Update: Shkreli was released on a $5 million bond after a hearing Thursday, and had his travel restricted to parts of New York. It was not immediately clear how he pleaded to the charges. Evan Greebel, whom the SEC said was Shkreli's lawyer, also faces a count of wire fraud conspiracy. He was arrested Thursday and released on a $1 million bail.

It is unclear if somehow Shkreli got 2.5x leverage on repackaged Collateralized Wu Tang Obligations.

* * *

The “most hated man in America” just got arrested for securities fraud.

SHKRELI, CEO REVILED FOR DRUG PRICE GOUGING, ARRESTED FOR FRAUD

N.Y. LAWYER EVAN GREEBEL ARRESTED IN SHKRELI INVESTIGATION

MOMENTS AGO: Martin Shkreli leaving FBI after being processed by officials in New York following his arrest. https://t.co/qGNZOusfgV — CNBC Now (@CNBCnow) December 17, 2015

Shkreli, the baby faced, former Jim Cramer protege and serial biotech mogul who famously raised the price of a toxoplasmosis drug by 5000% in September, igniting a media and political firestorm in the process, is accused of using Retrophin (a company he founded and ran until he was ousted by the board) as a kind of slush fund. As an aside, you’re reminded that Retrophin once raised the price of a drug used to treat a rare condition that causes reoccurring kidney stones from $1.50 a pill to $30.

Retrophin claims that after Shkreli’s hedge fund, MSMB Capital, went bust after a $7 million loss on a “disastrous” trade with Merrill Lynch four years ago, he used a series of complex transactions involving Retrophin to pay back MSMB’s investors.

“Retrophin sued Shkreli in August for misuse of company funds,” Bloomberg recounts. The company “claims he engineered numerous transactions between investors in MSMB and the biotechnology firm.”

Retrophin goes on to allege that “Shkreli paid some [MSMB] investors through fake consulting agreements and others through unauthorized appropriations of stock and cash”

At one point, Shkreli allegedly decided to reclassify a $900,000 investment MSMB made in Retrophin as a loan. So basically, he invested in himself and then decided later that he had actually loaned himself money and needed to pay himself back. Retrophin did indeed pay back the “borrowings” and Shkreli subsequently used the funds to “settle another unrelated legal dispute.”

As Bloomberg goes on to note, “The Securities and Exchange Commission, which according to court documents opened an investigation into Shkreli in 2012, is expected to file a parallel civil complaint against him, according to people familiar with the matter.”

While Shkreli is known for laughing in the face of criticism and ridicule, this one might be hard to shrug off. It’s at least possible he could end up banned from running a public company, meaning Turing and KaloBios would need to find new executives (maybe Joe Campbell's KBIO short will pay off after all).

“Some of these companies seem to act more like hedge funds than traditional pharmaceutical companies,” said Senator Susan Collins, a Maine Republican who ran the recent hearing into the soaring cost of specialty drugs.

On the bright side for Shkreli, he'll have plenty of time to listen to the one-of-a-kind Wu-Tang album he bought in May for $2 million if he ends up incarcerated.

Incidentally, we predicted this might happen way back in September when we said that while "we doubt the SEC will investigate his shorting activity of biotech indices - we are confident the young 'hedge funder' will have bigger headaches to deal with soon enough."

And as for the ultimate punchline - drumroll - Shrekli had planned a meeting just two days ago with lawyers for incarcerated rapper "Bobby Shmurda" who Shrekli planned to bail out of jail. We'll close with the following quote from Shkreli, who spoke to Vanity Fair:

“We’re actually in discussion to try to bail out Bobby Shmurda. Forget whether you think he’s guilty or not, the guy should not be sitting in jail right now. He deserves a fair trial. He deserves good lawyers. He doesn’t have good lawyers. His label is hanging him out to dry and so I have a conference call tomorrow morning with them (December 15). I’ll show up with $2 million bail money no fucking problem.”

Better save that $2 million in bail money Martin. You may need it for yourself.

Meanwhile, Jim Cramer is getting nervous:

I hired summer interns from NYC School system program. They sent me this kid Shkreli for a summer. It was part of a program to help kids — Jim Cramer (@jimcramer) December 17, 2015

I did not work at Cramer Berkowitz when they hired Shkreli as an analyst. I had left the firm; It kept my name. Didn't know him. Period — Jim Cramer (@jimcramer) December 17, 2015

.@ReformedBroker It's insane. I hired poor high school kids as interns from the NYC program. Trashed for it here! https://t.co/S7te8snLmF — Jim Cramer (@jimcramer) December 17, 2015

Full indictment:

Sh Krel i Indictment