Theranos founder Holmes indicted on fraud charges
Elizabeth Holmes, the disgraced founder of Theranos, the lab testing company that promised to revolutionise health care, and its former president, Ramesh Balwani, were indicted on Friday on charges of defrauding investors out of hundreds of millions of dollars as well as deceiving hundreds of patients and doctors.
The criminal charges were the culmination of a rarity in Silicon Valley — federal prosecution of a technology startup. This one boasted a board stacked with prominent political figures and investors, and a startling valuation of $9 billion just a few years ago. In the fabled universe of overnight billionaires and unicorns, companies with billion-dollar valuations, Holmes had catapulted herself and her company into the buzz-filled world of “disrupters” by pledging to upend the health industry and give consumers control over their own care.
Both Holmes and Balwani pleaded not guilty to charges of wire fraud. Lawyers for Holmes could not be reached for comment, but a lawyer for Balwani said in a statement that his client was “innocent and looks forward to clearing his name at trial.”
The indictment was filed by the United States attorney’s office in San Francisco and came about three months after the Securities and Exchange Commission settled civil fraud charges against Holmes.
On Friday, Theranos also announced that Holmes, who founded Theranos in 2003 as a 19-year-old Stanford University dropout, stepped down as chief executive. She will be replaced by David Taylor, the company’s general counsel, according to a statement from the company, which did not respond to requests for additional comment.
In announcing the indictment, federal prosecutors highlighted the culture of Silicon Valley and the lure of exciting new ventures.
“Investors large and small from around the world are attracted to Silicon Valley by its track record, its talent, and its promise,” prosecutors said. “They are also attracted by the fact that behind the innovation and entrepreneurship are rules of law that require honesty, fair play, and transparency.”
Holmes and Balwani were accused of misleading the public and their investors by promoting devices and tests that not only did not work but also endangered lives. Holmes had drafted a sales pitch and relentlessly pursued anyone — including her own employees — who doubted her new bloodtesting machines.