The Shkreli Indictment is, Honestly, Hilarious

Here's the short version: Shkreli set up two "hedge funds" and sought investors for them. They both worked the same way, using three entities:

1) The hedge fund itself, a limited partnership. The investors were limited partners in the fund. There was one general (controlling) partner, which was a limited liability company controlled by Shkreli (see 2)).

2) The limited liability company as general partner of entity 1. This was, essentially, Shkreli himself.

3) A second limited liability company, which served as investment advisor to the limited partnership. This was also Shkreli.

In both cases, the limited partnership sought investors, who put money into it. They paid fees to the general partner (1%) and the investment advisor (20% of profits). Both of those are Shkreli.

So, Shkreli is a partner in entity 1 through his role as controller of entity 2, and he provides advice to entity 1 through his role as controller of entity 3. Now on to the funny part:

Shkreli, far from being a boy genius, is actually really fucking bad at investing.

One of his hedge funds took in $700,000 in investments. A year later, the fund had $700 in assets. That is, he lost $699,300 in trading in one year! Nevertheless, he convinced new investors to put about $3 million back into the fund, mainly by telling them that the fund's assets ($700, mind you) were at $35 MILLION. MILLION! He had seven hundred dollars in the fund and told a potential investor that he had THIRTY-FIVE MILLION. Wait a second...



So, what does he do with the new influx of funds? He promptly loses the $3 million, which turns into $58,000 in less than a month. One reason? He poorly executed a short position that left both him and his brokerage (Merrill) damn near $10 million in the hole! Boy genius! Entrepreneur!



Why is this guy even allowed near a bank account? A random group of American high school sophomores could perform better on the market with a weekend's worth of training. This guy is not only an asshole, he's also a fucking moron.

The last stroke of genius was to use completely made up assets of pharmaceutical company he basically made up in order to pay back the duped investors of the hedge funds, who were, of course, shouting for their money (he told them they'd doubled it, even though he lost it ALL), and there was no money. When it became clear that the company's auditor was going to ask why this publicly traded company was paying these random, unrelated people for DOING NOTHING, he set up fake consulting agreements.

To be honest, any investor in the hedge fund who entered into a fake consulting agreement should also be charged for fraud.

What a piddling shit show.