Theranos Inc. was a consumer healthcare technology startup that closed down in 2018 after the company's founder and former CEO Elizabeth Holmes and former president Ramesh "Sunny" Balwani were indicted by the 澳洲幸运5官方开奖结果体彩网:U.S. Securities aജnd Exchange Commis𝕴sion (SEC). Th♈e charge was scheming to defraud investors, doctors, and patients. Holmes ♓and Balwani were each sentenced to over a decade in prison.

The company's leadership claimed that it would revolutionize the blood-testing industry. It had not just been a unicorn, a term applied to start-ups valued at $1 billion, but a decacorn—that is, at one point, it was valued at $10 billion.

The Theranos Claim

Theranos was a privately-held healthcare technology company founded in 2003 by then 19-year-old Elizabeth Holmes. Theranos claimed that its proprietary Edison testing technology could run a multitude of tests on a patient’s blood within minutes and at a fraction of the cost of current technology.

The tide began to turn in 2015 after more than a decade of fundraising and reaching a peak valuation of roughly $10 billion due to skepticism from the press.

The technological breakthrough that Holmes and Balwani touted was never demonstrated and Holmes was accused of purposely lying to investors and patients as well as lying about the company's profitability. Holmes and Balwani were convicted and sentenced to prison.

Doubt on Viability

A New Yorker profile said that Holmes' explanations of Theranos' technology were "comically vague." It cited Holmes' statement that "a chemistry is performed so that a chemical reaction occurs and generates a signal from the chemical interaction with the sample, which is translated into a result, which is then reviewed by certified laboratory personnel."

The Wall Street Journal then followed with a highly critical report on Theranos that was based on interviews with ex-employees. The newspaper alleged rꩲampant mismanagement and claimed that Theranos had grossly exaggerated the capabilities of its technology.

A former senior employee stated that only a small fraction of the tests were conducted on the Edison machines and that the majority of the tests were handled on competitors’ equipment despite Theranos’s claims to the contrary. This would have been a violation of the U.S. Food and Drug Administration (FDA) rules if true.

The Investigations

The FDA released two reports from its ongoing investigation into Theranos. They were less than favorable and claimed that Theranos had "uncleared medical device(s)," poor records, was mishandling complaints, and had failed to conduct audits and produce supplier qualifications.

An investigator referred to an unspecified medical device, noting that, "The design was not validated under actual or simulated use conditions." The FDA also stated that Theranos failed to “ensure the device conforms to defined user needs and intended uses.”

A letter released by the Centers for Medicare & Medicaid Services (CMS) at the beginning of 2016 stated that a California-based lab used by Theranos posed "immediate jeopardy" to patient health and safety. The CMS gave the company 10 days to correct the deficiencies or face daily fines and/or loss of CMS approval for Medicare payments.

Charges of Fraud

The U.S. Securities and Exchange Commission (SEC) formally charged Theranos, Holmes, and Balwani with "massive fraud" after a couple of years of settled lawsuits and broken deals with firms such as Walgreens and Safeway. The complaint alleged that the company raised more than $700 million by deceiving investors for years about the company's performance.

Both Theranos and Holmes agreed to settle the fraud charges pending court approval. Holmes lost control of the company, returned millions of shares, and was barred from serving as an officer or director of a public company for 10 years.

Balwani and Holmes were sued for multiple counts of fraud. Holmes was convicted of three charges to commit wire fraud and one charge of conspiracy to commit wire fraud in January 2022. Later that year, Balwani was convicted of six counts of defrauding investors, four counts of defrauding patients, and two counts of conspiring to commit fraud. Balwani was sentenced to 12 years and 11 months in federal prison. Holmes received 11 years and three months.

The Rise and Fall of Theranos: A Timeline

2003: 19-year-old Stanford drop-out Elizabeth Holmes founded Theranos.

2004: Theranos raised $6.9 million in early funding, gaining a $30 million valuation.

2007: The company's valuation hit $197 million after it raised another $43.2 million in early-round funding.

2010: Theranos was valued at $1 billion after further rounds of funding.

2013: Holmes introduced Theranos to the world via press appearances and unveiled a website.

2014: Theranos was valued at nearly $9 billion with over $400 million in funding. Holmes effectively became a multi-billionaire thanks to her approximate 50% stake.

December 2014: Holmes remained tight-lipped on exactly how the company's technology worked. It turned out that the technology had never been submitted for peer review in medical journals.

July 8, 2015: Capital BlueCross, a Pennsylvania insurer with 725,000 customers, chose Theranos as its preferred lab work provider. Theranos was valued at $9 to $10 billion according to various reports.

Oct. 15, 2015: The Wall Street Journal ran a scathing article criticizing Theranos. Holmes appeared on "Mad Money" and other media outlets to do damage control. She said she was “shocked” by the Wall Street Journal article and claimed that Theranos supplied over 1,000 pages of documentation to refute the allegations. The Wall Street Journal stands by its reporting.

Oct. 16, 2015: A follow-up article in the Wall Street Journal stated that Theranos was forced to suspend the use of its unapproved nanotainer for all but one type of blood test.

Oct. 27, 2015: The FDA released two partially redacted Form 483 reports from an ongoing investigation into Theranos.

Oct. 28, 2015: Fortune reported that Theranos sought to raise an additional $200 million in Series C-3 funding just days before the initial Wall Street Journal article was published.

Nov. 10, 2015: A $350 million deal with Safeway fizzled out after Theranos failed to meet key deadlines for rollouts and Safeway executives questioned the validity of the test results.

Dec. 27, 2015: The Wall Street Journal ran another article alleging management ineptitude at Theranos as well as test rigging to produce better results for its Edison machines.

Jan. 27, 2016: The Centers for Medicare and Medicaid Services released its damning report on the company's lab.

Jan. 28, 2016: Walgreens Boots Alliance Inc. (WBA) decided to temporarily close the Theranos Wellness Center in its Palo Alto store following the CMS report. It suspended its use of the company's Newark, California lab.

May 1, 2017: Theranos settled a lawsuit with Partner Fund Management, one of its largest investors, after the hedge fund accused the company of securities fraud. Theranos had previously settled proceedings with the 澳洲幸运♔5官方开奖结果体彩网:Centers for Mꦐedicare and Medicaid Services and the Arizona Attorney General.

March 14, 2018: The SEC charged Theranos, Holmes, and Balwani with fraud.

June 15, 2018: A federal grand jury indicted Holmes and Balwani on nine counts of wire fraud and two counts of conspiracy to commit wire fraud. The U.S. Attorney's Office stated that Holmes and Balwani had "engaged in a multi-million dollar scheme to defraud investors and a separate scheme to defraud doctors and patients." Holmes stepped down from her post as CEO earlier in the day although she continued to be the chair of the company's board.

September 2018: Theranos began the process of dissolving as a company.

Jan. 3, 2022: Elizabeth Holmes was convicted on four of 11 federal charges for conspiring to defraud investors. She was ultimately sentenced to 11 years and three months in prison.

July 7, 2022: Balwani was found guilty of all charges and ultimately sentenced to nearly 13 years in prison.

May 30, 2023: Holmes reported to federal prison camp Bryan in southern Texas after several efforts to delay her sentence through appeals.

Feb. 24, 2025: Holmes lost her appeal in federal court to have her fraud conviction overturned.

The Bottom Line

Theranos was a healthcare startup that claimed to revolutionize the blood-testing industry. However, the company's claims were later found to be fraudulent, as the company was fabricating results to deceive both investors and patients.

Former Theranos CEO Elizabeth Holmes and her co-conspirator, Ramesh "Sunny" Balwani, who was the company's president, were each convicted and sentenced to over a decade in federal prison.