . . . . . . . . . . . . . . . . . 33

1. Government’s Motion for Forfeiture. . . . . . . . . . . . . . 47

3. The Court’s Decision . . . . . . . . . . . . . . . . . . . . . . . . . . 52

1. Forfeiture Requires Unlawful Gains . . . . . . . . . . . . . 54

2. Securities Fraud Does Not Require Any

1. Monies Lawfully Acquired . . . . . . . . . . . . . . . . . . . . . 59

2. Deduction of Costs in Providing Goods

3. Factoring and Thereby Deducting the

Basic Inc. v. Levinson, 485 U.S. 224 (1988). . . . . . . . . . . . . . . . . . . . . . 57

Bollenbach v. United States, 326 U.S. 607 (1946) . . . . . . . . . . . . . . 34, 45

Blueford v. Arkansas, 132 S.Ct. 2044 (2012) . . . . . . . . . . . . . . . . . . . . . 39

Evans v. Michigan, 568 U.S. 313 (2013) . . . . . . . . . . . . . . . . . . . . . . . . 39

McBoyle v. United States, 283 U.S. 25 (1931) . . . . . . . . . . . . . . . . . . . . 56

United States v. Alfisi, 308 F.3d 144 (2d Cir. 2002) . . . . . . . . . . . . . . . 38

United States v. Bajakajian, 524 U.S. 321 (1998) . . . . . . . . . . . . . . . . . 69

United States v. Bass, 404 U.S. 336 (1971) . . . . . . . . . . . . . . . . . . . . . . 56

United States v. Berkovich, 168 F.3d 64 (2d Cir. 1999). . . . . . . . . Passim

United States v. Bodouva, 853 F.3d 76 (2d Cir. 2017) . . . . . . . . . . 55, 59

United States v. Capoccia, 503 F.3d 103 (2d Cir. 2007) . . . . . . . . . . . . 54

United States v. Cartelli, 272 F. App'x 66

United States v. Castello, 611 F.3d 116 (2d Cir. 2010) . . . . . . . . . . . . . 69

United States v. Contorinis, 692 F.3d 136

United States v. Daugerdas, 837 F.3d 212

United States v. Dinome, 86 F.3d 277 (2d Cir.1996) . . . . . . . . . . . . 34, 42

United States v. Dixon, 536 F.2d 1388 (2d Cir.1976) . . . . . . . . . . . 40, 58

United States v. Emerson, 128 F.3d 557(7th Cir.1997) . . . . . . . . . . . . . 55

United States v. Ferguson, 676 F.3d 260 (2d Cir. 2011) . . . . . . . . . . . . 37

United States v. Finazzo, 682 F. App'x 6 (2d Cir. 2017) . . . . . . . . . . . . 37

United States v. Gradwell, 243 U.S. 476 (1917) . . . . . . . . . . . . . . . . . . 56

United States v. Henry, 888 F.3d 589 (2d Cir. 2018). . . . . . . . . . . . . . . 38

United States v. Hollnagel, 2013 WL 5348317

United States v. Ingram, 490 F. App'x 363

United States v. Kalish, 626 F.3d 165 (2d Cir.2010) . . . . . . . . . . . . . . . 55

United States v. Koh, 199 F.3d 632 (2d Cir. 1999) . . . . . . . . . . . . . . . . 37

United States v. Lange, 834 F.3d 58 (2d Cir. 2016),

United States v. Levis, 488 F. App'x 481 (2d Cir. 2012)

United States v. Litvak (Litvak I), 808 F.3d 160

United States v. Litvak (Litvak II), 889 F.3d 56

United States v. Marzo, 312 F. App'x 356

United States v. McIntosh, No. 11-CR-500 (SHS)

United States v. Rybicki, 38 F. App'x 626

United States v. Santos, 553 U.S. 507 (2008) . . . . . . . . . . . . . . . . . . . . 56

United States v. Stevens, 210 F.3d 356 (2d Cir. 2000)

United States v. Various Computers & Computer Equip.,