The founder of the failed blood testing start-up Theranos was found guilty of four of 11 charges of fraud on Monday, in a case that came to symbolize the pitfalls of Silicon Valley's culture of hustle, hype and greed.
Ms.Holmes was the most prominent tech executive to be accused of fraud in a generation of high-flying, money-losing start-ups. A jury of eight men and four women took 50 hours to reach a verdict, convicting her of three counts of wire fraud and one count of conspiracy to commit wire fraud. She was found not guilty on four other counts. The jury could not reach a verdict on three counts.
Each count carries a maximum sentence of 20 years in prison, terms that are likely to be served concurrently. Ms.Holmes is expected to appeal.
The verdict is rare. Few technology executives are charged with fraud. Martha Stewart was sentenced to prison in 2004 for lying to investigators about a stock sale. Silicon Valley start-ups that stretch the truth to score funding and business deals are likely to be warned by Theranos.
The jury believed the evidence presented by prosecutors that showed Ms. Holmes lied to investors about Theranos's technology in the pursuit of money and fame. They were not swayed by her defense of blaming others for Theranos's problems and accusing her co-conspirator, the company's chief operating officer, of abusing her.
They were not swayed by the prosecutor's case. Ms.Holmes was acquitted of four counts related to patients who took Theranos's blood tests and one related to advertisements that the patients saw.
The guilty verdict arrived in a frenzied period for the tech industry, with investors fighting to get into hot deals and often ignoring potential red flags about the companies they were putting money into. There are people who warn that there will be more Theranos-like disasters.
The flow of capital toward charismatic founders has not been slowed by the tales of start-up chicanery, from the bungled initial public offering of WeWork to the aggressive boundary-pushing tactics of Uber. The downfalls did not result in criminal charges.
White-collar crimes have been renewed by the Justice Department. Lisa O. Monaco, the deputy attorney general, recently said in a speech that they will urge prosecutors to be bold. The fear of losing should not deter them.
Jessica Roth, a law professor at Cardozo School of Law and former federal prosecutor in the Southern District of New York, said that the conviction of Ms.Holmes sends a message to other founders and executives to be careful about their statements to investors and the public.
She said that it shines a light on the importance of drawing a distinction between truth and optimistic projections.
The disruptive change-the-world chutzpah of Silicon Valley heroes like Steve Jobs has turned companies like Apple,Tesla, and Facebook into some of the most valuable in the world.
She captured the attention of heads of state, top business leaders and wealthy families with idealistic plans to change the health care industry. She traveled the world on private jets, was feted with awards and glowing magazine cover stories, and was hailed as the world's youngest self-made female billionaire.
She lied about the accuracy, types and number of tests Theranos could do to raise funding and secure business deals.
Robert Leach, an assistant U.S. attorney, said in his opening statement that it was a crime in Silicon Valley and a crime on Main Street.
The proceedings alternated between exciting and dull. There were delays because of a coronaviruses scare, a burst water line, technology problems in the courtroom and juror travel. One juror was dismissed for playing a game while the other was dismissed for her faith. Crowds of spectators, many of whom followed the Theranos saga via podcasts, documentaries, books and news articles, waited for hours for a spot in the courtroom's limited seats.
The jury heard from dozens of witnesses and viewed hundreds of pieces of evidence used to support the prosecution's argument that Ms. Holmes misled investors and patients on her rise to fame and fortune.
James Mattis, the former defense secretary who sat on the Theranos board, as well as Lisa Peterson, who managed money for the wealthy family of a former education secretary, were among the witnesses. George Shultz and Henry Kissinger, who sat on the board, were never called to the stand, despite the fact that prominent investors including Murdoch and Ellison were discussed.
The case's evidence showed that Ms.Holmes was involved in faking demonstrations, false reports, and overstated financials at Theranos. The jury heard recordings and watched videos of Ms.Holmes making false claims.
Two years worth of blood tests were voided by Theranos before it shut down. It paid to settle several investor lawsuits.
Prosecutors argued that Ms.Holmes actions were criminal. They said she led investors to lose hundreds of millions of dollars and patients to get unreliable test results.
John Bostic, an assistant U.S. attorney, said in closing arguments that she chose the dishonest path.
In her defense, Ms. Holmes's lawyers attacked investors for not doing more research and said her failures were not a crime.
Ms.Holmes took the stand. She alternated between taking responsibility for certain mistakes and blaming others.
She said she believed that the company had relied on the expertise of more qualified people to run its lab. She used her charisma to sell jurors on the same vision of the future that had helped her win over investors, world leaders and the press.
She wanted to talk about what the company could do in the next 10 years. I wanted to discuss what was possible.
The government's evidence was consistent with traditional fraud cases and Ms. Holmes's argument that her optimistic projections were no different than that of other Silicon Valley companies was not true.
She said that if other founders and executives were involved in the kind of deceit that was alleged in this case, then they should be concerned.
Ms.Holmes accused Mr. Balwani of emotional and sexual abuse. The pair dated in secret for more than a decade, even owning an estate together. Ms. Holmes said that Mr. Balwani controlled her schedule, time with her family, and self-presentation. She said he forced her to have sex with him. Mr. Balwani denied the allegations.
That testimony, delivered through tears, threatened to turn the tide against the prosecutor's case by appealing to the jury's emotions. It was a risky strategy since Ms. Holmes did not provide an expert witness to support her accusations.
Mr. Balwani will be tried next year. He has denied the charges.
