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SEC Charges Theranos, CEO Elizabeth Holmes With 'Massive Fraud' (engadget.com)
An anonymous reader quotes a report from Engadget: The SEC has charged Theranos, Elizabeth Holmes and Ramesh "Sunny" Balwani with fraud relating to the startup's fundraising activities. The company, as well as CEO Holmes and former president Balwani are said to have raised more than $700 million from investors through "an elaborate, years-long fraud." This involved making "false statements about the company's technology, business and financial performance." In a statement, the commission said that the company, and its two executives, misled investors about the capability of its blood testing technology. Theranos' big selling point was that its hardware could scan for a number of diseases with just a small drop of blood. Unfortunately, the company was never able to demonstrate that its system worked as well as its creators claimed.
The company and Elizabeth Holmes have already agreed to settle the charges leveled against them by the SEC. Holmes will have to pay a $500,000 fine and return 18.9 million shares in Theranos that she owned, as well as downgrading her super-majority equity into common stock. The CEO is now barred from serving as the officer or director of a public company for 10 years. In addition, if Theranos is liquidated or acquired, Holmes cannot profit from her remaining shareholding unless $750 million is handed back to defrauded investors. Balwani, on the other hand, is facing a federal court case in the Northern District of California where the SEC will litigate its claims against him. Worth noting: the court still has to approve the deals between Holmes and Theranos, and neither party has admitted any wrongdoing.
The company and Elizabeth Holmes have already agreed to settle the charges leveled against them by the SEC. Holmes will have to pay a $500,000 fine and return 18.9 million shares in Theranos that she owned, as well as downgrading her super-majority equity into common stock. The CEO is now barred from serving as the officer or director of a public company for 10 years. In addition, if Theranos is liquidated or acquired, Holmes cannot profit from her remaining shareholding unless $750 million is handed back to defrauded investors. Balwani, on the other hand, is facing a federal court case in the Northern District of California where the SEC will litigate its claims against him. Worth noting: the court still has to approve the deals between Holmes and Theranos, and neither party has admitted any wrongdoing.
So nice to see some accountability for these people. I also saw this today:
https://www.justice.gov/usao-n...
Why does she get off with just paying a fine if she committed "massive fraud"? Shouldn't there be a little jail time involved, too? I'm not saying she's gotta do life, but maybe five years and then community service.
People get harsher sentences for selling half a pound of weed.
You are welcome on my lawn.
She raised $700m from investors but is only penalized $500k? I wonder what her net-worth is now? Probably still paid her self a ton during her tenure....
In fact, it is very rare for executives to go to jail, no matter how egregious, no matter how much they knew.
In this case, she is the "visionary" with no college degree and no world experience. Her lawyers can plausibly argue she was hands off and relied on experts for the important details.
I am not suggesting she should not be punished -- I am for it. But her case is unusual in a number of respects. Worrying over specifics about gonads is premature.
and the performing a chemistry...
I am shocked that someone who wears a black turtleneck and outputs not-quite-sensible technobabble could be guilty of defrauding people of money. It just can't happen, I tells ya!
Ah, she went full SV then; you don't get the credibility if you actually complete your degree.
Um, you missed the bit where all of Musk's stuff actually WORKS, like electric cars actually being out on the road and rockets that actually launch payloads and land again.
The Theranos majik blood tricorder never worked. Hence the fraud.
But we get it, you hate Elon Musk.
Again, I will just state that the reason we (maybe secretly) take so much satisfaction / schadenfreude at this story is that someone who was so hyped and the darling of Silicon Valley got so much funding and attention. While others who toil away on good ideas, without nearly so many connections and silver spoons, struggle to even get 1 minute of air time with the kind of funders and backers that she got.
Separately, I hope that they absolutely nail and jail Sunny Balwani, who threatened and intimidated whistleblowing employees with their careers for exposing the massive fraud that Theranos was.
Finally, we should be thankful that the SEC and agencies like DHHS and CMMS actually still have some teeth and reputability to follow through on issues like this and have not been totally gutted. Imagine 100 years ago when hucksters like this were touting every fake medicine under the sun and people were actually grateful for public-serving regulation. The order from CMMS to Theranos actually essentially said, "You are in immediate jeopardy of violating the law and must provide proof that you're reversing the harm caused by your inaccurate / fraudulent medical test results. Simply closing your lab will not remove this jeopardy." Thank god for rules.
And got nearly a decade, all his assets taken, no chance of profit, etc - and he had already paid everyone back (plus he gave away the meds to anyone who couldn't afford them for the original "scandal" that made him famous.) Holmes and her entire family should be executed if held to a similar standard.