Theranos and its Founder Charged with Fraud
The Securities and Exchange Commission (SEC) has has charged Theranos and its chief executive Elizabeth Holmes with “massive fraud” for raising $700m from investors by allegedly deceiving them about their supposedly groundbreaking blood-testing technology.
Theranos and Holmes agreed to settle the charges without admitting or denying wrongdoing, reports The Guardian. She will pay a $500,000 penalty, return millions of shares to the company, and relinquish her company voting power under the terms of the settlement. In addition, she will be barred for ten years from serving as an officer or director of a public company.
“The Theranos story is an important lesson for Silicon Valley, said Jina Choi, director of the SEC’s San Francisco office. “Innovators who seek to revolutionise and disrupt an industry must tell investors the truth about what their technology can do today, not just what they hope it might do someday.”
This verdict ends a long tale of excess experienced by the company.
“The company is pleased to be bringing this matter to a close and looks forward to advancing its technology,” explained Theranos’ independent directors in a statement.
The complaint from the SEC looks at how Holmes and Theranos enticed investors. In order to do so, they would stage a blood test for potential investors, with phlebotomists actually taking a finger prick of their blood, despite the fact that the company’s machines were not being used to perform the tests.
The complains also explains how Holmes tricked the media into overstating the capabilities of the technology, then used that coverage to raise funds. She falsely told investors that Theranos’ machines were being used by the US defense department on the battlefield in Afghanistan and that the company would bring in $100 million in revenue in 2014.