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Image / Agenda / Breaking Stories

All you need to know about Elizabeth Holmes’ unbelievable Theranos fraud case


by Jennifer McShane
26th Jul 2021
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With her trial finally taking place next month, we look at the former CEO who once had Silicon Vally at her feet – and where it all went wrong.

Our obsession with scammers in popular culture goes well beyond Netflix’s recent Fyre Festival documentary; from Anna Delvy’s Manhattan graft to Billy McFarland’s delusion, those who lie, cheat and steal their way to the top have always been the subject of fascination. Their spectacular fall from grace isn’t even the most intriguing part of the stories — it’s the how and the why.

How could they carry on such elaborate feats of deception so brazenly? And why were so many drawn into something that looked suspicious from the outset?

These questions and more are what has former Theranos CEO Elizabeth Holmes frequently in the news both as her court date approaches this year and as the subject of a recent documentary The Inventor: Out for Blood in Silicon Valley.

It’s intriguing: the scam, the money (she duped investors into putting over $400 million into the company), the fact that she could have seriously endangered people’s health to the often, downright bizarre: viewers are convinced Holmes ‘faked’ her voice, deliberately making it deeper in a bid to be taken more seriously. Her family deny this is the case.

What exactly happened? 

The comparison to Fyre’s McFarland is warranted, however, Elizabeth Holmes isn’t in jail or prison for her crimes. At least, not yet. Here’s how her story differs:

Hailed as the female Steve Jobs (right down to the black turtlenecks), and named by Forbes as the world’s youngest self-made female billionaire, her company was valued at over $9 billion with more than $400 million in venture capital.

Holmes came onto the scene in 2004 after founding Theranos, a tech company who promised to “democratise healthcare” by collecting data from blood droplets instead of larger vials; she insisted she had the technology and know-how to determine thousands of illnesses by using only a single drop of blood (she had a fear of needles herself).

It all started to unravel when a piece by The Wall Street Journal came out in 2015: a secret investigation of Theranos detailing that the startup was struggling with its blood-test technology — it didn’t do what it said on the tin. After settling with the Securities and Exchange Commission following charges for “massive fraud”, in 2018 Holmes was stripped of most of her control of the company. She and her partner were accused of raising millions of dollars by making misleading statements about, mainly, how well their blood-testing device worked amongst other things.

Intricate deceit

Essentially, the confident and charismatic Holmes built what was a billion-dollar company based on a fear of needles, a pack of lies and ambition that saw her blind to anything else but continuing her web of intricate deceit. Or, the ‘fake-it-till-you-make-it’ way of thinking.

Similar to McFarland, she doctored documents claiming Theranos had annual sales of $100 million, when sales were just $100,000 and the SEC complaint also says that the investors got binders of printed information that included reports that appeared to be written by pharmaceutical companies that had worked with Theranos, but were actually written by Theranos themselves.

Did she go to prison?

This is to be determined. She reached an initial plea deal admitting to the fraud which said that she must also return millions of shares (reportedly over $750 million) to the privately held company, pay a $500,000 fine and she cannot serve as an officer or director of a public company for 10 years. She and the company did not admit the allegations of widespread fraud and the U.S attorney case is still ongoing. It is now due to take place in October (pushed out from August thanks to Covid-19).

Many feel by taking a deal that Holmes effectively removed herself from taking any real responsibility for her actions, but this is a case that is ongoing; Holmes and her COO and now ex-boyfriend Ramesh ‘Sunny’ Balwani are headed into criminal proceedings sometime later this year, facing two counts of conspiracy to commit wire fraud and nine counts of wire fraud each.

Ongoing case

Holmes’ lawyers have asked a federal judge to throw out the US government’s case against the Theranos founder, arguing the government’s case against Holmes was too vague and full of “fudging language”. However, this hasn’t happened.

As of this year, she has had only some of the smaller charges dropped: a federal judge dismissed charges that Holmes and Balwani defrauded doctors and patients by offering the blood tests because the money for the tests came out of patients’ insurance, and therefore meant the patients suffered no financial loss.

Now, a twelfth felony fraud charge was filed n a new criminal indictment against Holmes. The charge concerns a patient’s blood-test results, according to the indictment filed in U.S. District Court in San Jose.

A California judge has still set an August  2021 start date for the federal fraud trial for which, if convicted, Holmes could face up to 20 years in prison.

With all the drama,  it’s little surprise that she is the subject of two documentaries and a podcast — The Dropout — as well as an upcoming movie starring Jennifer Lawrence. The Dropout series tells the story of the scandal with Amanda Seyfried playing the role of Holmes. It is currently being filmed.

She may have not played with fire but she has blood on her hands in some form — the world is just baffled how she managed to get away with it for so long.

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