Elizabeth Holmes, the former CEO and founder of private blood testing startup company Theranos, was convicted and found guilty on four out of 11 charges of defrauding investors. The high-profile, 4-month-long criminal trial has made Holmes the first ever Silicon Valley CEO to be convicted of a white-collar crime. However, Holmes has pleaded not guilty.
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Theranos made claims of designing blood tests that required very small amounts of blood. Furthermore, the company claimed that the tests could be performed very rapidly by using small automated devices the company had developed.
About Elizabeth Holmes
After dropping out of Stanford at 19 years of age, Holmes founded Theranos as a breakthrough health technology company that could run several health tests based on just a drop of blood.
During her 15-year reign as CEO, Holmes laid out revolutionary ambitions in health diagnostics and attracted Top Hedge Funds and big-ticket investors like George Shultz, Rupert Murdoch and Henry Kissinger, and former Pentagon chief Jim Mattis, among others.
As a result, the company’s market capitalization crossed $9bn at its peak, and she was declared a billionaire by the age of 30.
2015: The Turning Point in the Case
Contrary to their sky-high goals, Elizabeth Holmes and her company fell massively short of their ambitious plans.
In 2015, a Wall Street Journal report stated that the Theranos testing machines did not work as promised and were full of inaccuracies. It also mentioned that the company was resorting to traditional blood drawing methodology to perform certain tests, and was conducting the tests in laboratories outside Theranos.
Holmes was aware of the shortcomings of the technology and deliberately misled the investors. Holmes manipulated documents, adding logos of Pharma giants like Pfizer (NYSE: PFE) and Schering-Plough to Theranos reports, before sharing the same with potential partners and investors. This led to false implications that the companies had endorsed the methodology.
The Verdict
It took seven days of deliberations for the jurors to reach the verdict. Elizabeth Holmes was found guilty on four counts including conspiracy to defraud investors and tricking them into putting their money into the company’s proclaimed revolutionary testing system.
However, she was acquitted on four other charges related to conspiracy to defraud patients; meanwhile, the jurors remained deadlocked on three other charges of criminal counts as they were not able to arrive at a verdict on the same.
Following the verdict, 37-year-old Holmes is expected to spend several years behind bars. A sentencing date has not been set yet, which will be determined by the judge.
