KaloBios Plummets 50% After Martin Shkreli Is Arrested For Fraud

The most unpopular man in the pharmaceutical world is in a little bit of trouble.

Turing Pharmaceuticals founder Martin Shkreli has been arrested on securities fraud related to a firm he founded, Bloomberg reported Thursday morning. Separately, Reuters citing witness said the entrepreneur was arrested by the FBI.

According to the Bloomberg report, "Prosecutors charged [Shkreli] with illegally taking stock from Retrophin Inc., a biotechnology firm he started in 2011, and using it pay off debts from unrelated business dealings. He was later ousted from the company, where he’d been chief executive officer, and sued by its board."

Shkreli is accused of engaging in a "shell game" after his now-defunct hedge fund MSMB Capital Management lost millions. "He is alleged to have made secret payoffs and set up sham consulting arrangements," Bloomberg said.

The controversial CEO has been in the news quite a bit in the second half of 2015, as he infamously raised the price of a potentially life-saving pill from $13.50 to $750. The drug, Daraprim, was seen as a treatment related to HIV and cancer. Its price was hiked just after Shkreli's Turing bought the drug.

"Retrophin sued Shkreli in August for misuse of company funds, claiming he engineered numerous transactions between investors in MSMB and the biotechnology firm. Similar allegations are laid out in the company's regulatory filings," the report continued. "The company alleged in a complaint filed in Manhattan federal court that, through a disastrous trade with Merrill Lynch in 2011, Shkreli cost MSMB more than $7 million, leaving it virtually bankrupt."

Shkreli was named CEO of KaloBios Pharmaceuticals Inc KBIO on November 20, two days after the penny stock was about to go bankrupt. On November 18, Shkreli bought 1,211,115 shares of KaloBios at $1.35 per share.

The stock plummeted 50 percent in Thursday's pre-market session. It last traded at $11.75 before being halted at 6:50 a.m. ET. Nasdaq later Thursday morning said trading will remain halted until they satisfy request for additional information.

The U.S. Attorney and FBI officials will hold a press conference at 12 p.m. ET to discuss Shkreli's arrest.

After trading under $3 for most of the year, it hit a high of $45.82 after Shkreli saved the company from near bankruptcy.

Bloomberg said Shkreli could be banned from running a public company due to the regulatory charges he now faces. "The charges also show that a small group of health care firms—ones that acquire the rights to drugs and significantly increase their prices—is drawing the scrutiny of regulators and prosecutors, with a possible chilling effect on aggressive drug-pricing strategies," it said.