Stock trader didn’t see Shkreli doing a lot of buying or selling of shares


Timothy Pierotti

Source: CNBC

A securities trader at one of “pharmaceutical brother” Martin Shkreli’s hedge funds said on Tuesday he had not seen Shkreli “buy and sell stocks” or do other things than hedge fund operators normally do.

“I didn’t see him do much,” said trader Timothy Pierotti during Shkreli’s securities fraud trial in Brooklyn, New York, in federal court.

“Normally in a hedge fund you would see people managing their position, managing their risk, talking to brokers, buying and selling stocks,” said Pierotti, who was sitting right across from Shkreli’s desk while working for him.

Alixandra Smith, a prosecutor, then asked, “And you didn’t see the accused do any of these things?”

“No,” replied Pierotti, 46, whose tenure at Shkreli extended from late summer 2011 to late 2012.

Pierotti’s testimony reinforces prosecutors’ claims that Shkreli’s funds, MSMB Capital and MSMB Healthcare, were operating with relatively little money to negotiate, despite Shkreli’s boasting to investors of having as much as $ 100 million in cash. management. Pierotti said Shkreli talked about having $ 80 million or $ 100 million under management.

Pierotti is expected to testify later Tuesday about being threatened by Shkreli in 2013 after Pierotti refused to return 350,000 shares he bought for just $ 400 from a shell company that had merged backwards with a company pharmaceutical company, Retrophin, which Shkreli had founded.

Shkreli, 34, has pleaded not guilty to looting Retrophin of stocks and cash to reimburse investors, he is also accused of defrauding his hedge funds.

Pierotti was one of a group of more than half a dozen friends and associates of Shkreli who received a total of around 2 million shares in a shell company that undertook a reverse merger with Retrophin. in 2012 to help it become publicly traded.

Prosecutors alleged that Shkreli secretly controlled these actions, or expected to control these actions, but did not disclose such control as required to the Securities and Exchange Commission.

Martin Shkreli, former CEO of Turing Pharmaceuticals, leaves with his attorney Benjamin Brafman after a hearing in United States Federal Court in Brooklyn, New York, June 26, 2017.

Lucas Jackson | Reuters

Court documents in a civil case that Retrophin filed against Pierotti indicate that Shkreli, in January 2013, wrote to Pierotti’s wife, saying, “Your husband stole $ 1.6 million from me and I will get it back.” I will do whatever it takes to get it. return.”

“Your pathetic excuse as a husband has to get a real job that doesn’t depend on fraud to be successful… I hope to see you and your four children homeless and I will do whatever I can to secure it,” reportedly writes Shkreli.

Pierotti was hired in 2011 to trade for another Shkreli fund, MSMB Consumer, founded that year to invest in stocks of consumer companies.

He said that while Shkreli planned to capitalize MSMB Consumer with $ 10 million and hoped to double that amount quickly, in early 2012, “Martin started taking money out.”

“He just started taking money out of the fund,” Pierotti said.

Pierotti said Shkreli did not know where the money to fund MSMB Consumer came from or where it went after it was withdrawn.

“Martin didn’t tell anyone where the money came from and where it came from,” Pierotti said.

Eventually, Pierotti said, there was so little money in MSMB Consumer that it operated less like a hedge fund and began to pursue a strategy of focusing on one stock.

One of those titles was Rick’s Cabaret, a company that operates strip clubs and nightclubs, Pierotti said.

Pierotti also said that in mid-2012, he showed up at the MSMB office on Madison Avenue in Manhattan to see “guys put their computers and flat screens in wheeled suitcases and get them out of the building.”

“I thought the bills weren’t paid,” Pierotti said. “To rent.”

Shkreli’s funds were then moved to new offices elsewhere in Manhattan.

After getting the shares of Retrophin, along with the group of other friends and associates, said Pierotti, Shkreli made “comments… that the people who had traded… should trade the stock, buy it and sell it,” buy it and sell it this. “

Pierotti noted that “stocks are more valuable if they have liquidity.”

“If a group of people decided to just trade stocks, buy between them, just for the appearance of creating volume, that would be insider trading,” Pierotti said.

Pierotti, who specializes in consumer company stocks, previously worked for the hedge fund Galleon Group, which he left in 2008.

At the start of his testimony on Tuesday, Pierotti said he informed federal authorities that while working for Galleon he became aware of cases of insider trading at that company. One of those cases, Pierotti said, involved Galleon founder Raj Rajaratnam.

Pierotti said that neither Rajaratnam nor anyone else asked him to do a transaction involving the jam company JM Smucker, but during a meeting, Rajaratnam “asked me if I was with him” on such a transaction, “and I said yes”.

“I knew, and he told me, that they were using information that was not public,” Pierotti said. “I didn’t think it was important, but it wasn’t public.”

Pierotti said he knew Rajaratnam “had obtained information given to him by a member of the board of directors of Procter & Gamble who did business with Smucker’s.”

Rajaratnam was convicted of insider trading in 2011 and is serving an 11-year sentence in federal prison.

Rajaratnam’s ex-pal and former Procter & Gamble board member Raj Gupta was convicted in a securities fraud trial in 2012. He was released from prison in early 2016 after being sentenced to death. ‘a two-year sentence.

Pierotti said he had agreed with prosecutors to testify against Gupta at trial, but was never called upon to do so.

Pierotti also said he was given a non-prosecution agreement in connection with the case, which ensured that he would not be criminally charged for activities in Galleon until he lied to federal authorities at their subject.

WATCH: Co-worker says Shkreli is “mentally unstable”


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