Theranos and Elizabeth Holmes Charged with Fraud - Scientific American https://www.scientificamerican.com/article/theranos-and-elizabeth-holm...

The SEC complaint alleges that the company misled investors

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The Securities and Exchange Commission on Wednesday charged

Theranos and CEO Elizabeth Holmes with fraud, capping off a
remarkable downfall for a once high-flying company that promised
to revolutionize the blood testing industry but instead became a
parable for Silicon Valley hype and hubris.

The SEC’s complaint alleges that the privately held company

deceived investors by exaggerating or speaking falsely about what its
technology could do. While the company told investors it could
provide quick, accurate medical test results from just a few drops of
blood pricked from a finger, it was in fact running most of its tests
on machines manufactured by other companies. Theranos also
falsely told investors that its products were used by the Department
of Defense and that the company would bring in a thousand times
more revenue in 2014 than it actually did, the SEC alleged. These
and other deceptions were first reported in a series of investigative

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Theranos and Elizabeth Holmes Charged with Fraud - Scientific American https://www.scientificamerican.com/article/theranos-and-elizabeth-holm...

stories by the Wall Street Journal’s John Carreyrou.

Both Holmes and her company have agreed to settle the cases,
neither admitting nor denying the SEC’s allegations. Holmes, the
charismatic young Stanford dropout who once adorned the cover of
magazines in Steve Jobs-esque turtlenecks, must pay a $500,000
penalty, give up voting control of the company, return the shares
she obtained during the alleged fraud, and cannot be part of the
leadership of a public company for a decade.

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The SEC separately charged the company’s former president and

No. 2 executive, Sunny Balwani, in a case that will be litigated in
federal court in California.

In 2014, the Silicon Valley upstart reached a valuation of $9 billion,

the most of any venture-backed company working in health care.

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Theranos and Elizabeth Holmes Charged with Fraud - Scientific American https://www.scientificamerican.com/article/theranos-and-elizabeth-holm...

But in June 2016, Forbes estimated that its value had fallen to close
to zero. The company announced later that summer that it was
pivoting to developing a “MiniLab” to carry out a variety of tests in
different locations.

Theranos released a statement on Wednesday quoting its

independent directors as saying that the company “is pleased to be
bringing this matter to a close and looks forward to advancing its
technology.”

Republished with permission from STAT. This article originally

appeared on March 14, 2018

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