Elizabeth Holmes, founder of blood-testing company Theranos has been charged with fraud. The criminal charges are related to the claims about the blood-testing technology made by Theranos, which have since proved to be inaccurate, even false.
On Friday 15th June, Holmes surrendered to the FBI together with Theranos’ ex-president Ramesh Balwani. The pair appeared in court in San Jose, California, to hear their charges. The charges stand as two counts of conspiracy to commit wire fraud, as well as nine counts of wire fraud.
Holmes founded Theranos in 2003, with the aim to change the way blood tests are carried out. Her revolutionary idea would require no more than a prick of the finger, and results from hundreds of laboratory tests could be processed in one single machine.
The company quickly gained a lot of positive media coverage, as well as investments totalling more than $700 million. Big businesses were interested, such as Walgreens who joined forces with Theranos and offered tests using the Theranos machine in their stores.
Walgreens subsequently broke off their collaboration with Theranos following investigations that claimed to reveal major flaws to the blood-testing kit.
Criticism for Theranos
Theranos has been under scrutiny for some time. In August 2015 the FDA began an investigation into the company. They reported several inaccuracies that they observed in the blood-testing that Theranos was carrying out on patients.
The Wall Street Journal has also cast a critical eye over Theranos, publishing a series of articles in 2015 and revealing that the majority of the tests Theranos claimed to be doing with their new machine were actually being carried out with standard machines bought from other companies.
An investigation by the U.S. Securities and Exchange Commission (SEC) resulted in Holmes paying out $500 000 and no longer being eligible to serve as a director or officer of a company for 10 years. Despite this, and the increasing criticism of Theranos, one of their earliest investors, Tim Draper, continued to defend Holmes, calling Theranos a “great vision”. It remains to be seen if he will maintain his defence of Holmes in the light of the recent charges against her.
Holmes no longer CEO
Holmes’ indictment came mere hours after Theranos announced that she had stepped down from her role as CEO. “Holmes remains with the Company as Founder and Chair of the Board”, the press release read.
Allegedly misled patients
The indictment alleges that investors were defrauded, and that Holmes and Balwani also deceived doctors and patients, providing blood-test results that were both "inaccurate" and "unreliable".
According to John Carreyrou, the journalist who wrote all the damning reports for the Wall Street Journal, Theranos is down to just 20 employees. This is a long way from the 800 employees and the $9 billion valuation that the company enjoyed at its peak.
Holmes and Balwani have been released after making bail payments of $500 000 each. They have also had to hand over their passports. If they are found guilty, they both face up to 20 years in prison.
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