Elizabeth Holmes Charged With Massive Fraud For Fake Blood Testing Company
Looks like the world got duped by Miss. Snow White and can’t say that we are upset about it. What Elizabeth Holmes has gotten away with just shows how American picks and chooses who it wants to put the spotlight on. Perhaps they should check for any stains before glorifying someone with something they didn’t do. Case and point….. read below….
(Tech Crunch) Years after it was reported that the SEC was looking into improprieties at the once high-flying blood-testing company Theranos, its founder, Elizabeth Holmes, and the company’s former president, Ramesh “Sunny” Balwani, have been formally charged with massive fraud by the agency.
The charge, more precisely: that the two raised more than $700 million from investors through an “elaborate, years-long fraud in which they exaggerated or made false statements about the company’s technology, business, and financial performance.” Theranos and Holmes have agreed to resolve the charges against them, says the SEC, though neither admitted nor denied the allegations in the SEC’s complaint.
For her part, Holmes has agreed to: pay a $500,000 penalty; be barred from serving as an officer or director of a public company for 10 years; return the remaining 18.9 million shares that she obtained during the fraud; and relinquish her voting control of Theranos by converting her super-majority Theranos Class B Common shares to Class A Common shares. This way, if Theranos is acquired or is otherwise liquidated, Holmes won’t profit until more than $750 million is first returned to Theranos’s shareholders.
As for Balwani, the SEC says it will litigate its claims against him in federal district court.
Theranos first came under scrutiny in October 2015, when the two-time Pulitzer-prize winning WSJ journalist John Carreyrou published an explosive investigative piece, suggesting that the company — then valued by investors at a stunning $9 billion — had greatly exaggerated its abilities to quickly process an expansive range of laboratory tests from a few drops of blood.
In reality, former employees told Carreyrou, the lab instrument Theranos had developed handled just a small fraction of the tests sold to consumers, with the rest being done with traditional machines from companies like Siemens. (Famed attorney David Boies, who represented Theranos at the time, acknowledged to the WSJ that Theranos wasn’t using its device for all the tests it offered, calling the transition a “journey.”)
Employees were also “leery” about the accuracy of Theranos’s machines, said the report.
They were right to be, as it turns out. According to former employee Tyler Schultz — a grandson of former Secretary of State George Schultz, who was among Theranos’s earliest board members — not only did Theranos’s machines often fail the company’s quality-control standards, but Balwani, then president, pressured employees to run blood tests on the machines anyway.
Schultz did something about it, contacting New York state’s public-health lab to tell them Theranos was manipulating a process known as proficiency testing.
Blowing the whistle on Theranos came at a cost, Schultz, later told the WSJ. Not only was he followed by private investigators but relations with his grandfather grew strained to the point that the two communicated only via their attorneys. Still, his findings were later corroborated by the federal Centers for Medicare and Medicaid Services and by last year, Holmes was banned from owning or running a lab company for two years. Theranos also closed its last remaining blood-testing facility after it reportedly failed a regulatory inspection.
The SEC complaint appears to follow this string of events, alleging that Theranos, Holmes and Balwani made “numerous false and misleading statements in investor presentations, product demonstrations, and media articles” that deceived investors in the process.
Theranos’s press account wasn’t receiving inbound inquiries this morning. But the company — which has been marketing a “miniLab” device that it claims can carry out an array of tests with a prick of blood and which managed to secure a $100 million loan last December from Fortress Investment Group (owned by SoftBank) — published a statement a bit ago.
Says the statement, which is somewhat remarkable for its blandness: Theranos “is pleased to be bringing this matter to a close and looks forward to advancing its technology.” Meanwhile, Balwani’s attorneys have separately sent out a statement to media outlets, defending Balwani’s role in the company and calling the SEC’s enforcement action “unwarranted.”
The statement further notes that Balwani — who “took on significant financial risk” and “never benefited financially from his work at the company” despite investing “millions of dollars of his own cash in the company” — is a named inventor on 154 of the more than 1,000 patents that he says Theranos has and which he “believes have great value and potential.”
That’s an “unusually significant contribution for a company officer,” it reads.
September 29, 2014: Holmes is named one of the richest women in America by Forbes. The outlet reports she owns a 50% stake in the startup, which is valued at $9 billion.
— December 15, 2014: The New Yorker reports Theranos has raised more than $400 million and it counts Oracle’s Larry Ellison among its investors.
— October 12, 2015: The New York Times names Holmes one of its “Five Visionary Tech Entrepreneurs who are changing the world.” But shortly after, headlines for Holmes and Theranos take on a different tone.
— October 16, 2015: Wall Street Journal publishes a front-page story about the accuracy of Theranos’ tests, claiming the company used traditional lab machines instead of its own.
— October 27, 2015: An FDA report cites numerous concerns with the company, calling its proprietary blood-collection vial an “uncleared medical device.”
— January 27, 2016: Centers for Medicare and Medicaid Services sends Theranos a letter saying it was not complying with federal blood-testing rules and that patients were in “immediate jeopardy.” It gives the company 10 days to address the issues.
— July 7, 2016: Regulators ban Theranos from running a lab for two years and revoke its certification.
— October 5, 2016: Theranos closes clinical labs and wellness centers and lays off 340 employees. Holmes says the company will pivot and focus on making a small, automated testing machine.
— March 3, 2016: A federal agency releases a redacted 121-page report based on a previous inspection of the Theranos labs, citing serious issues with the company’s equipment and quality control.
— May 2016: Theranos president and COO Ramesh “Sunny” Balwani steps down from the company.
— June 1, 2016: Forbes revises its estimate of Holmes’ net worth from $4.5 billion to $0. It also lowered its valuation for the company from $9 billion to $800 million.
— June, 2016: Drug chain Walgreens, which had Theranos centers at 40 locations, pulls out of its three year partnership with the company.
— August 1, 2016: Holmes tries to revive the company by presenting the company’s mini testing laboratory, called miniLab, at a conference for the American Association for Clinical Chemistry. Attendees were skeptical.
— October 10, 2016: Major Theranos investor Partner Fund Management sues the company, accusing it of securities fraud. The lawsuit was settled in May, 2017, for an undisclosed amount.
— November 8, 2016: Walgreens sues Theranos for $140 million, alleging breach of contract. The lawsuit was settled August, 2017, for an undisclosed amount.
— January 6, 2017: Theranos lays off another 155 employees — 41% of its staff.
— January 17, 2017: The Wall Street Journal reports that Theranos failed a second regulatory lab inspection in September, and that the company was closing its last blood testing location as a result.
— April 17, 2017: Theranos settles with the Centers for Medicare and Medicaid Services, paying the government agency $30,000, giving $4.65 million to Arizona customers, and vowing to stay out of blood testing for two years.
— March 14, 2018: The SEC charges Holmes and Balwani with raising more than $700 million from investors through an “elaborate, years-long fraud in which they exaggerated or made false statements about the company’s technology, business, and financial performance.”