When federal prosecutors unsealed their securities fraud indictments of “Pharma Bro” hedge fund manager Martin Shkreli, they added a warning that “the government will seek forfeiture” of “any property” traced to Shkreli’s crimes if convicted.
Now that Shkreli was convicted of securities fraud in Brooklyn on Aug. 4, one of his most mysterious and expensive pieces of property that might be up for government seizure and auction is “Once Upon a Time in Shaolin,” the one-of-a-kind copy of Wu-Tang Clan’s double album sold to Shkreli in 2015 for a record price of $2 million.
The feds refuse to say whether they plan to seize and sell the mysterious rap album. Both the U.S. Attorney’s Office for the Eastern District of New York in Brooklyn and Shkreli’s defense attorney Benjamin Brafman declined to comment on any potential government forfeiture.
Shkreli was dubbed “Pharm Bro” and the “most hated man in America” in 2015 when he snapped up “Once Upon a Time in Shaolin” from Wu-Tang Clan and then abruptly jacked up the price of his AIDS drug by 5,000 percent.
If the federal government confiscates the CD and puts it up for auction, it would be far outside the ordinary realm of property seized by the federal government in a criminal forfeiture case, one expert said.
“Real property, cash, and cars” are the bread-and-butter property seized in criminal forfeiture cases, former federal prosecutor and white collar crime defense attorney Jonathan Howden told TheWrap.
Howden said the most unusual property seized in his time as a federal prosecutor in San Francisco was a stable of Kentucky thoroughbred horses and “some extremely valuable Tiffany glass lamps.”
If the Wu-Tang Clan CD is seized and sold at auction by the feds, there is no guarantee that the federal government could find a buyer willing to pay $2 million.
The $2 million sale of the double album is the highest auction price for a musical recording, easily topping the $300,00 auction price for an acetate of Elvis Presley’s first song bought by White Stripes musician Jack White in 2015, according to Art News.
Beyond the price, selling the sole copy of “Once Upon a Time in Shaolin” might create legal headaches for the government and any potential buyers.
Government lawyers would need to examine the secret contract between Wu-Tang Clan and Shkreli and determine whether “the new buyer would be bound by that contract,” forfeiture expert and lawyer at the libertarian Institute for Justice Robert Johnson told TheWrap.
The complicated contract between Shkreli and Wu-Tang Clan took “months” to negotiate and finalize, the Paddle8 auction house that handled the sale said at the time.
Potential buyers have little idea what the album sounds like because the entire “Once Upon a Time in Shaolin” has never been played to the general public, at least not as of this writing.
One year later, Wu-Tang Clan played 13 minutes of the 31-track double album in March 2015 for a select group music writers, fans, and potential buyers in New York before putting it up for auction.
Since Shkreli bought the CD, he has kept it out of the public arena. He played portions of it online to celebrate the election of President Trump in November 2016, although those tracks are no longer available online.
On Aug. 4, shortly after Shkreli was convicted of two counts of securities fraud and one count of conspiracy, he retreated to his apartment and live streamed a very low-quality portion of a CD on YouTube that was reportedly “Shaolin.”
If the CD is seized and sold by the feds, “the proceeds are deposited in the federal forfeiture account and used for federal law enforcement purposes,” said Johnson, the lawyer at Institute for Justice.
Asset forfeiture is big business for the government. Federal law enforcement officials use both criminal and civil forfeiture laws to confiscate property worth “well over $1 billion a year,” Johnson said.
Meanwhile, Shkreli remains free on $5 million bail and maintains possession of his $2-million CD. He faces a maximum sentence of 20 years in prison.