Former Theranos chief executive Elizabeth Holmes, who made headlines with her $9 billion fortune after raising $9 billion dollars in funding from investors, was indicted in federal court in New York on 13 counts of fraud. As part of the indictment, prosecutors allege that Holmes lied about Theranos’s ability to deliver blood tests faster and at lower cost — and that her account of how the company was progressing was more red herring than she led investors to believe.
The indictment marks a new turn in the affair that, at its heart, is a star-crossed science.
She met Steve Davis, a Silicon Valley entrepreneur who worked at Levi Strauss & Co., in 2010 while a freshman at Stanford University. She’d never even left California; this was her time to expand. If Davis’s parents were worried about their daughter dabbling in science before she’d had a chance to collect her degree, it didn’t show. She arranged an internship at Theranos’s lab, and came to New York to meet with the CEO there, Sunny Balwani.
The two hit it off — an ideal mix of nerdy Midwestern awkwardness, rough-and-tumble New York charisma, and, remarkably, ferocious ambition. “We had a connection from the first time we met — the way we looked at problems, the way we looked at people, and the way we both held ourselves as role models for women,” Holmes told Fast Company in 2016.
And Holmes’s work at Theranos seemed to reflect that, too. “He thinks there’s a technology opportunity here that can save lives,” Miles Norris, chief executive of Lucas Orchard Therapeutics, a startup that Theranos was working with in 2010 and 2011, told Forbes after he and his team helped explain the technology to investors. “So he comes in and says, ‘This company has a potential $50 billion revenue opportunity.’”
Early on, Holmes was everywhere — signing on to help the National Science Foundation do a study of the company’s technology in Boston. During trips to the company’s lab, she’d usually be the only one in the room.
“She would be here working with employees, talking with them, reading our reports,” said Kamrul Islam, a senior manager at Theranos in 2010 and 2011. “It’s part of her personality that she will get to know the people that she works with and that helps her — it shows how caring she is, and she cares about the company.”
But in 2013, Theranos abruptly announced that it would stop running clinical labs. Though it promised that it was transitioning out of research and development, its advisory board was almost immediately dismantled and almost all of its employees were let go.
Just how bad was the scandal? The Wall Street Journal first reported it in 2015, and it took another nine months before Theranos was vindicated by investigators from the Securities and Exchange Commission. In the meantime, it reported, Holmes and Balwani had continued to raise millions of dollars from investors, including a $68 million round in 2017. They falsely portrayed themselves as inching toward a product that never existed.
For example, according to the SEC’s sentencing recommendation of Holmes in 2017, she had referred to $50 million as Theranos’s “launch-pipeline funding,” in February of 2016. Which may explain why Holmes was still sounding positive about her company when she spoke in 2016 to a group of Silicon Valley engineers after the SEC’s ruling. “All of the regulatory scrutiny and questions around our technology is a good thing because it’s driving us forward,” she said.
Back in 2015, Theranos executives told customers that the FDA was still investigating whether the company had been complying with safety standards. But in 2016, it was announced that the agency had never launched any investigation. The FDA, rather, found that Theranos had been “steeped in deception” with regard to the tests it had running for insurance companies and private labs.
The company, according to the Securities and Exchange Commission, ceased operations altogether in October 2017. Holmes made headlines again in 2018 after selling another 70 percent of her shares to a Chinese firm for $145 million.
Whether it’s enough to deter the disgraced former CEO, however, remains to be seen.
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