The CEO of blood-testing company Theranos, Elizabeth Holmes, has been charged alongside the company’s former President Ramesh Balwani with “elaborate, years-long fraud” by the Securities and Exchange Commission.
The Washington Post reports that the CEO of blood-testing company Theranos has been charged with massive fraud alongside the companies former president. Theranos CEO Elizabeth Holmes has been charged alongside Ramesh Balwani with knowingly committing “elaborate, years-long fraud.” According to the SEC’s complaint, Theranos “deceived investors into believing that its key product – a portable blood analyzer – could conduct comprehensive blood tests from finger drops of blood, revolutionizing the blood testing industry.” Holmes is ceding her voting control of the company and reducing her equity stake in Theranos, the two executives have agreed to deal with the charges brought against them but have not admitted or denied responsibility in the case.
Theranos was at one point valued at $9 billion after the company promised to revolutionize consumers’ access to their medical history through a portable blood analyzer. the company was helmed by college dropout CEO Elizabeth Holmes with a board consisting of ex-military and government members, including former Secretary of State George Shultz; Chairman of Bechtel Group Riley P. Bechtel; former Wells Fargo Chairman and CEO Richard Kovacevich; former Senators Sam Nunn and Bill Frist; former Secretary of State Henry Kissinger; and former Secretary of Defense William Perry.
Theranos seemed on the verge of success until they were hampered by a number of regulatory issues and the revelation that the company was using rival technology to perform their blood tests. The SEC claims that Holmes and Balwani falsely alleged that Theranos’ products were being used by the Department of Defense in Afghanistan and on medevac helicopters. General James N. Mattis, who led U.S. Central Command at the time, did push for the technology to be used, but it was never implemented by the Department of Defense. Mattis later joined Theranos’ board but left when he became the U.S. defense secretary.
Jina Choi, director of the SEC’s San Francisco regional office, discussed the charges brought against Holmes and Balwani in a statement saying: ”The Theranos story is an important lesson for Silicon Valley. Innovators who seek to revolutionize and disrupt an industry must tell investors the truth about what their technology can do today, not just what they hope it might do someday.” Theranos’ independent board said in a statement that they were “pleased to be bringing this matter to a close and look forward to advancing its technology.”
A report from June 2016 alleged that Elizabeth Holmes’ net worth had dropped from an estimated $4.5 billion to zero. Forbes reported “Our estimate of Holmes’ wealth is based entirely on her 50% stake in Theranos, the blood-testing company she founded in 2003 with plans of revolutionizing the diagnostic test market. Theranos shares are not traded on any stock market; private investors purchased stakes in 2014 at a price that implied a $9 billion valuation for the company.”
Actress Jennifer Lawrence is also set to portray Holmes in an upcoming film titled Bad Blood, which will be directed by The Big Short writer Adam McKay. Deadline described the tone of the film in a report saying “Where McKay focused on the greed that caused the economic collapse in The Big Short, Bad Blood casts a critical eye on how innovative companies gain astronomical valuations, and sometimes prove too good to be true.”