The Federal Trade Commission and seven states asked a federal court on October 13 to hold Martin Shkreli in civil contempt, alleging that he has broken a lifetime ban on taking part in the pharmaceutical industry by publicly trading the stocks of at least 60 pharmaceutical companies. The 2022 order that imposed the ban also required him to give up more than $64 million, after a judge found that he organized a scheme to keep generic competitors away from the drug Daraprim. The filing is a request to the court, and the allegations in it have not been tested.
The money question for patients is narrower than it might seem. The 2022 judgment that the FTC is enforcing grew out of Daraprim, a drug used to treat toxoplasmosis, whose price rose from $17.50 to $750 a tablet under the scheme the court found. The more than $64 million in that order is payable to the plaintiff states, not to individual patients, and the new filing seeks something different: sanctions to force compliance with the ban, including a fine equal to the profits from his stock trades.
The number to watch is the fine: the FTC wants it set at Shkreli’s profits from pharma-stock trading plus interest, and no total has been stated.
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What the motion says Shkreli did
The FTC’s announcement says the violations began after Shkreli’s release from prison in May 2022 and played out on YouTube, X and Reddit. The motion alleges that he publicly traded stocks of at least 60 pharmaceutical companies and broadcast opinions on the business and management of many of them. In livestreams, the commission says, he ran public campaigns to short certain stocks, predicting that their key clinical trials would fail, and told viewers, “I’m showing you how to trade and invest in biotech.”
The motion quotes Shkreli calling his method a “magic trick”: “It doesn’t matter what trades I make because I can always find a couple of biotech stocks to smoke.” Fierce Pharma reported that the filing also points to a campaign to short the biotech Cassava Sciences and to a stream in which he hinted at “other accounts” he would not show viewers because “feds are watching.” Shkreli’s response was not part of the FTC’s announcement or the Fierce Pharma report.
The lifetime ban and the court’s earlier findings
The ban comes from an order entered on February 4, 2022, in FTC v. Vyera Pharmaceuticals in the Southern District of New York. It bars Shkreli for life from “directly or indirectly participating in any manner in the pharmaceutical industry.” The FTC says the order specifically prohibits acquiring or holding an ownership interest in a pharmaceutical company and taking any action to influence or control the management or business of one. The allegations track those two prohibitions: stock trading on one side, public commentary about company management on the other.
That order followed a trial in which the court found that Shkreli organized an illegal scheme to maintain a monopoly on Daraprim and called his conduct “egregious, deliberate, repetitive, long-running and ultimately dangerous illegal conduct.” Separately, a federal jury convicted him in 2017 of two counts of securities fraud and one of conspiracy, and he served more than four years of a seven-year sentence, Fierce Pharma reported.
An earlier contempt motion in the same case, filed in January 2023, concerned compliance paperwork rather than trading. In it the plaintiffs said Shkreli had paid nothing toward the judgment, had missed several extended deadlines for a supplemental compliance report and had announced a Web3 drug-discovery company, Druglike, Inc., in July 2022. The October motion adds a different theory: that the violation was visible on his own livestreams.
The sanctions the FTC wants
The FTC asks the court for an order to show cause why Shkreli should not be held in civil contempt. If the court agrees, the commission wants him to divest any pharmaceutical stocks he owns and pay a fine equal to the profits from his pharma-stock trading plus prejudgment interest, without offsetting trading losses. It also seeks escalating consequences for future violations, including financial penalties and possible incarceration, with the stated aim of compelling compliance. The release does not put a dollar figure on the profits.
Daniel Guarnera, director of the FTC’s Bureau of Competition, said the court found Shkreli’s conduct “drove up prescription drug costs for American patients” and that the commission “will not hesitate to enforce violations of court orders.” The commission voted 1-0 to authorize the filing, and Chairman Andrew Ferguson was recused. Seven states joined the motion; the release does not name them, though the 2023 filing in the case lists New York, California, Illinois, North Carolina, Ohio, Pennsylvania and Virginia as plaintiffs.
What the 2022 order required of Shkreli
The February 2022 order, filed as ECF No. 876, directed Shkreli to pay the plaintiff states up to $64.6 million within 30 days. Up to $40 million of that amount can be offset by payments the corporate defendants make by December 6, 2031 under a separate stipulated order, according to the plaintiffs’ January 2023 filing. The FTC’s October release describes the judgment as a disgorgement of more than $64 million, and the 2023 filing said Shkreli had paid nothing toward it at that point.
The order also required verified compliance reports within 60 days and then annually, each confirming that he is not participating in the pharmaceutical industry, and it gave the plaintiffs a right to interview him and inspect records on five days’ notice. A narrow exception allows qualified employment if he gives written notice and no plaintiff objects within 20 working days. None of those provisions turns on his stock holdings by name; the October motion argues that the ban’s ownership-interest language reaches them.
The first thing to watch is whether the court issues the show-cause order and sets a hearing; the FTC’s announcement gives no date. If it does, the profit figure that decides the size of any fine will have to come from an accounting of his trades, which is the one number in the filing that the commission has not yet stated.
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This article was prepared with AI assistance from cited public sources and reviewed before publication.
