Indian-American held for multi-million dollar fraud
An Indian-American former president of a bloodtesting company along with its founder has been charged in the US for allegedly engaging in a multi-million dollar scheme to defraud investors, doctors and patients by making false claims about the accuracy of their much-hyped testing devices.
Ramesh “Sunny” Balwani, 53, and Elizabeth Holmes, 34, were charged with two counts of conspiracy to commit wire fraud and nine counts of wire fraud and appeared on Friday before US Magistrate Judge Susan van Keulen in San Jose for their initial appearances, Acting United States Attorney Alex Tse said.
According to the indictment unsealed on Friday, the charges stem from allegations Holmes and Balwani engaged in a multi-million dollar scheme to defraud investors, and a separate scheme to defraud doctors and patients. Both schemes involved efforts to promote Palo Altobased company Theranos.
Holmes founded Theranos in 2003 as a private health care and life sciences company aimed at revolutionising medical laboratory testing through allegedly innovative methods for drawing blood, testing blood, and interpreting the resulting patient data.
Balwani, a former boyfriend of Holmes, was employed at Theranos from September of 2009 through 2016. At times during that period, Balwani worked in several capacities including as a member of the company's board of directors, as its president, and as its chief operating officer.
According to the indictment, Holmes and Balwani used advertisements and solicitations to encourage and induce doctors and patients to use Theranos’s blood testing laboratory services, even though they knew Theranos was not capable of consistently producing accurate and reliable results for certain blood tests.
The tests performed on Theranos technology, in addition, were likely to contain inaccurate and unreliable results. The indictment alleges that the two used a combination of direct communications, marketing materials, statements to the media, financial statements, models, and other information to defraud potential investors.
Specifically, they claimed that Theranos developed a revolutionary and proprietary analyser, which could perform a full range of clinical tests using small blood samples drawn from a finger stick. Holmes and Balwani represented that the analyser could produce results that were more accurate and reliable than those yielded by conventional methods—all at a faster speed than previously possible.
Holmes and Balwani knew many of their representations about the analyser were false and that the analyser had accuracy and reliability problems. Authorities said Holmes and Balwani not only defrauded investors, but also consumers who trusted and relied upon their allegedly-revolutionary blood-testing technology.