The Theranos Tale of Charm, Deception, and Federal Charges

Elizabeth Holmes accused of manipulating investors and patients, faces federal charges

She was captivating, well spoken, affiliated with Stanford University, and during the course of fifteen years, able to manipulate Silicon Valley investors out of billions of dollars.  Meet Elizabeth Holmes, founder of Theranos, a now-defunct health technology company.

Holmes and former Theranos president Ramesh “Sunny” Balwani were indicted by the Northern District of California on federal criminal wire fraud and conspiracy charges on June 15, 2018.

  Holmes has since stepped down from the company she started in 2003 at the age of 19.

Reforming blood testing at a fraction of the cost

pin prick blood test, and federal charges for massive fraud

Holmes called her invention “the IPod of healthcare.”  It took a pinprick of blood from a patient and claimed to be able to conduct hundreds of medical tests.  This proprietary technology, the Edison, eliminated the need for a large needle, and was a fraction of the price of traditional testing.  Patients could simply test right at their local pharmacy. It would disrupt the 60 billion dollar lab test industry, and Holmes said, “it was the most important thing humanity has ever built.”

Investors bought in. Walgreens was hooked.  The media swooned. Holmes appeared on the cover of Fortune magazine and was named one of Time’s 100 Most Influential People.  At its height, Theranos was worth 10 billion dollars and Holmes became the youngest self-made female billionaire in the world.

Theranos raised nearly 900 million dollars from investors. High profile investors such as Education Secretary Betsy DeVos, Henry Kissinger, and Rupert Murdoch had no idea what was going on behind closed laboratory doors.  Theranos claimed its technology was validated by the FDA and pharmaceutical companies. The company employed persons with reputable backgrounds from MIT, Harvard, and Apple.

Test results inaccurate

But sources say it was all a lie- to regulators, investors, and the public.  Tests results were not accurate. More than one million patient results were later invalidated.  USA Today reported that examiners from Medicare inspected Theranos’s lab in 2015 and found deficiencies in its test for the clotting of blood, which is critical information in dosing blood thinners. Wall Street Journal investigative reporter John Carreyrou broke a story questioning Theranos’s technology validity in 2015.

Legal ramifications – Federal Charges

The Securities and Exchange Commission charged Holmes, Balwani and Theranos with massive fraud in March of 2018.  Holmes paid $500,000, returned her shares in the company, and relinquished control as part of the settlement. Balwani did not settle.  In June of 2018, the federal indictment of Holmes and Balwani was brought forth by the US Attorney for the Northern District of California.  Theranos closed operations on August 31, 2018.

The scope of the Theranos deception is unprecedented in US history.  Following its legal ramifications is of interest to all US citizens.

Federal cases such as this one can be complex and far-reaching.  If you find yourself needing advice for a federal case, consider Columbus-based defense attorney Joe Edwards who has over 25 years of experience as a trial attorney.

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