Hassan's dealings with the Wall Street bad boy offered a window into the workings of the lucrative hedge fund world, and illustrated the tension at the heart of the prosecution's case: the victims ultimately made money.
In the year after Hassan's initial investment, prosecutors say, MSMB Capital would take massive losses that Shkreli failed to tell Hassan and other investors about. Instead, they allege, Shkreli launched into a multi-year scheme to loot other enterprises he founded to repay investors and hide his failed stock bets.
And yet, Shkreli's attorneys say Hassan walked away with more than US$1 million after her initial US$300,000 investment.
Whether Shkreli's investors were actually defrauded emerged as a central theme during the early days of a trial that could run six weeks or so. His case has drawn national media attention as much for the charges he faces - he could be sentenced to more than 20 years in prison - as for his history as the head of a pharmaceutical company that sharply raised the price of a 62-year-old drug primarily used to treat newborns and HIV patients. Fueling that notoriety has been a boisterous personality and social media habit that has flustered even his attorneys at times.
Shkreli, a wiry child of immigrants from Albania and Croatia, can often appear awkward in public, an image that his defense attorney, Benjamin Brafman, did not shy from during his opening statements. "Is he strange? Yes. Will you find him weird? Yes," Brafman said earlier this week.
But for all his outrageous, another the image of a well-connected Wall Street insider emerged during testimony this week.
Josiah Austin, a Texas ranch owner and member of the board of directors of a biosciences firm who manages $300 million of his own money through a firm called El Coronado, said he met Shkreli in 2005 or 2006 at a bank conference and was immediately impressed.
"I thought Martin was young, smart and a little cocky. You know, I liked Martin," he said. "He wanted to make a lot of money. Martin Shkreli wanted to be Stevie Cohen." Cohen is a billionaire hedge fund manager.
Austin said he sometimes spoke with Shkreli on a weekly basis, and even agreed to pay several months rent to help Shkreli's sister, whom he didn't know personally. Even after losing nearly $5 million in one of Shkreli's early hedge funds, Austin said, "I still thought Martin was an intelligent , smart guy, but I didn't particularly want to do any more business with him."
Like Austin, Hassan also had ties to the drug industry. Hassan is the daughter of Fred Hassan, a partner at Warburg Pincus and the former chairman of Bausch & Lomb and the chairman and chief executive of the former Schering-Plough.
At their first meeting, Shkreli said his hedge fund had US$40 million to US$50 million in assets, Hassan said. (Prosecutors say it was much less.) "He seemed to be pretty smart," she said. He "talked fast, was sometimes a little distracted." Hassan said she wanted to build a business relationship with Shkreli, noting that her US$300,000 investment represented about 30 per cent of her US$1 million in personal net worth.
About a month after Hassan invested, Shkreli emailed her to say that her investment had increased to US$324,600. "I was fairly ecstatic; I was quite excited about the investment," she said.
Shkreli's relationship with Hassan helped him snag a rare meeting with her father, pharmaceutical industry giant, Fred Hassan. Fred Hassan testified Friday that he met with Shkreli for 20 to 30 minutes as a "favor" to his daughter at an industry conference. "He was a pleasant person, a little intimidated by me," Fred Hassan testified. "He had done his homework on me." (His daughter, Sarah Hassan, would later complain that Shkreli was conflating her investment in Shkreli's hedge fund with her father, who was not involved.)
Later, Shkreli approached Hassan about investing in Retrophin, a pharmaceutical company he had started. The company would focus on so-called orphan drugs that treat rare conditions. "You can make a lot of money on orphan drugs, because the price per patient is quite high," she said he told him. After being told other wealthy people were also backing the company, Hassan invested US$150,000 from her family's personal hedge fund, DynaGrow.
Eventually, Hassan testified, Shkreli notified her that he was shutting down his hedge fund but became evasive when it came to returning her money. He later told her that it had all been put into Retrophin, which Hassan testified she did not realize could happen. "I felt somewhat betrayed at this point," said Hassan, 27. "It just wasn't right." Prosecutors say that Shkreli stole from Retrophin shareholders to pay off his debts to his hedge fund investors.
Under cross-examination, Brafman repeatedly returned to the profit Hassan eventually made from the transaction. In addition to US$400,000 in cash she was given more than 50,000 shares in Retrophin, which she later sold for about US$900,000. Shkreli "more than tripled your money," he said. "At the end of the day you made a hefty profit?"
Yes, Hassan said, "even more than I asked for."
