Mr. Shkreli had based his appeal, in part, on the 1999 decision by the Second Circuit in United States v. Berkovich. In that case, the appeals court upheld an instruction that for a wire fraud conviction the judge must clearly inform “the jury that they could not convict appellant unless he intended to cause loss to someone.”

But there is an important distinction between the wire fraud charges, on which the jury found Mr. Shkreli not guilty, and the securities fraud charges on which he was convicted. The wire fraud statute requires proving that the defendant used a fraudulent scheme to obtain money or property from the victims.

Securities fraud does not require that investors suffer a loss. The statute prohibits “any manipulative or deceptive device or contrivance” in violation of any rules issued by the Securities and Exchange Commission. Rule 10b-5, the primary anti-fraud rule, provides that it is a violation “to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.”

In United States v. Litvak, the Second Circuit last year pointed out that “unlike common law fraud or a civil action for damages where an investor seeks compensatory damages, proof of harm is not necessary in a criminal prosecution under Section 10(b), so long as materiality, intent to defraud, and a connection to a securities transaction are shown.” In United States v. Leonard, a 2008 Second Circuit decision, the appeals court upheld giving a “no ultimate harm” instruction because the defendants “intended to deprive investors of the ‘full information’ they needed to ‘make refined, discretionary judgments.’” By doing so, the court said the defendants “intended to harm the investors.” In other words, harm stems from the false statements to induce investments, not whether anyone lost money.

Thus, the court of appeals distinguished wire fraud and securities fraud and rejected the argument that jurors should have been told that investor losses were important to find securities fraud. The Second Circuit stated that “exclusion of additional language describing an element not required for the charged crime” could not have been prejudicial to Mr. Shkreli.

Without the “no ultimate harm” instruction, the court of appeals said jurors might have found Mr. Shkreli did not have the requisite intent to defraud because “he believed that the investors would ultimately make money from their investments.”

The appeals court also upheld the district court’s order that Mr. Shkreli forfeit $6.4 million as ill-gotten gains from the securities fraud. The judges rejected his argument that the investors did not lose any money and found that “forfeiture is gain based, not based on the losses (or gains) to the victims.” Thus, the finding that he misappropriated money from the hedge funds for his own use supported the forfeiture order.