Medicine

Theranos founder Elizabeth Holmes charged by United States regulators with yearslong fraud

Theranos founder Elizabeth Holmes charged by United States regulators with yearslong fraud

The SEC's litigation will be led by Jason Habermeyer and Marc Katz of the San Francisco office.

In a prepared statement, Theranos' independent board of directors said the company is "pleased to be bringing this matter to a close and looks forward to advancing its technology".

After the Journal's investigation, Theranos and Ms Holmes pushed back hard, and for months refused to acknowledge that its machines were effectively a sham. John Dwyer, a lawyer for Holmes with Cooley LLP, declined to comment. Mattis later joined Theranos' board but left when he became the US defense secretary.

Behind the scenes, things were very different. It did not fully validate Theranos' tech and ended up losing about $50 million by investing in Theranos, quitting the partnership and suing the startup for misrepresenting the state of its technology. Although the technology wasn't ready, they chose to try to partner with a large pharmacy chain and a large grocery chain to take their technology to consumers.

But scores of minor scandals and lawsuits, combined with 2017's series of scandals at the country's most valuable private startup, Uber (former motto: "Always be hustlin'"), make it clear that faking it is more common than just Theranos. The companies eventually settled.

Theranos's miniLab blood analyzer "was not commercially ready" in 2010 when Holmes and Balwani made a decision to try to sell their services to consumers through partnerships with unnamed pharmacy and grocery chains, the SEC complaint says.

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Holmes was also scheduled to host a $2,700-a-head fundraiser for Hillary Clinton in March 2016 at the Theranos Palo Alto, California headquarters, an event Chelsea Clinton was scheduled to attend. The pharmacy gave Theranos a $100 million "innovation fee" to help with the expansion. Its CEO, Elizabeth Holmes, was named one of TIME's most influential people of 2015. Doubts began to emerge about the technology after a Wall Street Journal report that the testing equipment might not be what it seemed. As such, according to the SEC, Theranos only generated $100,000 in revenue in 2014. Theranos and Holmes have agreed to resolve the charges against them. Federal regulators say Holmes and Theranos' former president, Ramesh Balwani made numerous false and misleading statements. Bloomberg wasn't able to reach Balwani for comment.

What followed were a string of investigations by numerous U.S. authorities, lawsuits from disgruntled investors, the closure of labs, and the sacking of 340 staff as the company attempted to salvage something from the wreckage. But because the SEC case was resolved without admissions of wrongdoing, prosecutors couldn't use it against Holmes and Balwani, Koenig said.

In a separate complaint (PDF), the SEC also accused Balwani of participating in the fraud scheme.

The company eventually had to retract or correct tens of thousands of medical tests that had been administered to patients. She is also banned from serving as an officer of a public company for a decade.

In a statement, the company said it's happy to be moving on from the incident.

The SEC is not taking aim at the startup itself, which a year ago was near bankruptcy and recently obtained a loan to survive, according to Peikin.