Once upon a time, Elizabeth Holmes was the biotech industry’s darling. She was glowingly written about in dozens of outlets (including CelebrityNetWorth). Thanks to the incredible success of her company, in 2015 her net worth topped $4.5 billion net worth (on paper). She was the world’s youngest self-made billionaire. She was heralded as an innovator and genius thanks to the purported technological revolution offered by her blood testing company Theranos.
Unfortunately, those days are over. The fortune is gone, she was convicted of multiple criminal counts and today she was sentenced to serve 11 years in prison.
As a quick refresher, during its heyday, Theranos promised it could perform a variety of very specialized tests and screenings using a tiny blood prick that could be performed at your local CVS. The results would be ready almost instantly. This was seen as a miracle because up to that point, the prevailing system involved patients visiting a blood lab where a vial of blood would be drawn with a needle and results wouldn’t be known for days.
Unfortunately, the miraculous Theranos blood tests were not miraculous at all.
Theranos first found itself in the hot seat when a Wall Street Journal article came out in October 2016 that questioned the accuracy and legitimacy of its blood test. That led to an investigation that resulted in the shut down of one of Theranos’ labs where blood was tested as well. Holmes was barred from running a clinical lab for two years.
In 2017 the company settled with the Centers for Medicare and Medicaid Services, which is the government agency that oversees the regulation of blood testing labs. In the settlement, Theranos agreed not to own or operate a clinical lab for two years.
In 2018 the Securities and Exchange Commission filed fraud charges against Holmes and Theranos. As part of the fraud announcement, Holmes agreed to give up majority voting control and reduce her equity stake in the company. She also paid a $500,000 fine.
The SEC’s allegations against Theranos and Holmes are below:
- Theranos “made numerous false and misleading statements in investor presentations, product demonstrations, and media articles” about its blood-testing technology while raising more than $700 million.
- That included claims that the Department of Defense was using Theranos’ technology and that Theranos would bring in more than $100 million in revenue in 2014. The SEC said that in reality, the department never used the technology and the company made about $100,000 in revenue that year.
Steven Peikin, a director of the Enforcement Division of the SEC said in a release:
“Investors are entitled to nothing less than complete truth and candor from companies and their executives. The charges against Theranos, Holmes, and Balwani make clear that there is no exemption from the anti-fraud provisions of the federal securities laws simply because a company is non-public, development-stage, or the subject of exuberant media attention.“
In June of 2018, Elizabeth Holmes and her partner Sunny Balwani were indicted by a federal grand jury on nine counts of wire fraud and two counts of conspiracy to commit wire fraud. COVID caused a multi-year delay. Her criminal trial began in August 2021. In January 2022 she was convicted on four counts and faces. On November 18, 2022, Elizabeth was sentenced to 135 months in prison, which is a little over 11 years. In July 2022 Sunny Balwani was found guilty on all charges. He faces up to 20 years in prison.