SEC charges Theranos and CEO Elizabeth Holmes with 'massive fraud'

From Engadget - March 14, 2018

In a statement, the commission said that the company, and its two executives, misled investors about the capability of its blood testing technology. Theranos' big selling point was that its hardware could scan for a number of diseases with just a small drop of blood. Unfortunately, the company was never able to demonstrate that its system worked as well as its creators claimed.

Theranos also apparently claimed that its hardware was used by the US Department of Defense and was deployed in combat zones. Investors were told that this deal, and others, would help the company pull in $100 million in revenue in 2014. Unfortunately, the DOD never used the equipment in combat zones and only generated $100,000 in revenue during that year.

The company and Elizabeth Holmes have already agreed to settle the charges leveled against them by the SEC. Holmes will have to pay a $500,000 fine and return 18.9 million shares in Theranos that she owned, as well as downgrading her super-majority equity into common stock. The CEO is now barred from serving as the officer or director of a public company for 10 years. In addition, if Theranos is liquidated or acquired, Holmes cannot profit from her remaining shareholding unless $750 million is handed back to defrauded investors.

Balwani, on the other hand, is facing a federal court case in the Northern District of California where the SEC will litigate its claims against him. It's important to note that the deals between Holmes and Theranos are still subject to approval by the court, and neither party has admitted any wrongdoing.


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