How Martin Shkreli Made a Killing by Shorting Mannkind Stock

Before he was known for having the most punchable face in America, Martin Shkreli was just a smalltime hedge fund manager making an honest living by sabotaging companies and profiting from their declining stock prices (Bloomberg, 2014). Shkreli’s methods, while certainly unethical, were apparently not illegal. Hedge funds are not regulated by the Securities and Exchange Commission (SEC), so they can get away with pretty much anything. But now that the Reddit group WallStreetBets has driven up the share price of Gamestop by 134% – totally screwing over the hedge funds that bet against it – the SEC is desperately hunting for evidence of fraud (Bloomberg, 2021). The hypocrisy is laughable.

Martin Shkreli at a congressional hearing

Short-selling is a lesser known investment technique used by hedge funds. The most famous example was depicted in the Hollywood movie The Big Short – a true story about hedge fund manager Michael Burry (played by Steve Carrell) who made $750 million when he bet against the housing market (The Huffington Post, 2016). Shkreli, on the other hand, made his money with a more direct approach. He bought stock in biotech companies like the MannKind Corporation and then did everything he could tank them – from sabotaging the drug approval process to undermining investor confidence (CREW Letter to SEC, 2012). On more than one occasion, it worked.

Short-selling is very risky; if a company’s stock price goes up, then the hedge funds that bet against it end up owing money (The Huffington Post, 2016). The Reddit group found out that hedge funds were betting against Gamestop and managed to drive up its stock price from $4/share to $200/share (CNN Business, 2021). The Reddit group investors made a ton of money, while the hedge fund investors were left with the bill. Historically we, the little people, have been left with the bill, and the regulators have been fine with it.  

In the case of Shkreli shorting MannKind stock, people living with diabetes were the ones who suffered. Diabetes is an epidemic, affecting 34.2 million people in the US alone (CDC, 2020). People with Type 1 diabetes must abide by rigid routines and inject themselves with insulin multiple times per day, every day, or they will die (Smith-Marsh, 2016). MannKind’s flagship product, a needle-free insulin (called “Afrezza”), was going to revolutionize diabetes management. Instead of having to constantly inject themselves with insulin – which needs to be refrigerated – patients would be able to take their insulin through a tiny inhaler anytime, anywhere (Mannkind Corporation, 2013). Late in 2010, the needle-free insulin was on its way to FDA approval (Zinn, 2013). Or so the company thought.

What they did not realize was that Shkreli had been behind the scenes working hard to sabotage them. Shkreli, with a bachelor’s degree in business administration, sent his own 30-page-long negative review of MannKind’s clinical trial data to the FDA. He claimed that MannKind’s “clinical trial package was lacking” and urged the FDA not to approve the needle-free insulin. Despite the fact that his credentials were lacking and he was upfront about being short on MannKind stock, the FDA agreed with Shkreli. They rejected MannKind’s application for the approval of needle-free insulin (Zinn, 2013).

Next, Shkreli posted an article on Seeking Alpha, a popular investment site, entitled: MannKind Is Simply Running Out Of Cash. In it, he predicted the company would soon go bankrupt and claimed that “inhaled insulin (including Afrezza) is a bad idea conceptually, with marginal theoretical benefits compared to regular insulin and no actual benefits.” (Seeking Alpha, 2012). Diabetics who have to stick themselves with needles every day might disagree.

Shkreli went on to sabotage other biotech firms and profit from their declining stock prices. Citizens for Responsibility and Ethics in Washington (CREW) filed a grievance with the SEC accusing Shkreli of manipulating the public and the FDA for profit (CREW Letter to SEC, 2012). The SEC never launched a formal probe to investigate (Bloomberg, 2014). A couple of years later, Shkreli became notorious for making massive profits off of Turing Pharmaceuticals’ HIV drug, Daraprim, when he raised the per pill price from $13.50 to $750.00 overnight (Associated Press Reporter, 2016). That is how Shkreli became one of the most hated men in America.

MannKind’s needle-free insulin was approved in 2014 (, n.d.). Sometimes referred to as “the best-kept secret for anyone living with diabetes” it has a small but mighty following (Spectrum News Buffalo, 2018). Shkreli is currently serving seven years in prison; not because he sabotaged biotech companies like MannKind for profit, nor because he grossly inflated the cost of a lifesaving HIV drug. Martin Shkreli is in prison because he lied to investors about how much money they made (CNN Money, 2017).

Works Cited

  1. Associated Press Reporter. (2016, February 4). Disgraced ‘pharma bro’ Martin Shkreli SMIRKS at Congress committee, calls them imbeciles and pleads the Fifth as he refuses to answer questions about his 5,000% price hike on HIV drug. Retrieved from Daily Mail:
  2. Bloomberg. (2014, April 17). Once a Notorious Short Seller, Martin Shkreli Now Sees a Future in Biotech. Retrieved from Bloomberg Business:
  3. Bloomberg. (2021, Feb 3). SEC Hunts for Fraud in Social-Media Posts Hyping GameStop. Retrieved from Bloomberg:
  4. CDC. (2020, Feb 11). National Diabetes Statistics Report, 2020. Retrieved from Diabetes:
  5. CNN Business. (2021, Jan 28). Everything you need to know about how a Reddit group blew up GameStop’s stock. Retrieved from CNN Business:
  6. CNN Money. (2017, August 4). Martin Shkreli convicted of securities fraud, conspiracy. Retrieved from CNN Money:
  7. CREW Letter to SEC. (2012, March 9). Retrieved from Scribd:
  8. (n.d.). Afrezza Approval History. Retrieved from
  9. Mannkind Corporation. (2013). AFREZZA® – A First-in-class Ultra Rapid-Acting. Retrieved from Mannkind Corporation Insulin:
  10. Seeking Alpha. (2012, January 19). MannKind Is Simply Running Out Of Cash. Retrieved from
  11. Smith-Marsh, D. E. (2016, March 2). Type 1 Diabetes . Retrieved from endocrineweb:
  12. Spectrum News Buffalo. (2018, May 1). Here’s the best-kept secret for anyone living with diabetes. Retrieved from Spectrum News Buffalo:
  13. The Huffington Post. (2016, Jan 24). A Short Explanation Of What A ‘Short’ Is In ‘The Big Short’. (Don’t Worry, It’s Not Long). Retrieved from Huffpost:
  14. Zinn, M. (2013, December 11). MannKind Corporation: One Large Step for Shareholders, One Gigantic Step for Diabetics. Retrieved from