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Theranos CEO Elizabeth Holmes charged in ‘massive fraud’ scheme

March 16, 2018  |  Posted by: Francesca Falzarano
Theranos CEO Elizabeth Holmes charged in ‘massive fraud’ scheme

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The Securities and Exchange Commission has charged Elizabeth Holmes — the Silicon Valley star whose blood-testing startup company Theranos has fallen in the midst of multiple scandals — with “massive fraud.”

On Wednesday, the SEC accused Theranos CEO Holmes and a top executive of defrauding investors of over $700 million through false claims about its company.

Holmes — a wannabe Steve Jobs who dressed only in black turtlenecks as she praised her blood-testing unicorn, which at one point claimed an evaluation of more than $9 billion — settled with the regulators for $500,000 while neither confirming nor denying the allegations.

Theranos revealed in a 2016 letter to investors that the company was under a criminal investigation.

Holmes also agreed to not be a director or officer of a public company for ten years, and to waive profiting from Theranos ownership until $750 million is paid back to investors, the consent order with the SEC revealed.

Theranos and 34-year-old Holmes operated “an elaborate, years-long fraud which exaggerated or made false statements about the company’s technology, business, and financial performance,” the SEC stated.

While Theranos had claimed it was on track to make $100 million by the conclusion of 2014, the real number was “a little more than $100,000,” the SEC noted. And, contradictory to what Theranos told investors about the Department Defense using its blood tests, they were “never deployed by the DOD in the battlefield, in Afghanistan, or on medevac helicopters,” the settlement continued.

According to CNBC, shamed CEO also deceived employees about its institutional backing. Theranos gave out pitch books to investors with articles purportedly published by other pharmaceutical executives — lending the startup institutional clout —but were actually written by company staff.

Ramesh “Sunny” Balwani, the company’s president and CEO, is fighting the accusations.

“Investors are entitled to nothing less than truth and candor from companies and their executives,” Steve Peikin, the SEC’s head of enforcement, revealed in a statement.

The charges result in one of the biggest controversies to rock the tech world since the tech bubble burst in 1999.

The SEC alleges that Holmes deceived investors about her technology, which Theranos said was able to examine for diseases with only a pinprick, and more cheaply than what was available on the commercial market.

In reality, the company didn’t have any reliable technology to test blood samples, and sent blood to third-party companies for testing, according to the complaint.

The settlement indicates a further humiliation for Holmes, a Silicon Valley power player, who at one point was the youngest self-made female billionaire with a net worth of $4.5 billion.

Theranos began to unravel in 2015 after the Wall Street Journal published that its blood tests were being carried out by commercial analyzers and that the actual technology wasn’t unique.

That day, Elizabeth Holmes appeared on “Mad Money” with Jim Cramer to deny the charges, and alleged that the paper was out to hinder innovation.

“First they call you crazy, then they fight you, then you change the world,” she stated on CNBC, paraphrasing a quote.

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