Theranos, along with its CEO Elizabeth Holmes and former president Sunny Balwani have been charged by the SEC with "massive fraud". Holmes is ceding her voting control of the company and reducing her equity stake in Theranos, the two executives have agreed to deal with the charges brought against them but have not admitted or denied responsibility in the case.
At its high point, Theranos was valued at $9 billion, primarily based on claims its technology could run accurate blood tests from a single drop of blood.
What a difference a few years makes: When the Wall Street Journal's John Carreyrou wrote his first story back on October 16, 2015, raising doubts about the blood-testing company's claims, the reaction was a lot different. Holmes, who did not comment, paid a $500,000 penalty and agreed to a 10-year ban from serving as an officer or director in a public company.
Theranos Founder Elizabeth Holmes was once thought to be the next Steve Jobs. Since then, the company has been on a downward spiral, spending upwards of $10 million per month on legal fees, while shrinking its workforce from 900 employees to just 170 previous year. A consumer lawsuit from Arizona's attorney general was settled late past year.
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The Silicon Valley-based Theranos was founded in 2003 and claimed its portable blood analyzer could perform comprehensive tests almost anywhere with only a few drops of blood from the finger. Theranos claimed its portable blood testing techniques could rapidly assess a variety of diseases for a fraction of the price of conventional testing through just a finger pinprick. Prosecutors alleged she also made misleading statements about the company's contracts with the Department of Defense, exaggerated partnerships with a pharmacy and grocery store, and told investors that Theranos didn't require approval from the Food and Drug Administration despite being informed by officials the product required the agency's approval. "Theranos' proprietary analyser could complete only a small number of tests, and the company conducted the vast majority of patient tests on modified and industry-standard commercial analysers manufactured by others".
A California firm that parlayed a change in Arizona law to generate business here was charged Wednesday by federal regulators with defrauding investors with false claims about its technology - the very technology that was cited in amending the state law.
In reality, the SEC found that the DOD didn't deploy Theranos's technology.
"Innovators who seek to revolutionize 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", she said in a statement.