Theranos, a blood-testing start-up that promised to revolutionize consumers’ access to their medical information, was a Silicon Valley darling once valued at $9 billion.
Holmes had a Cinderella angle: a college dropout-turned-chief executive who had assembled a company board filled with powerful ex-government and military leaders and wanted to change the world. Her personal story about a fear of needles driving her to develop a better solution was heavily featured in the media, even as some medical experts puzzled over what was so novel about her technology and asked for evidence that showed how it worked and why.
Read the story of how it all came apart in The Washington Post.
Theranos founder and CEO Elizabeth Holmes and the company’s former President Ramesh “Sunny” Balwani raised more than $700 million from investors through an “elaborate, years-long fraud” that deceived investors by claiming the company had developed a portable blood analyzer that could perform a range of tests from a small sample of blood, the SEC said.
The SEC said that Holmes and Balwani claimed that Theranos’ technology could perform tests that were “faster, cheaper and more accurate” than conventional lab-testing equipment.
Despite their claims that the blood-testing technology could perform comprehensive tests, the company conducted “the vast majority of patient tests on modified and industry-standard commercial analyzers manufactured by others,” the SEC said in a statement.
The SEC said Holmes and Balwani also falsely claimed that the company’s products were used by the U.S. Department of Defense in Afghanistan and on medical helicopters. The company also claimed it would raise more than $100 million in revenue in 2014, even though the company collected just over $100,000 in operating revenue in 2014, according to the SEC.
Arizona served as the main testing ground for the embattled blood-testing startup in 2013 when it claimed to have rolled out its unproven technology at Walgreens stores across metro Phoenix. The company opened 40 Theranos Wellness Centers in the Valley and operated a laboratory at Arizona State University’s SkySong office complex in Scottsdale.
Theranos also courted legislators and Gov. Doug Ducey, and the company successfully lobbied for a bill that allowed consumers to order any test without a doctor’s orders. Read more in The Arizona Republic
Theranos and Holmes have agreed to settle the fraud charges levied against them by the SEC.
Holmes 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, though the settlement is subject to court approval. Read more in Regulatory Affairs Professional Society