The daughter of a well-known pharmaceuticals executive testified Thursday she felt “betrayed” by Martin Shkreli after the “Pharma Bro” dragged his feet for months in paying out her supposedly profitable hedge fund investment — only to tell her the money had been used without her permission to capitalize his new drug company.
“I was upset. I saw that as being my cash,” testified Sarah Hassan about learning from Shkreli in early 2013 that there was no money left in his hedge fund MSMB Capital after his decision to close it.
“To be frank, I felt somewhat betrayed at this point,” Hassan, 27, told jurors in Brooklyn, New York, federal court. “I was told I could get my cash from the fund months ago.”
“It just wasn’t right,” said Hassan, who was the first witness to testify at Shkreli’s criminal trial on charges of securities fraud.
Hassan said that when Shkreli had told investors he was closing the fund, he offered to pay out either all of their investments in cash, in stock of his new drug company Retrophin, or a combination of both.
Hassan also described having several times felt compelled to tell Shkreli not to publicly suggest, falsely, that her dad Fred Hassan was either an investor with Shkreli or an adviser to his then-startup Retrophin.
Fred Hassan was the CEO and chairman of Schering-Plough before it merged with Merck in 2009, and was chairman of Bausch & Lomb for three years after that. He now is a managing director at the private equities investment firm Warburg Pincus.
His daughter said she was surprised, several times, to see her father mentioned as a consultant to Retrophin in news articles.
Sarah Hassan said she first invested $300,000 with Shkreli’s hedge fund MSMB Capital in early 2011, and was “ecstatic” over the months to receive emailed statements showing a solid profit for her money.
By the end of 2011, she testified, Shkreli had told her the investment had grown to more than $365,000.
Hassan said she was “surprised” to hear in late 2012 that Shkreli planned to wind down MSMB to focus on a different investment strategy.
Hassan noted that Shkreli claimed the fund had an almost 80 percent return on assets under management since it was started in 2009, well outpacing the benchmark S&P stock index. She said it would be unusual for a hedge fund to close when it was doing so well.
She described her frustration over how Shkreli for months dragged his feet in disbursing what she had been told was then more than $435,000 in funds at MSMB, net of fees, by the time Shkreli told her he was closing the hedge fund. That represented a return of more than 45 percent on her original investment.
Hassan said that after months of asking him about the money, Shkreli told her the money had been used to fund Retrophin, his new drug company.
And it was only sometime after that, she said, that she ended up getting $400,000 in cash, and more than 58,000 shares of Retrophin stock. She later sold that stock for $900,000, she testified.
Prosecutors have argued that Hassan and other investors were unaware of the fact that Shkreli, contrary to the glowing financial statements he sent them, was losing money at MSMB Capital, and then another hedge fund he started, MSMB Healthcare.
They allege he looted millions of dollars from Retrophin to repay the investors he had defrauded at his hedge funds.