The indictment said Shkreli made false representations to MSMB investors to draw in $3 million in investments.

After MSMB suffered devastating trading losses in 2011 and ceased trading, Shkreli for months sent fabricated updates to investors touting profits of as high as 40 percent since inception, the indictment said.

He also solicited $5 million from investors for another fund, MSMB Healthcare Management LP, while concealing his performance managing MSMB Capital and a prior fund and providing investors an inflated valuation of his then-private firm Retrophin, the indictment said.

To pay back the MSMB funds' investors, Shkreli and Greebel misappropriated $11 million in Retrophin assets through settlement agreements and sham consulting deals, according to the indictment.

The case mirrors a lawsuit Retrophin filed in August against Shkreli in federal court in Manhattan for $65 million, claiming he had used his control over Retrophin to enrich himself and pay off MSMB investors' claims.

Shkreli has denied the allegations.

The case is separate from the ongoing drug pricing controversy that had in recent weeks enveloped Shkreli and Turing Pharmaceuticals.

At least two separate Congressional probes have been launched since September on the pricing issues of Daraprim, which had long been available as a generic drug used to treat toxoplasmosis in AIDS patients. Turing is under investigation by the New York state attorney general for antitrust concerns.

At a Senate hearing on drug pricing last week, a doctor who treats babies with life-threatening toxoplasmosis testified that a course of treatment with Daraprim went from about $1,200 to no less than $69,000.

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