In 31 minutes a hedge fund managed by Martin Shkreli in 2012 went from a roaring success to an empty shell, one of his investors told a jury.
Sarah Hassan, 27, who gave Shkreli $300,000 to invest, said she got an email at 8:13 p.m. on Sept. 9, 2012, saying she was up $135,000, a return of 45 percent. At 8:44 p.m., Shkreli sent out a second email notifying Hassan and other investors he was shutting the fund down.
"We went through operational mishaps," Shkreli said in the email. "There is no longer any cash in the funds."
Shkreli, 34, is on trial in Brooklyn federal court accused of operating his hedge funds like a Ponzi scheme. He took his clients’ money without their permission and used it to start Retrophin Inc., according to the U.S. Shkreli’s also accused of fleecing $11 million of the drug company’s assets to pay off investors who’d lost money in the funds.
Hassan said she invested with Shkreli and his MSMB Capital on the recommendation of her father’s friend, who described Shkreli as "a rising star in the hedge fund world." Her father is Fred Hassan, the former chief executive officer of pharmaceutical giant Schering-Plough, the managing director of Warburg Pincus LLC and the ex-chairman of Bausch & Lomb Inc.
Shkreli claimed MSMB Capital had about $40 million of assets under management in early 2011 when Hassan made her investment. In reality, the fund had about $700 in December 2010, according to the U.S. For months, Shkreli claimed the fund’s returns were outperforming the S&P 500 Index, Hassan said.
"I was fairly ecstatic," she told jurors. "I trusted Martin. They were pretty phenomenal returns."
Then came the news that there was no money in the fund.
Shkreli told Hassan she could either redeem her investment or roll it over into Retrophin stock. Hassan asked for the $300,000 back, but she said Shkreli stalled for months. A year later she got the cash and Retrophin shares.
She made $2.7 million when she sold her Retrophin stock.