SEC has charged Theranos and CEO Elizabeth Holmes with 'massive fraud'

14 March, 2018, 19:45 | Author: Darnell Taylor
  • SEC has charged Theranos and CEO Elizabeth Holmes with 'massive fraud'

"Years after it was reported that the SEC was looking into improprieties at the once high-flying blood-testing company Theranos, its founder, Elizabeth Holmes, and the company's former president, Ramesh "Sunny" Balwani", have been formally charged with massive fraud by the agency.

Holmes and Theranos have made a deal to settle the case against them, with the penalty including her surrendering majority voting control of the company, according to a statement by the US Securities and Exchange Commission. Holmes, the charismatic young Stanford dropout who once adorned the cover of magazines in Steve Jobs-esque turtlenecks, must pay a $500,000 penalty, give up voting control of the company, return the shares she obtained during the alleged fraud, and can not be part of the leadership of a public company for a decade. Describing the process as an "elaborate, years-long fraud in which they exaggerated or made false statements about the company's technology, business, and financial performance", the charges also accused Theranos and its two key executives of misleading statements about how the U.S. military was using the technology.

The SEC complaint charged that Theranos raised more than $700 million from late 2013 to 2015 while "deceiving investors by making it appear as if Theranos had successfully developed a commercially-ready portable blood analyzer that could perform a full range of laboratory tests from a small sample of blood". DEVELOPING: More details will be added to this report as they become available.

Theranos has been under fire since 2015, and had previously said it was working with the SEC regarding its investigation into the company.

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"Investors are entitled to nothing less than complete truth and candor from companies and their executives", Steven Peikin, the co-director of the SEC's enforcement division, said in a statement. In addition, the CEO is barred from serving as the office or director of a public company for 10 years. It claims its technology can work with just a finger prick.

Elizabeth Holmes, CEO of Theranos. Due to the company's liquidation preference, if Theranos is acquired or is otherwise liquidated, Holmes would not profit from her ownership until - assuming redemption of certain warrants - over $750 million is returned to defrauded investors and other preferred shareholders. The SEC intends to litigate its claims again Balwani in federal court.

"As part of the settlement, neither the Company nor Ms. Holmes admitted or denied any wrongdoing", Theranos said in a statement.

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