Firm in blood-test deceit set to close

Theranos Inc., the Silicon Valley blood-testing company accused of defrauding investors, will formally dissolve, The Wall

Street Journal reported Wednesday.

The company was unable to sell itself, and it is now looking to pay unsecured creditors its remaining cash, about $5 million, in the coming months. At its peak, the privately held company was valued at $9 billion.

“We are now out of time,” David Taylor, the company’s chief executive and general counsel, informed investors in an email first reported Tuesday by The Wall Street

Journal. Taylor declined to comment further, saying the message spoke for itself.

The Theranos board is expected to meet Friday. The process of dissolving the company is expected to take six to 12 months.

Investors who gave the company $100 million or more included the heirs to Walmart Inc. founder Sam Walton; Atlanta’s Cox family; the family of Education Secretary Betsy DeVos; and Rupert Murdoch, executive chairman of 21st Century

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Fox and of News Corp., the

The Wall Street Journal’s parent company, the newspaper reported Wednesday.

Wednesday’s announcement comes nearly three months after Theranos founder and former CEO Elizabeth Holmes and former Chief Operating Officer Ramesh Balwani were charged with criminal fraud. Prosecutors allege Holmes and Balwani deliberately misled investors, policymakers and the public about the accuracy of Theranos’ blood-testing technologies going back to at least 2013.

The indictment by the U.S. attorney in San Francisco alleging wire fraud follows claims by the Securities and Exchange Commission that Theranos, Holmes and Balwani lied about the company’s technology while raising more than $700 million to build the medical-testing startup.

If convicted, they could face prison sentences that would keep them behind bars for the rest of their lives, as well as fines of $2.75 million each.

Holmes, once considered a wunderkind in Silicon Valley, had pitched Theranos’ technology as a cheaper way to run dozens of blood tests. Holmes said Theranos had discovered a new way of doing blood testing, one able to conduct dozens of tests with just a prick of a finger and few droplets of blood.

Theranos shared very little about its blood-testing machine, nicknamed Edison, with the public or medical community. Holmes said she was inspired to start the company in response to her fear of needles.

She carefully crafted her image as well, often wearing

black turtleneck sweaters that led some in Silicon Valley to describe her as “the next Steve Jobs,” a reference to the Apple founder.

Investors bought what Holmes was selling and invested hundreds of millions of dollars in the company. At one time, Holmes was the youngest self-made female billionaire.

But an investigation by

The Wall Street Journal two years ago found that Theranos’ technology was inaccurate at best, and that the Palo Alto, Calif.-based company was using routine bloodtesting equipment for the vast majority of its tests. The story raised concerns about the accuracy of Theranos’ bloodtesting technology, which put patients at risk of having conditions either misdiagnosed or ignored.

The newspaper’s investigation marked the beginning of the end of Theranos. Walgreens ended its bloodtesting partnership with the company, and the Department of Health and Human Services in 2016 effectively banned Theranos from doing any blood-testing work.

The Securities and Exchange Commission brought civil fraud charges against Holmes and Balwani in March. Holmes settled with the SEC, agreeing to pay $500,000 in fines and penalties. Balwani is fighting the charges.

Theranos laid off most of its staff earlier this year.

Lawyers for the company did not respond to requests for comment.

Balwani issued a statement through a representative: “As an investor who put millions of dollars of his own money and nearly seven years of his life into Theranos, Mr. Balwani was saddened to see the letter from Theranos to investors [Tuesday].”

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