The founder and former CEO of Theranos, Elizabeth Holmes, and her partner, Billy Evans, left the Robert F. Peckham Federal Building in San Jose, Calif., on November 23, 2021.
Elizabeth was found guilty of three counts of criminal wire fraud and one count of criminal conspiracy to commit wire fraud. After six days of deliberations, the jury delivered its verdict.
Tech startups often pitch investors on their technological prowess and business prowess using wildly optimistic assumptions, but the government's victory in the case is a rare rebuke.
Theranos raised over $900 million on the back of claims that its proprietary tests were better, cheaper, and less intrusive than the competition. The health and safety of patients was at stake, and unlike many other Silicon Valley startups, it was true.
The family office of the DeVoses was defrauded of $100 million, and a hedge fund was defrauded of $38 million. She was found guilty of conspiracy to commit wire fraud against Theranos investors. The jury returned no verdict on three wire fraud charges. The charges of defrauding patients were not found to be true. She could face 20 years in prison.
With the guilty verdict, the founder of the company is the first executive to be held criminally responsible for her actions.
It was very personal for Holmes.
The trial was about the fraud of Theranos investors and patients. She dropped out of the university to start the company with the goal of changing the way medical diagnostic testing is done. Most of the wealthy families and individuals who helped raise over $900 million for the company had no experience investing in startup companies.
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Theranos could never fulfill its promise that it could perform more than 1,000 tests. It could do 12. The company rigged its proprietary devices with null protocols to avoid raising red flags during investor demos. During the trial, the jury heard how the investor presentations were personally approved by the man.
The court heard how the reports were doctored to look like they were approved by the pharmaceutical companies. The contracts that Theranos had with those companies forbade the startup from using their logos. She said she was merely trying to convey the partnership between the two companies.
The government called 29 witnesses in its prosecution of the man. The jury heard from two patients who received questionable results from Theranos, but the testimony focused on the investors. A woman was told that she had tested positive for HIV, but she had not. A pregnant woman was told that she was miscarrying after taking Theranos tests. She found out that the Theranos had probably messed up a decimal point. She would give birth to a baby that was healthy.
The defense failed.
The defense relied on blaming others, including scientists, and on allegations that she had been abused and controlled by her ex-boyfriend. She claimed that Balwani wanted to control her life and that he raped her.
Defense attorneys didn't try to put that testimony in context, and didn't call to the stand the expert witness on intimate partner violence. It is not clear if the defense felt that Mechanic's testimony wouldn't be beneficial or if the presence ofHolmes on the stand was sufficient.
The jury didn't buy into the story of Theranos that was told by the man. At a later date, he will return to court. A trial for Balwani is scheduled to start next year.
