Founder of 'revolutionary' US blood-testing startup once valued at $9bn charged with fraud
Elizabeth Holmes and Ramesh Balwani ‘misled doctors and patients about the reliability of medical tests that endangered health and lives’, says FBI
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.The chiefs of a medical startup company once worth billions of dollars have been charged with fraud in the US.
Theranos was established by Elizabeth Holmes in 2003 when she was just a 19-year-old Stanford drop out. Within a year it had won $6m (£4.5m) backing from investors attracted by Ms Holmes’s desire to disrupt the industry monopoly over blood tests – and she was toasted as a rising star of Silicon Valley.
Ms Holmes’s former partner, Ramesh Balwani, served as president of Theranos between 2009 and 2016 – the period encompassing the company’s high water mark. In 2014, Forbes valued its worth at $9bn (£6.8bn).
Ms Holmes and Mr Balwani claimed the Theranos analyser could perform a full range of clinical tests using tiny blood samples drawn from a finger stick, asserting that its results were more accurate, reliable and faster than those from conventional blood tests.
Their claims attracted high-profile investors, including venture capital firm DFJ, media mogul Rupert Murdoch and Oracle co-founder Larry Ellison.
Potential investors were told that Theranos could generate about $1bn (£752m) in revenues – despite the company only generating profits of a few hundred thousand dollars over the 2014-15 financial year.
Prosecutors say that Ms Holmes and Mr Balwani encouraged doctors and patients to use its blood testing laboratory services despite knowing the company could not produce accurate and reliable results – findings revealed by a 2015 Wall Street Journal investigation.
Ms Holmes and Mr Balwani face two counts of conspiracy to commit wire fraud and nine counts of wire fraud. Both entered pleas of not guilty on Friday during a hearing before a federal magistrate judge in San Jose, California.
“This conspiracy misled doctors and patients about the reliability of medical tests that endangered health and lives,” said FBI special agent John Bennett.
Theranos said Ms Holmes would remain chair of the company’s board – despite stepping down as its CEO. She is replaced by Theranos’s general counsel, David Taylor.
The criminal charges came after Ms Holmes settled civil fraud charges brought in March by the US securities and exchange commission, which barred her from serving as an officer or director of a public company for 10 years.
Lawyers for Ms Holmes did not respond to requests for comment. Jeffrey Coopersmith, Mr Balwani’s attorney, said his client had committed no crimes.
“Mr Balwani looks forward to trial because he did not defraud anyone, and it will be an honour to defend him vigorously,” said Mr Coopersmith.
Reuters contributed to this report