Martin Shkreli may face a decade in prison after the Hon. Kiyo Matsumoto ruled that damages by the infamous internet troll caused losses of $10.4 million dollars.
Shkreli, 34, and his lawyers have been hoping that he will receive either no time in prison — or perhaps just 16 months or less — for his conviction for securities fraud.
Matsumoto's ruling makes that much less likely. As a rule, the higher the loss amount of a crime, the longer the prison sentence suggested by a calculation of the federal guidelines.
Her ruling relates only to the amount of loss for the purpose of calculating Shkreli's recommended sentence — not in determining how much he should pay the government as part of that sentence.
Also Monday, Matsumoto in her same ruling rejected a bid by Shkreli's lawyers to reverse his criminal conviction.
At trial, there was testimony and evidence that showed Shkreli had repeatedly lied to investors about details of two hedge funds he ran — which ended up going bust without him telling investors — and then used money and cash from a drug company he later founded to pay them back their money, and then some.
Prosecutors had argued that Shkreli caused between $9 million and more than $20 million in losses. Shkreli's lawyers have said he caused no loss.
In her ruling, the judge dismissed arguments by Shkreli's lawyers that there was no actual loss because Shkreli paid hedge fund investors more than back on their money with cash and stock in the drug company he founded, Retrophin.
Matsumoto noted, "By the time Mr. Shkreli began to funnel money from Retrophin to his MSMB Capital investors, many of those investors, as well as the Securities and Exchange Commission, had detected the fraud."
Because of that, the judge said, she refused to give Shkreli any credit for paying back the investors with assets from Retrophin. That credit would have reduced the amount of the loss for the purposes of sentencing.
Shkreli's lawyer, Benjamin Brafman, in an email statement said, "Disappointed by the ruling but still hopeful that the court will find it in her heart to impose a reasonably lenient sentence on March 9th."
John Coffee, director of the Center on Corporate Governance at Columbia University Law School, told CNBC, "Under the Sentencing Guidelines, the gain or loss from the offense is a principal factor in determining the sentence."
"Such a finding of loss could justify a 10-year sentence — or longer. But federal judges no longer have to follow the guidelines and they are only advisory," Coffee said.
Shkreli’s smug attitude is well known. He is most widely recognized for his controversial 5000% price-gouging of an anti-parasitic drug, Daraprim, after Shkreli’s company Turing Pharmaceuticals acquired it in August 2015.
But that same cocky attitude could ultimately be what forces him to spend a long time behind bars.
"[Judge Kiyo Matsumoto] has great discretion as to the sentence she imposes; she could recognize that he is a first offender and give him modest time. Or she could place more emphasis on the amount of the loss and his unrepentant attitude," Coffee said.
"This is why most defense counsel instruct their client to appear modest and humble at their trial. Shkreli was the opposite and may pay a high price for his arrogance."
‘I’m so innocent,’ claimed Shkreli during trial prep. Apparently not, said Judge Matsumoto.