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Even Behind Bars, Martin Shkreli Is Still Filing Lawsuits

Imprisoned Shkreli Sues Ex-Investor for Fraud Tied to His Fund

(Bloomberg) -- Convicted “Pharma Bro” Martin Shkreli is in prison serving a seven-year sentence, but that hasn’t tamed his appetite for using the courts to battle former colleagues and clients. On Friday, he claimed a former investor in his Elea Capital hedge fund forced him to sign a $250,000 promissory note that is now unenforceable.

Shkreli alleges Lee Yaffe, a former business associate who became a prosecution witness, directed his father to start a wrongful legal action that has since resulted in a $420,000 judgment, according to a complaint filed in Brooklyn federal court. It’s the same courthouse where Shkreli was convicted by a jury two years ago of securities fraud.

During Shkreli’s trial, Yaffe testified that he’d persuaded his father, George Yaffe, to invest $100,000 in Elea Capital, then later lost all of it and spent five years trying to get the money back. After the implosion of Shkreli’s hedge fund in 2011, Shkreli launched biotech company Retrophin Inc.

The younger Yaffe told jurors that after failing to get his father’s money back, he eventually made a deal with Retrophin to provide consulting services for $200,000 and 15,000 shares of the startup. But he never actually provided any services. Yaffe later sold the stock and testified he eventually had to pay the money back after reaching an agreement with the government to avoid being prosecuted.

In his suit, Shkreli claims he’s the one who was wronged. He argues that both Lee Yaffe and his father were experienced investors and knew the risks of putting their money in a hedge fund.

Shkreli also claims that after Elea’s implosion, Lee Yaffe leaned on him, insisting he “man up,” and repay the elder Yaffe. Shkreli argues he was pressured into signing a promissory note for $250,000, which Shkreli claimed was “more than double” the original investment.

“The promissory note was the product of fraudulent representations made by Lee Yaffe that Mr. Shkreli must do the ‘right thing,’” Shkreli said in his suit.

In December, George Yaffe won a $420,000 default judgment against Shkreli, who didn’t defend the suit.

Edward Kang, a lawyer for Shkreli, didn’t respond to a voicemail at his office seeking comment about the earlier default judgment.

Shkreli has filed other suits from prison. In May, he sued the former chief executive of Retrophin and two other executives, claiming they’d “illegally” ousted him from the company for their own benefit. He settled that case a month later under terms that weren’t disclosed.

Dubbed the Pharma Bro, Shkreli is serving his term at the federal prison in Allenwood, Pennsylvania,. He was moved there from a low-security camp in March after the Wall Street Journal reported he was using a contraband mobile phone to secretly run Turing Pharmaceuticals, now known as Phoenixus AG, as well as posting on Twitter. The facility he’s now in is more secure.

Meanwhile, a federal appeals court in July upheld Shkreli’s conviction just three weeks after his appeal was heard.

The case is Shkreli v. Yaffe, 19-cv-5084, U.S. District Court for the Eastern District of New York (Brooklyn).

To contact the reporter on this story: Patricia Hurtado in Brookyln federal court at pathurtado@bloomberg.net

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Steve Stroth

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