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Comment by downandout | Hacker News Reader

>When fraud happens those affected don't usually get their money back much less a return on that money.

That will be a footnote at sentencing. Federal sentencing is generally based on intended or actual loss, whichever is greater. Further, the judge is allowed to take into account intended losses from his entire course of conduct, not just the intended losses from the specific counts on which he was found guilty.

In other words, the fact that his investors lost no actual money will have little bearing on his sentence. I don't know what the actual amount he took in was, but he will be sentenced for a multimillion dollar fraud scheme, and because he went to trial and lost, he'll get nowhere near the minimum. The government likes to punish people for making them expend the time and effort of a trial (in 2012, 97% of federal cases ended with a guilty plea instead of a trial [1]). He's probably looking at 5 years at best.

[1] https://www.wsj.com/articles/SB10000872396390443589304577637...

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I disagree. I think it will be a major factor at sentencing. First the fact that he did give them their money (with a significant return on it) back to the people well before the government got involved (meaning it wasn't a PR show) to me means there was never any intent for them to actually lose money. I think the judge will see it the same way. Because if that weren't true, he would never have repatriated the money back to pay them out. He would have just said "oops, I lost it" and continued about his regular business. As much as I dislike the guy, I do believe he didn't want to rip the people off, he wanted to try to salvage what he could to make himself look good get them their money. He just chose a deceptive, illegal manner in which to do it.

Also, harm/damage is a big consideration in sentencing. He broke the law, yes. But usually a violation of the law in this regard results in substantial losses. Because it did not here, the only damage is his violation of his contractual obligation to provide money back to those who said they wanted to cash out. By holding the money, he deprived them of their rightful property as per the contract they signed when they invested with him. And considering they would have a real hard time beating his returns, proving any sort of tort injury is essentially impossible. This leaves only the statutory violation, meaning he amazingly didn't necessarily harm anyone or their property but rather just broke the law. Given the lack of injury to the victims of his crime, I think he's likely to see a very light sentence.

If you don't mine me asking, are you actually a lawyer or are you just speculating?

Definitely not a lawyer. Total speculation on my part.

I am just trying to come to some sort of logical conclusion about how the judge might approach sentencing, using my limiting knowledge of law.

Let me start by saying that what you are saying probably should be the way it plays out in this case. Everyone seems to have made money. I was just stating how it actually plays out in the vast majority of federal cases, and will likely play out here.

In this case, because of the amount involved, the guidelines will call for a substantial prison sentence (well over 5 years). There is actually a loss table (again, we're talking about the "intended loss") that determines a certain number of points for the loss [1] (plus 7 points for the "base offense level"), and that number of points is then used with the sentencing table [2] to determine the sentence. The judge is of course free to depart up or down from the guideline sentence, but the sentencing range determined by those tables will be the starting point. The odds that he will receive no prison time at all after having gone to trial and lost are effectively zero. The judge will likely cut him some kind of break because nobody actually lost anything - his lawyers will argue that he showed remorse after the fact by eventually making his victims whole - but that will have a minor effect at best. My best guess, having watched many of these things play out, is 4-6 years.

[1] https://www.ussc.gov/guidelines/2016-guidelines-manual/2016-...

[2] https://www.ussc.gov/guidelines/2016-guidelines-manual/2016-...

EDIT: OK, nevermind, I guess.

>Perhaps that makes me a bad person.

Not bad, merely ignorant. You're celebrating the incarceration of someone you presumably know very little about, all while searching for "true" victims ("perhaps the public?") to fuel your indignation.

I feel great. Shrekeli's a terrible person and I'm comfortable with him being held to account for his crimes.

Perhaps society doing a societal good. A shot across the bow when organs of state have failed them.

Like Al Capone going to jail for tax fraud.

Didn't he commit tax fraud, though? There was no stretch of the law was there?

There wasn't but he was hit hard for tax fraud really to punish him for his other crimes.

Glee at the suffering of others hardly marks a man as more evolved.

From where I sit, I do not see much difference between the man this article is about, and those enjoying schadenfreude at his expense. All are trapped in the same place.

No, I think you actually mean bad. (That's not to say I don't understand your sentinment towards me, but really... I haven't hiked prices on life-saving medicines by upwards of 1000%, etc., so at least I win on moral relatisivm points?)

This man has harmed quite a few people... or their insurance companies... which of course means harming of their customers, i.e. "us" (who can even afford insurance).

I know enough about Shkreli to consider him an awful, awful person. Do I need to know how much he loves his children, or something equally conceited and pointless?

No, no I don't.

EDIT: Oh, wait, you're one of those extremist libertarian types, aren't you? (At least judging by your most recent 5 comments).

EDIT: Look, if he hadn't been convicted of securities fraud, I would still be defending his rights as a... defendant, but now that he has been convicted, I don't feel sorry for him. (For ultimately unrelated reasons, as it turns out. I'm guessing I'm a bad person for that.)

> I know enough about Shkreli to consider him an awful, awful person.

That isn't what this trial is about. Just because you don't like someone because of one thing, doesn't mean they should be getting a harsh sentence for a separate crime (which apparently had no victims).

Perhaps instead of vilifying characters who break the not at all free market pharmaceutical industry, and name-calling people who espouse ideologies that conflict with your pre-existing beliefs, you should instead consider why a single guy was able to stir up so much trouble in your heavily regulated medical industry. Was it because there wasn't enough government to protect people? Or was it more likely due to an extremely high barrier to entry to the pharmaceutical industry imposed by the FDA? (And in other cases, excessive IP protections play a significant role).

I'll leave it as an exercise.

> Look, if he hadn't been convicted of securities fraud, I would still be defending his rights as a... defendant, but now that he has been convicted, I don't feel sorry for him.

Unfair sentencing is just as much judicial malfeasance as is prosecutorial misconduct, unfair court trials or allegations. As citizens of America (which I assume, but do not know you to be) we should all champion fairness at ever level of the judicial process at all times, lest we ever find ourselves or our friends in the crosshairs of a court that we've allowed to give punitive sentencing to.

There are undoubtedly very good debates to be had on what might be considered a fair sentence for a crime of this nature, but if you're damning him for crimes completely disconnected from this case, then by definition you are championing an unfair sentence. That's the sort of thing that has allowed our judicial system to get away with so much unfair treatment in the past, and for all our sakes, we should root against it at every level.

> Oh, wait, you're one of those extremist libertarian types, aren't you?

This counts as personal attack and we ban people for that. In addition, it's not legit to use HN for ideological battle. (Irrespective of which flavors you're for or against.) So would you please not post like this again?

Very interesting. I certainly hope he gets more time than I am expecting. Personally, my gut is saying 1-2 years. I'd be happy if he gets 4-6 like you expect.

Definitely going to be interesting to hear the judges words during sentencing. I was listening to the Michelle Carter sentencing yesterday, as I was following that relatively closely. Now I'm waiting to see what happens here, but this is much more cut and dry than that case. I'm only interested because it's Shkreli.

I'm willing to say less than 1 year, we'll see who's right ;)

He just said in a podcast with h3h3 that it would something like 6 months.

It'd be interesting to hear why you'd like 4-6 years. I'm not judging your preference or response, really just curious.

Seems like a sorta horrible thing to say imo, 6 years is a long time to spend in prison.

Why do you favor harsher sentencing for him?

As a hedge fund manager, losing money is not illegal. The only illegal thing he did was lie about it so that he could get them their money back.

It would've been perfectly legal for him to lose all his clients money in the hedge fund, make them aware of this fact, and reap the profits from his pharma business without dishing it out to his hedge fund clients.

As far as I can tell, Shkreli turned a technically legal "I fucked up and lost your money scenario" into a technically illegal I fucked up, lost your money, but got it back to you scenario.

If I was part of Shkreli's hedge fund, I would much prefer to be involved in the latter scenario than the former.

Sure, I could sue Shkreli to recoup some of my hedge fund losses, but this way they didn't need to.

> The only illegal thing he did was lie about it so that he could get them their money back.

You're missing the point; giving his investors 'their' money back was the thing he did that was unethical and illegal. If you're a fund manager and the value of your portfolio goes down after making bad bets, you can't just inject your own money into the fund to make it look like you have a positive track record so that you can solicit more outside funds.

You're grasping for ways to punish this guy because you don't like him. The fact is, he made a mistake and wanted to pay back the people he made a mistake with.

I'd say it's exactly the opposite. The guy blatantly broke the law, but you seem to he very attached to him because you see him as some kind of noble do-gooder.

If you lie about the nature of an investment your fund is doing it is fraud, even if the investment you have secretly been doing turns out to be successful.

I realize that it is fraud, but it's "lesser of two evils" fraud, which is why I personally favor lighter sentencing.

At the heart of it Shkreli was robbing Peter to pay Paul.

He took some of Retrophin investors profits and used it to pay back his investors in MSMB. Those profits should have gone to Retrophin investors.

From the perspective of the hedge fund, this is a pretty bad spot to be in. Retrophin investors will be looking to be made whole for the money Shkreli gave to MSMB investors.

I would imagine that this is how Ponzi schemes start.

I believe it is the SEC suing him for fraud, not investors trying to recoup losses. If you commit fraud in the financial industry, whether with or without harm, the regulator will come after you.

SEC can only file civil actions. This is a criminal case, which can only be brought by the DOJ.

Either way. Not investors suing him.

Interesting point. Never realized the government has a monopoly on bringing criminal charges.

I should point out too that his being able to pay them back with profit really had nothing to do with his original taking of money. It is tantamount to pure luck that he was able to, entirely separately from the fraud, recoup their losses. Had it not been for that separate channel of money available to him, he wouldn't have had the opportunity to undo the damage done by his harm. And THAT is why this is a punishable crime. If you stab someone and then treat the wound and it heals entirely - even if you find, say, a tumor while you're treating the wound and end up unintentionally saving the person's life, you have still committed the crime of assault. It was only by coincidence that you helped the person out after the crime was committed.

Yes, exactly. Look at Madoff. Early on, it's entirely possible that he could have gotten lucky trading and made the money back. That still doesn't change the fact that he committed fraud. If we only punish the people who lose money, we create a huge incentive for more fraud, because it encourages yet more "double or nothing" behavior on the part of people who screw up.

> Also, harm/damage is a big consideration in sentencing.

That's how it should be. However, if that were really the case, poor Ross wouldn't be serving two life sentences.

> As much as I dislike the guy, I do believe he didn't want to rip the people of

Not these rich people, no. He had no qualms about ripping off regular people with his other business though.

I think turc1656 meant to say "he didn't want to defraud the people".

I'm pretty sure the "no harm no foul" defense doesn't hold water in a fraud case. A Ponzi scheme is illegal the entire time (because it's fraudulent) even though the early investors receive returns.

I'm pretty sure it does. A ponzi scheme absolutely does harm people through fraud, namely everyone left holding the potato. Sure, it doesn't harm everyone involved, but many people are harmed because of fraud.

In Shkreli's case, he didn't actually harm anyone through fraud, because although he committed fraud, he got them their money back through entirely legal, non-fraudulent means.

Getting money back is just one point in the probabilistic set of possible outcomes. Investment is all about risk, therefore you really cannot ignore that part.

Completely over the top illustrative example: you give me money for ten years to invest in real estate, because your investment portfolio is lacking in that sector. I blow it all on cocaine and hookers, then when the money is due I get nervous, buy lottery tickets and win. You get your money back, with a nice profit attached in the upper parts of what could be expected by a real estate investment. Was I a faithful manager of your money? Hell no! If you wanted lottery tickets you would have bought them yourself.

Yeah, except Shkreli's handling of the HF money was not fraudulent (he didn't blow people's money on cocaine and hookers, or blow it on anything really, the hedge fund just did poorly).

A coverup is a coverup. If he cannot stand up to his investments doing poorly he has no place in the institutional investment business. If you fake (or hustle) good results to lure in the next batch of investors, yes, that is fraud. It would be an entirely different case if he would have let his funds tank but compensated the losses of his investors with large put nominally unrelated personal donations (assuming that the investors are the actual owners of the money invested, not some middlemen fiduciaries). The illustrative purpose of my example was not how bad cocaine is, it was how bad being deceptive about the nature of an investment could be even when it turns out to be successful.

Most ponzi schemes and unauthorised trading start with someone trying to make up for a loss they made and hoping they will fix things and everyone will be made up. That doesn't make it less serious.

It may look surprising given the hatred of bankers here, but it's a profession based on honesty. A guy got banned from the city in London for regularly frauding on his train tickets.

He didn't get convicted of the ponzi scheme charge though. So the way he paid back investors is considered legit.

Yes, this is why - regardless of the outcome - he needed to be charged. People shouldn't be able to think they can get away with a thought process that equates to "I can defraud people and if my plan doesn't work out I'll find some other way to make it right." Fraud is fraud, and if you make it "right" via some other channel you haven't really made it right. You've gotten lucky and made your fraud look better.

> As much as I dislike the guy, I do believe he didn't want to rip the people off, he wanted to try to salvage what he could to make himself look good get them their money.

I think his behavior in both this case and in his "pharmaceutical" endeavor clearly demonstrate his willingness to rip people off.

> The government likes to punish people for making them expend the time and effort of a trial

While I understand why this is true, I hate it about our legal system. If you're not guilty then you shouldn't be coerced into a plea because of the draconian maximum punishment they hold over your head.

This is evident nowhere more clearly than drug convictions, where they can lock you up for the rest of your life because you're doing something they don't like.

It's probably even simpler - the conviction is the deliverable produced by a prosecutor, and the thing that moves their career forward. So they are incentivized to always go for the harshest possible punishment, in the same fashion that a company chooses profits over everything else.

The system isn't malicious, it's just not designed to counteract this sort of thing.

Prosecutors don't charge people if they aren't fairly confident that the evidence will result in a conviction. However they will also be willing to bargain for a plea to save the effort and expense of a trial. This lets them get more cases through the system in less time. They (or the police) might also try to pressure a suspect to confess, just to see if he will. That saves them even more time.

So bottom line, you should never admit or confess to anything. If the prosecutor has enough evidence, he'll probably start with an offer of a plea deal. If his evidence is marginal, he might try to get a plea but likely won't bring charges if he thinks his chances in court are iffy.

If you go to trial anyway, in the face of strong evidence against you, then you've probably lost your chance at a light sentence, modulo how good a defense you can afford.

> Prosecutors don't charge people if they aren't fairly confident that the evidence will result in a conviction.

Yes they do. They throw a huge array of charges, provable or now, at people with the intent to scare them.

Punishing people for refusing to plead guilty should be a crime.

Example?

Aaron Swartz?

All the changes there were ridiculous, but easily provable.

However often that may happen in non-computer cases, it doesn't appear to have happened in this case; you can read the whole indictment in less than 4 minutes.

> In other words, the fact that his investors lost no actual money will have little bearing on his sentence

AFAICT, the Retrophin investors lost actual money. The losses came out of gains and reduced them, and they still had net gains from Retrophin, but they lost money to the fraud.

Isn't Mr. Shkreli one of those Retrophin investors, too? Like, he could have made his defrauded hedge fund clients whole out of his stake in Retorphin, rather than from Retrophin as a whole.

This is what really confuses me. I haven't found a source that actually specifies what specifically he was found guilty for. At least one of the charges was about defrauding Retrophin investors, but he was found not guilty on several charges, so it's hard to tell. Quotes like this make me think that he was found not guilty on that charge:

> Shkreli said during a press conference after the jury's announcement that he was "delighted by the verdict" since he was found not guilty on a key charge regarding his former drug company Retrophin.

http://www.businessinsider.com/martin-shkreli-verdict-securi...

It will be interesting to see the sentence. He definitely seems to disagree with you: https://twitter.com/SamTheManTP/status/893552820548403201

Q: How much time do you likely face?

Shkreli: Uh I'm guessing none on the short side 6 months long side

I could see that he was expecting something like that based upon his press conference outside the courthouse. I think he's in for a very rude introduction to the concept of "intended loss" and the federal sentencing system in general.

Not claiming any knowledge on the subject, just wanted to back up suggestions of his expectations with evidence. We'll see what happens. Personally I'm rooting for him, I think he's misunderstood.

I'm curious, what part of his message is misunderstood to you?

I just think he's generally misunderstood and undeservedly hated. While I don't dispute he committed crimes and should be punished for that, it's compounded with his existing bad reputation over the completely legal and unremarkable Retrophin move. There's been a massive smear campaign against him and he has been unjustly dragged through the mud over that.

Granted his social awkwardness and attention seeking threw a lot of fuel on that fire, so he's partially at fault for encouraging it. But if you look past those immature antics he's a smart and productive member of society. It would be a shame, in my opinion, if he winds up in prison for several years. I think a fairer sentence would be a big fine and parole.

What's the definition of "intended" here? I would not normally say that someone desperately covering up business failures as they keep running it intends there to be any loss.

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