Ex-Drug Executive Shkreli Has $40 Million Trading Loss: U.S.

Former pharmaceutical executive Martin Shkreli suffered a roughly $40 million drop in the value of a trading account used to secure his bail following his arrest on securities fraud charges, a U.S. prosecutor said on Wednesday.

At a hearing in federal court in Brooklyn, Assistant U.S. Attorney Winston Paes said the account contained mostly shares of KaloBios Pharmaceuticals Inc <KBIOQ.PK>, a drug company that Shkreli briefly ran.

KaloBios filed for bankruptcy in December, wiping out most of its equity value. That caused the value of Shkreli's E*Trade brokerage account to drop to $4 million to $5 million, from the $45 million level when it had been frozen, the prosecutor said.

Paes told U.S. District Judge Kiyo Matsumoto that Shkreli may need to post new assets to secure his $5 million bond, which was issued following the 32-year-old's arrest in December.

Shkreli's new laywer, Benjamin Brafman, responded, "There's nothing like an indictment to affect the price of shares even if the shares have significant value."

Shkreli's criminal case arose from his prior management of hedge fund MSMB Capital Management and Retrophin Inc <RTRX.O>, a biopharmaceutical company where he was chief executive before being fired in 2014.

Prosecutors said Shkreli engaged in a Ponzi-like scheme in which he defrauded investors in MSMB, and misappropriated $11 million in assets from Retrophin to repay them. He has pleaded not guilty.

Shkreli's arrest came soon after Turing Pharmaceuticals, another company he headed at the time, caused a public outcry by raising the price of a drug used to treat a dangerous parasitic infection to $750 from $13.50.Since his arrest, Shkreli has remained active on social media and given interviews to the press.

Some of that may now end.

Brafman, whose clients have included former International Monetary Fund chief Dominique Strauss-Kahn and rapper Sean "Diddy" Combs, told reporters that as a condition of his hiring, Shkreli was to stop talking to the media.

"We want to try this case in court, not the media," Brafman said.

Shkreli is expected to appear on Thursday at a congressional hearing on drug pricing, and assert his Fifth Amendment right against self-incrimination under the U.S. Constitution.

In a separate case, a federal judge in Manhattan on Tuesday gave preliminary approval to a $3 million class action settlement for Retrophin shareholders, based on many claims at issue in Shkreli's criminal prosecution.

(Reporting by Nate Raymond in New York; Editing by Jonathan Oatis)