FTC, States Ask Federal Court to Hold Martin Shkreli in Contempt for Allegedly Violating Lifetime Ban from Pharmaceutical Industry

The Federal Trade Commission and seven states today asked a federal judge to hold Martin Shkreli in contempt based on their allegations that he flagrantly and repeatedly violated a 2022 court order that banned him from the pharmaceutical industry.

In a motion and brief filed today, the FTC and its state co-plaintiffs allege that Shkreli, since his release from prison in May 2022, has been violating the court order by publicly trading in pharmaceutical industry stocks and broadcasting his opinions about the business and management of many pharmaceutical industry companies.

“After a full trial, the court found that Martin Shkreli’s conduct drove up prescription drug costs for American patients and blocked the entry of lower-cost generics,” said Daniel Guarnera, Director of the FTC’s Bureau of Competition. “When judgment is entered by a court, whether it’s a settlement or an order following a trial, defendants must fulfill their obligations. Today’s action should serve as notice that the FTC will not hesitate to enforce violations of court orders.”

The FTC voted unanimously in January 2020 to initiate the case against Shkreli, another individual executive and the companies they founded, Vyera Pharmaceuticals LLC and Phoenixus AG. In 2022, the U.S. District Court for the Southern District of New York ruled that Shkreli organized an illegal anticompetitive scheme to perpetuate a monopoly for the life-saving drug Daraprim, a treatment for a rare, potentially fatal parasitic infection known as toxoplasmosis.

The court found that the anticompetitive scheme executed by Shkreli and his codefendants prevented generic competition and protected their ability to increase Daraprim’s price from $17.50 per tablet to $750 per tablet. The court further found that “Shkreli’s egregious, deliberate, repetitive, long-running and ultimately dangerous illegal conduct” warranted an industry ban, and the court ordered Shkreli to disgorge over $64 million. 

Contempt Filing 

The joint motion alleges numerous examples of Shkreli violating the order’s lifetime ban by publicly trading in pharmaceutical industry stocks of at least 60 companies and broadcasting online his opinions about the business and management of many pharmaceutical companies. These activities run afoul of the court’s 2022 permanent injunction, which banned Shkreli “from directly or indirectly participating in any manner in the pharmaceutical industry,” including by “[a]cquiring or holding an Ownership Interest in a Pharmaceutical Company” or “[t]aking any action to directly or indirectly influence or control the management or business of any Pharmaceutical Company,” according to the FTC and states’ joint motion.

Shkreli has publicized his order violations by livestreaming and posting on numerous social media platforms, including YouTube, X, and Reddit. The motion alleges that, while livestreaming his trades in pharmaceutical industry stocks, Shkreli told his viewers “I’m showing you how to trade and invest in biotech.” The motion further alleges that, in another livestream, Shkreli confessed his “magic trick”: “It doesn’t matter what trades I make because I can always find a couple of biotech stocks to smoke.” As alleged in the motion, Shkreli used his livestreams to wage multiple public campaigns to short certain pharmaceutical company stocks based on his prediction that their key clinical trials would fail. 

In their contempt filing, the FTC and its co-plaintiff states ask the court for an order to show cause why Shkreli should not be held in civil contempt for violating the lifetime ban imposed by the court and ultimately to issue civil sanctions to force Shkreli to comply with the terms of the court’s 2022 injunction.

Sanctions sought in the contempt filing seek to require Shkreli to:

• Divest any pharmaceutical company stocks he currently owns;
• Pay a fine equal to his profits from any pharmaceutical company stock trading (plus prejudgment interest) without the ability to account for offsetting losses; and
• Face clear and escalating consequences for any future violations, including financial penalties and potential incarceration.

The Commission vote to authorize staff to file a civil contempt action against Martin Shkreli was 1-0. FTC Chairman Andrew N. Ferguson is recused. Commissioner Mark R. Meador issued a statement. The motion was filed in the U.S. District Court for the Southern District of New York.