He was very unpopular and had always desired Bag End for himself. When Frodo embarked to Rivendell, Lotho finally received Bag End and from there set himself up as Chief of the Shire.
He became an accomplice of Saruman during the War of the Ring. With the aid of these Ruffians, Lotho was able to depose and imprison Will Whitfoot, the Shire's lawful mayor, and declared himself Chief Shirriff. Now a small-time criminal master in Hobbiton, Sharkey personally took over the Shire, that was already under his control thanks to the countless agents that used to spy Gandalf, and for about half a year he manipulated the Hobbits into serving him. Saruman eventually betrayed Lotho and killed him; Saruman's minion Grima Wormtongue then presumably ate him.