ETFC E TRADE Financial Corporation

The criminal charges against Martin Shkreli appear to have taken a toll on the former pharmaceutical executive's assets, with the value of his $45 million E*Trade account he used to secure bail now worth around $4 million, prosecutors said during a court hearing Wednesday.

The account was mostly comprised of shares in KaloBios Pharmaceuticals, where Mr. Shkreli was chief executive until he was fired in December, shortly after his arrest on fraud charges.

Trading in KaloBios shares was halted in December after Mr. Shkreli's arrest, and its price has plummeted to $2.05 at the market's close Tuesday, after briefly trading at more than $40 in December. KaloBios filed for bankruptcy protection late last year.

"There's nothing like an indictment to affect the value of shares," Mr. Shkreli's lawyer, Benjamin Brafman, said in court Wednesday.

Mr. Shkreli used his E*Trade account to secure the $5 million bond. Mr. Brafman, who took over as Mr. Shkreli's defense attorney earlier this week told U.S. District Judge Kiyo A. Matsumoto that he would talk to assistant U.S. Attorney Winston Paes about possibly putting up additional assets in order to meet the terms of the bond.

The hearing in Brooklyn federal court was Mr. Shkreli's first since he was indicted in December along with his lawyer, Evan Greebel, and charged with running a Ponzi-like scheme. Mr. Shkreli faces seven counts of securities fraud and conspiracy, while Mr. Greebel faces a wire fraud conspiracy charge.

Both men have pleaded not guilty to the charges.

Mr. Shkreli gained notoriety last year when he raised by more than 50-fold the price of a drug that treats a potentially deadly parasitic infection that his company, Turing Pharmaceuticals, had purchased. Mr. Shkreli, who resigned as chief executive of Turing shortly after his arrest, has been called to testify at a congressional hearing Thursday on the dramatic price increases of certain medicines.

Mr. Brafman said Wednesday that it was unclear if Mr. Shkreli would attend the hearing, but that if he did, he would invoke his Fifth Amendment right not to incriminate himself and would not answer questions.

Mr. Brafman, who was hired by Mr. Shkreli to replace law firm Arnold & Porter LLP, is a well-known criminal defense lawyer in New York who has previously handled cases involving celebrities and other public figures. After the hearing Mr. Brafman told reporters that he only agreed to take on the case after the outspoken Mr. Shkreli promised to stop talking to the media.

He said his client never knowingly broke any laws and that the drug-price increase had nothing to do with the criminal case. "We want to try this case in the courtroom and not in the media," he said.

Wednesday's hearing was largely devoted to housekeeping items—setting a schedule and designating the case as complex—but Mr. Brafman did raise one potentially thorny issue. Mr. Braman said he was in the process of reviewing documents that underpinned another judge's decision to void the attorney-client privilege between Mr. Shkreli and Mr. Greebel and could ask the court to exclude some emails between the pair from the case.

Documents unsealed last week revealed that days before charging the two men, prosecutors convinced a judge to pierce the privilege protecting Mr. Greebel's legal advice to Mr. Shkreli, a powerful legal concept that protects most legal advice, except in certain circumstances, including when that advice is in furtherance of a crime.

Communications between the two men underpin the criminal case. Prosecutors cited emails between the pair in the indictment that accused them of looting pharmaceutical company Retrophin Inc where Mr. Shkreli was CEO, to cover losses suffered by in investors in Mr. Shkreli's hedge funds.

Mr. Brafman said Wednesday he had not yet determined whether he would ask the court to exclude some of the emails.

Write to Christopher M. Matthews at christopher.matthews@wsj.com

(END) Dow Jones Newswires

February 03, 2016 13:55 ET (18:55 GMT)

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