Elizabeth Holmes, the embattled Theranos Inc. founder and chief executive, has been charged with fraud by the SEC. Per her agreement with the SEC, she will neither admit guilt nor innocence and she is now forced to give up majority control over the company which she founded.
Holmes paid a $500,000 fine and surrendered her voting control in the company. Theranos inc., a blood-testing company that once was sold by Walgreens, hit the skids in 2015 when the Wall Street Journal exposed the company as a potentially fraudulent setup. The allegations claimed that Theranos inc. rarely used their innovative blood testing technology in the Walgreens kits. The article also claimed that several former employees found the technology to be subpar and likely not very accurate.
A near one million test results have been voided by Theranos inc. since the company was exposed publically as fraudulent.
According to the Wall Street Journal, there is more bad news for Theranos inc. on the horizon.
In addition to reaching a settlement with Ms. Holmes, the SEC is pursuing civil securities fraud charges in California against Ramesh “Sunny” Balwani, Theranos’s former president and chief operating officer. Ms. Holmes and Mr. Balwani jointly ran the company for seven years before he retired in May 2016. They also were in a romantic relationship, according to multiple people familiar with the matter.
Furthermore and unrelated to the SEC’s investigation, the U.S. attorney’s office in San Francisco has an ongoing criminal investigation into Theranos’ business activities.
“The Theranos story is an important lesson for Silicon Valley,” said Jina Choi, director of the SEC’s regional office in San Francisco, in a statement released Wednesday by the agency. “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.”