Theranos founder Elizabeth Holmes has been charged with criminal fraud

quote:

---

Elizabeth Holmes, once a darling of Silicon Valley, vowed to disrupt health care with inexpensive, accessible finger-prick blood tests.

Now the 34-year-old founder of the biotech startup Theranos is facing federal criminal charges. On Friday, the US attorney’s office in San Francisco wrapped up a two-and-a-half-year investigation of Theranos by indicting Holmes and her ex-boyfriend Sunny Balwani, Theranos’s former president and CEO, for alleged fraud. The federal prosecutors allege Holmes and Balwani defrauded doctors, patients, and investors of hundreds of millions of dollars.

According to a press release about the indictment, the duo “used advertisements and solicitations to encourage and induce doctors and patients to use Theranos’s blood testing laboratory services, even though the defendants knew Theranos was not capable of consistently producing accurate and reliable results for certain blood tests.”

The criminal charges follow civil fraud charges in March against Holmes and Balwani from the Securities and Exchange Commission.

At its peak, Theranos was valued at $9 billion and employed 800 people. Yet according to John Carreyrou, the Wall Street Journal reporter whose investigations exposed Theranos’s fraud, the company is down to just 20 employees who are trying to close up shop. Holmes also announced she stepped down as CEO earlier Friday.

The story of Theranos increasingly looks like a cautionary tale about hype in Silicon Valley. The FBI special agent in charge of the investigation, John Bennett, warned, “This office, along with our other law enforcement partners in the Bay Area, will vigorously investigate and prosecute those who do not play by the rules that make Silicon Valley work.”

And in the Journal, Carreyrou also called the charges a “warning shot for Silicon Valley”:

As money has gushed into the Valley’s ecosystem in recent years, hundreds of private tech startups valued at more than $1 billion have sprouted, embracing a culture of disruption of incumbent industries and a cavalier attitude toward regulations.

---