Biotech company Theranos founder Elizabeth Holmes, who promised to revolutionize blood testing, has been charged by the SEC with a “massive fraud” involving more than $750 million.
CEO Elizabeth Holmes, 34, will now surrender control of the company, and gives up most of her equity after the SEC indicted her with an ‘elaborate, years-long fraud’
Elizabeth Holmes, along with company president, Ramesh “Sunny” Balwani, who promised to revolutionize blood testing has been under a three-year long investigation for financial fraud
Holmes and Balwani were charged Wednesday by the SEC with a “massive fraud” involving more than $750 million
Her plea deal with the SEC, is starts with stripping Holmes of control of the company, she is to pay a fine of $500,000 and return millions of shares to Theranos
She is also barred from serving as an officer or director of a public company for 10 years
Holmes founded the Silicon Valley startup, once deemed to be worth as much as $9 billion, at the age of 19, in 2003
It promised to create a cheaper, more efficient alternatives to traditional medical tests, which the SEC complaint said has never materialized
In 2014 the SEC complaint states, Holmes and Balwani hoodwinked shareholders, claiming that revenues of $100, 000 was actually $100M
The SEC said it would take its case against Balwani to federal court
Theranos CEO Elizabeth Holmes has been under investigation for financial fraud has been booted from the startup she founded as a teenager, and returns millions of shares to the company
US securities regulators on Wednesday charged the chief executive of the blood-testing company Theranos, Elizabeth Holmes, and a former president at the onetime soaring Silicon Valley startup was indicted for defrauding her investors by the US Securities and Exchange Commission [SEC], on Wednesday.
The company was formed in 2003 to create a cheaper, more efficient alternatives to traditional medical tests, but US securities regulators on Wednesday charged the chief executive of the blood-testing company Theranos, Elizabeth Holmes, and a former president at the onetime soaring Silicon Valley based company with an ‘elaborate, years-long fraud’
CEO Holmes, 34, and company president Ramesh Balwani have been charged by the SEC with fraud involving more than $700 million.
Holmes and her biotech company, Theranos, have made a deal to settle the case against them, acceding to the penalty which includes her surrendering majority voting control of the company, the SEC announced in a statement Wednesday.
Founded in 2003 by Holmes when she was only 19, the company had been seen as a rising star but came under scrutiny after The Wall Street Journal published articles questioning the reliability of its technology.
Holmes copped a deal with the Securities and Exchange Commission which bars her from holding public office for a decade
Theranos, bragged about a revolutionary new way of bio-testing that uses far less blood and delivers faster results at much lower cost than traditional methods in US labs, has been under civil and criminal investigation over its claims, in the past two years.
Once deemed to be worth as much as $9 billion.
But it’s been rattled by controversy following a 2015 Wall Street Journal report that questioned its technology and testing methods. The company has since voided two years of blood tests, faced federal probes and pivoted away from blood testing.
The SEC charged Holmes and former Theranos president Ramesh Balwani with raising more than $700million by exaggerating or lying about the business and its technology.
As a result of Holmes’ alleged fraudulent conduct, she is being stripped of control of the company she founded, is returning millions of shares to Theranos, and is barred from serving as an officer or director of a public company for 10 years,’ SEC enforcement division co-director Stephanie Avakian said in a statement.
Former Therano president Ramesh “Sunny” Balwani was also charged. The two reportedly, raised money 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,” the SEC said Wednesday.
The complaints allege that Theranos, Holmes, and Balwani made numerous false and misleading statements in investor presentations, product demonstrations, and media articles by which they deceived investors into believing that its key product
The key complaint revolved around its star product, a portable blood analyzer, ostensibly designed to could conduct comprehensive blood tests from finger drops of blood, revolutionizing the blood testing industry.
Alleged co-conspirator and former Therano president, Ramesh “Sunny” Balwani seen [left] with CEO Elizabeth Holmes, has not taken a plea. His trial is scheduled for federal court in San Francisco.
In reality the SEC compliant stated, Theranos’ proprietary analyzer could complete only a small number of tests, and the company conducted the vast majority of patient tests on modified and industry-standard commercial analyzers manufactured by others.
The complaints further charge that Theranos led by Holmes and Balwani claimed that Theranos’ products were deployed by the U.S. Department of Defense on the battlefield in Afghanistan and on medevac helicopters. Consequently, they projected that the company would generate more than $100 million in revenue in 2014.
In truth, Theranos’ technology was never deployed by the U.S. Department of Defense and generated a little more than $100,000 in revenue from operations in 2014.
Theranos and Holmes agreed to resolve the claims against them, the SEC said. Holmes agreed to give up control of the company and much of her stake in it.
Holmes will pay a $500,000 penalty, 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.
The SEC said it would take its case against Balwani to federal court in San Francisco.