Theranos founder Elizabeth Holmes charged with fraud
June 16, 2018
Federal prosecutors in the United States indicted Elizabeth Holmes on Friday on criminal charges of defrauding investors, doctors and patients as the chief executive officer of blood-testing startup Theranos.
Holmes and her former chief operating officer Ramesh "Sunny" Balwani, have been charged with two counts of conspiracy to commit wire fraud and nine counts of wire fraud, prosecutors announced on Friday.
If convicted, both could face 20 year prison sentences for each charge and up to $2.75 million ($3.2 million) in fines.
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Prosecutors charge that Holmes and Balwani deliberately misled investors, policy makers and the public by falsely claiming that they had developed revolutionary technology that could quickly and cheaply provide a range of clinical tests from a small drop of blood.
"CEO Elizabeth Holmes and COO Sunny Balwani not only defrauded investors, but also consumers who trusted and relied upon their allegedly revolutionary blood-testing technology," Acting U.S. Attorney Alex Tse said in a statement.
From 'Jobs' to jobless
Holmes founded Theranos in 2003, aged 19, saying her company had the technology to conduct dozens of blood tests with just a prick of a finger.
Sporting a black turtle neck that earned her the moniker "the next Steve Jobs," Holmes quickly became known as a wunderkind in Silicon Valley.
She teamed up with Balwani, who she met on a summer trip to Beijing during her senior year of high school and together they raised more than $700 in investment.
At one point, Theranos was worth $10 billion, which made Holmes the youngest-ever self-made billionaire.
Theranos shared very little about its blood testing machine, nicknamed Edison, with the public and the medical community.
Doubts over the technology
In 2016, The Wall Street Journal published articles questioning Theranos' innovative technology. Its report raised concern about the accuracy of the blood tests, which put patients at risk of having conditions either misdiagnosed or ignored.
After the paper's investigation, Walgreen, an American pharmacy store chain, ended its partnership with Theranos. The US Department of Health and Human Services effectively banned the company from doing any blood testing at all.
Three months ago, the US Security and Exchange Commission (SEC) filed civil fraud charges against Holmes and Balwani. Holmes settled with the SEC by paying a $500,000 fine, but Balwani is fighting the charges.
Holmes stepped down earlier on Friday as Theranos' chief executive, but remains as chair of the board. The company said that David Taylor, its general counsel, has been appointed chief executive in her place.
dv/jm (AFP, AP, dpa)