Martin Shkreli, the boyish pharmaceutical entrepreneur who caused a public uproar after he drastically raised the price of a life-saving prescription drug, was arrested on Thursday for engaging in what US prosecutors said was a Ponzi-like scheme at his former hedge fund and a pharmaceutical company he previously headed.

Shkreli, who has become a lightning rod for growing outrage over soaring prescription drug prices, was arrested before dawn at the tony Murray Hill Tower Apartments in midtown Manhattan. Clad in a grey hoodie, the 32-year old could be seen being escorted by a slew of law enforcement, including FBI, into a car.

It was a dramatic turn of events for Shkreli, who in recent months became a pariah for his controversial remarks in the press and taunts on social media outlets, including to Democratic presidential candidate Bernie Sanders.

Many on social media said Shkreli was getting what he deserved. On Twitter, the top hashtag and keyword related to his arrest was #Karma. But ironically his downfall was not related to expensive drug pricing.

In an odd foreshadowing of events, a video posted last night on his YouTube page shows Shkreli answering a phone call during a live stream in which a caller at 1:22:10 identifies himself as a "special agent" before Shkreli appears to cut him off and hangs up.

Shkreli, who is Chief Executive Officer of Turing Pharmaceuticals and KaloBios Pharmaceuticals Inc, was charged in a federal indictment filed in Brooklyn relating to his management of hedge fund MSMB Capital Management and biopharmaceutical company Retrophin Inc.

Brooklyn US Attorney Robert Capers said at a news conference that Shkreli "essentially ran his companies like a Ponzi scheme, where he used each subsequent company to pay off defrauded investors in the prior company."

Authorities highlighted what they called the "brazenness" of his actions. Shkreli's efforts to conceal the fraud led him to use the assets of Retrophin to pay off debts from his hedge funds, Capers said.

Shkreli was charged with securities fraud, securities fraud conspiracy and wire fraud conspiracy. The maximum sentence for the top count is 20 years in prison.

"Mr. Shkreli is confident that he will be cleared of all charges filed by the US Attorney's Office for the Eastern District of New York (EDNY) and the Securities & Exchange Commission," a representative said in a statement late Thursday.

"(He) also strongly denies the charges regarding the MSMB entities, which involve complex accounting matters that the EDNY and SEC fail to understand," the representative added.

The indictment, the result of an ongoing investigation, also charged Evan Greebel, a former partner at law firm Katten Muchin Rosenman who was Retrophin's outside counsel. Greebel, 42, was also arrested on Thursday.

Shkreli and Greebel entered pleas of not guilty through their lawyers.

Both were also sued in a related lawsuit by the US Securities and Exchange Commission, which also named New York-based hedge fund MSMB Capital Management as a defendant.

The securities fraud investigation predated a separate controversy surrounding Shkreli since September, when reports surfaced that his privately held Turing had raised the price of Daraprim, a 62-year-old treatment for a dangerous parasitic infection, to $750 a tablet from $13.50 after acquiring it.

Asked if Shkreli raised drug prices to pay back investors, Capers said that was not part of the investigation. "I wouldn't want to speculate on his reasoning for trying to increase the price on those drugs," he added.

Shares of KaloBios fell 53% to $11.03 in premarket trade before being halted. Retrophin, which said in a statement that it had fully cooperated with the government investigations of Shkreli, closed down 1.9% at $20.94.

Turing and KaloBios declined to comment. Lawyers for Shkreli had no comment.

In July, Greebel had joined the law firm Kaye Scholer, which in a statement noted the "transactions in question predated his arrival to the firm."

PONZI-LIKE SCHEME

Thursday's charges relate to Shkreli's management of MSMB Capital Management, whose closure he announced in 2012, and his time as CEO of Retrophin from 2012 to 2014.

The indictment said Shkreli made false representations to MSMB investors to draw in $3 million in investments.

After MSMB suffered devastating trading losses in 2011 and ceased trading, Shkreli for months sent fabricated updates to investors touting profits of as high as 40% since inception, the indictment said.

He also solicited $5 million from investors for another fund, MSMB Healthcare Management LP, while concealing his performance managing MSMB Capital and a prior fund and providing investors an inflated valuation of his then-private firm Retrophin, the indictment said.

To pay back the MSMB funds' investors, Shkreli and Greebel misappropriated $11 million in Retrophin assets through settlement agreements and sham consulting deals, according to the indictment.

The case mirrors a lawsuit Retrophin filed in August against Shkreli in federal court in Manhattan for $65 million, claiming he had used his control over the company to enrich himself and pay off MSMB investors' claims.

Shkreli has denied those allegations.