Controversial pharma executive Martin Shkreli has been charged with misappropriating money from investors in hedge funds that he managed and lying about their financial performance to cover up his trading losses.

Federal prosecutors accused Shkreli of ensnaring investors through “a web of lies and deceit” while he ran the MSMB Capital management and MSMB Healthcare hedge funds and then misappropriating the assets of Retrophin, the drug company he founded in 2011, to pay off disgruntled investors.

Shkreli, 32, was arrested Thursday by the FBI on criminal fraud charges and is also facing related civil claims brought by the U.S. Securities and Exchange Commission.

“Shkreli essentially ran his company like a Ponzi scheme where he used each subsequent company to pay off defrauded investors from the prior company,” Robert Capers, the U.S. Attorney in Brooklyn, N.Y., said at a press conference.

Andrew J. Ceresney, director of the SEC’s Division of Enforcement, said Shkreli allegedly “perpetrated a series of frauds on investors in his hedge funds and Retrophin’s shareholders in order to cover up his poor trading decisions.”

In one instance, the SEC said, Shkreli told an investor that MSMB Capital had $35 million in assets under management when it actually had less than $1,000 in its bank and brokerage accounts. Nine clients invested $3 million in the fund from October 2009 to January 2011.

“For months following the complete loss of the investments in MSMB Capital and the end of trading activity, Shkreli continued to send fabricated performance updates to investors that touted profits of as high as forty percent since inception,” prosecutors said.

The SEC said Shkreli misappropriated about $120,000 from MSMB Capital to pay for food, clothing, medical expenses, office rent, and cash withdrawals, and another $775,000 from MSMB Healthcare to pay part of a $1.5 million settlement to Merrill Lynch over a $7 million trading loss.

Shkreli, a former intern for “Mad Money’s” Jim Cramer, had recently won notoriety for raising the price of the drug Daraprim, which is used to fight parasitic infections in AIDS patients. He increased the price of the drug more than 55-fold from $13.50 per pill to $750, with the BBC calling him “the most hated man in America.” He was voted out as Retrophin’s CEO in September.

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