Theranos: the latest news about the controversial blood-testing startup

Ramesh Balwani, the former business partner and romantic interest of Elizabeth Holmes, defrauded investors and patients of the blood testing company Theranos, a jury found today.

Balwani, who goes by Sunny, faced 10 counts of wire fraud and two counts of conspiracy to commit wire fraud. He was found guilty of all counts and faces up to 20 years in prison for each count.

After a long trial, former Theranos CEO Elizabeth Holmes has been found guilty of four out of the 11 charges brought against her, including three counts of wire fraud and conspiracy to defraud investors in her now-defunct blood testing company. The verdict caps a journey filled with both promises and disappointments, one that ultimately led to the downfall of what could have been one of the most successful companies, and entrepreneurs, to come out of Silicon Valley in over a decade.

While the verdict is a milestone in holding startup founders accountable for false promises, it actually further complicates the difference between fraud and the “fake it til you make it” mindset of many startups. The Verge’s deputy editor Liz Lopatto breaks down the outcome of the trial and what to expect in the months to come. With Holmes’ business partner, Sunny Balwani, getting ready to stand trial later this month, the story is far from over.

There is no doubt in my mind that former Theranos CEO Elizabeth Holmes will appeal the four charges she was convicted of: conspiracy to defraud investors and wire fraud. She still has the Silicon Valley mindset, after all: reality can be bent to your will. But what have we learned from the Theranos trial? Almost nothing.

Holmes was found guilty on four of 11 counts after about 50 hours of deliberation. Those counts could be grouped, roughly, into defrauding patients and defrauding investors. The jury found her not guilty of defrauding patients or conspiracy to defraud patients.

Elizabeth Holmes deliberately misled investors about the capabilities of the blood testing technology at Theranos and is guilty of three counts of wire fraud, a jury found today. She is also guilty of conspiracy to defraud investors with her co-defendant, Sunny Balwani.

She faces up to 20 years in prison for each of the counts. The jury found her not guilty of two counts of defrauding patients and not guilty of conspiracy to defraud patients. The jury did not return a verdict on three more counts of defrauding investors.

Today, we had the first direct link between the problems in Theranos’ labs and Elizabeth Holmes. Former manager of assay systems Surekha Gangakhedkar’s job was preparing blood tests for use in patients. The system was unreliable; describing herself as “stressed and unhappy and concerned with the way the launch was going,” Gangakhedkar quit.

Gangakhedkar met with Holmes to explain why she was resigning: she didn’t think the Edisons were good enough for patient use. Holmes told her Theranos had “promised to deliver to the customers and didn’t have much of a choice,” except to go ahead with the launch, Gangakhedkar testified.

Erika Cheung, who took the stand yesterday for her direct testimony, which continued today, is known for being one of John Carreyrou’s sources for his blockbuster article about Theranos. You know, the article that’s part of the reason we are now witnessing US v. Elizabeth Holmes. (Holmes is on trial for several counts of wire fraud and conspiracy to commit wire fraud.) 

Cheung is, famously, one of the people who blew the whistle on Holmes. She’s even given a TED talk about it. The other major source for Carreyrou was her friend, Tyler Shultz, who also worked at Theranos and was the grandson of one of the board members. He is expected to testify later in the trial, since he tried to bring problems in the lab to Holmes’ attention.

It was around the time that the defense counsel referred to “deferred revenue” that I began to feel genuinely bad for the members of the jury in the wire fraud trial of Elizabeth Holmes. 

Tuesday’s testimony involved the nuances of accounting, how quality control works in labs, and way too many Excel spreadsheets. I get it — you have to show the financials to show that Theranos was in a tricky financial position. And you have to show how the labs were failing in order to establish that they were failing and that Holmes knew it. But go through this too fast, and you risk confusing people.

Would you rather be a failure or a fraud? Judging by the opening statements in Elizabeth Holmes’ wire fraud trial, those seem to be Holmes’ options. 

Here’s Robert Leach, assistant U.S. attorney, who is prosecuting the case against Holmes: “This is a case about fraud, about lying and cheating to get money,” Leach says. “That’s a crime on Main Street and a crime in Silicon Valley.” But according to Lance Wade, Holmes’ attorney, Holmes is just another failed startup leader: “In the end, Theranos failed. And Ms. Holmes walked away with nothing. But failure is not a crime.”

When I say “Elizabeth Holmes,” a character probably comes to mind: wispy bleach-blonde hair, black turtleneck, thin, white, unusually low voice, unblinking gaze. In most of her magazine covers, she’s holding a tiny vial meant to contain the “few drops of blood” needed for her company’s finger-prick blood tests. 

“When I finally connected with what Elizabeth fundamentally is, I realized that I could have just as well been looking into the eyes of a Steve Jobs or a Bill Gates,” Theranos advisor Channing Robertson, a Stanford chemical engineering professor, told Fortune in 2014. “She has sometimes been called another Steve Jobs, but I think that’s an inadequate comparison,” former defense secretary and Theranos board member William Perry told The New Yorker the same year. (Perry knew Jobs.) “She has a social consciousness that Steve never had. He was a genius; she’s one with a big heart.”

With just a few days left until Theranos founder Elizabeth Holmes faces criminal fraud charges at trial, newly unsealed court documents (via NPR) reveal evidence that her lawyers may cite in her defense.

If you don’t remember the details from the scandal as described in a book, documentary, and more than one podcast series, Theranos told investors it developed revolutionary blood test technology capable of amazing results based on just a few small drops. Theranos had been valued at as much as $9 billion before reports exposed its inaccurate results and use of modified machines by other companies to perform crucial testing instead of its own Edison device. The company folded in 2016, and federal prosecutors charged Holmes and Balwani (pdf) two years later for wire fraud, listing investors and patients as victims of their deception.

Elizabeth Holmes, the disgraced founder of blood-testing startup Theranos, will officially go to trial in San Jose next year, according to the US District Judge Edward J. Davila of the Northern District of California.

Federal prosecutors indicted Holmes and the company’s former president and COO, Ramesh “Sunny” Balwani last summer, charging the pair with two counts of conspiracy to commit wire fraud and nine counts of wire fraud. The pair face 20 years in prison and hundreds of thousands of dollars in fines.

It may have been surprising to hear that blood-testing startup Theranos was technically still around, even though it was a fraud that put people in real danger. But per an email chief executive officer David Taylor sent to shareholders, Theranos will finally close.

Taylor starts the email by saying that he “write[s] with difficult news about the future of the company,” though it is hard to believe that any shareholder would be blindsided by this development. Taylor, who is also general counsel, became CEO after previous CEO and founder Elizabeth Holmes was indicted for fraud by federal prosecutors. When the founder of the company is facing criminal charges and potentially 20 years in prison, the “difficult” news should at least be expected.

Federal prosecutors have indicted disgraced Theranos founder Elizabeth Holmes and former president and chief operating officer, Ramesh “Sunny” Balwani, for defrauding customers and investors, calling their actions a “corporate conspiracy” that “endangered health and lives.”

Holmes has also stepped down as CEO from the blood-testing company, once a Silicon Valley darling valued at $9 billion. Starting in 2015, a series of articles in The Wall Street Journal by investigative journalist John Carreyrou revealed that the company was peddling a technology — blood tests with a simple finger prick — that did not actually work. The company has been forced to void or correct nearly a million blood-test results. The company has since become an example of the dangers of Silicon Valley hype and Holmes, once a billionaire, now has a net worth close to zero.

Theranos will fire 340 employees — about 40 percent of its workforce — in California, Arizona and Pennsylvania, as well as shuttering all its clinical labs and Theranos Wellness centers, the company said in a statement today. The troubled start-up appears to be moving back to doing more research and development.

The startup was once a poster-child for Silicon Valley, with Holmes gracing the covers of many publications, including Inc, Forbes, Fortune, and The New York Times’ T Magazine. It earned a $9 billion valuation, largely on the strength of a pin-prick test that used its proprietary technology to draw small amounts of blood from a fingerstick, rather than using a large needle to draw from the vein. Only one of its tests was approved by the US FDA — the rest were sold through a regulatory loophole — but it was able to sell its products at 40 Walgreens stores.

Troubled diagnostic company Theranos suffered another blow as it withdrew its request for federal approval of a new Zika virus blood test, The Wall Street Journal reports. The Food and Drug Administration is said to have turned up evidence that Theranos began testing the diagnostic without the necessary protections for human subjects of research.

Over the past year, scandal has dogged the startup that was once valued at $9 billion. In May, the company threw out tens of thousands of results from its Edison blood-testing machine and issued corrected lab test reports to patients. But in an attempt to get back on its feet, the company unveiled its latest miniaturized diagnostic device — called the miniLab — that it says will be able to run several tests on blood samples, including a test for Zika. Theranos had already begun trials on blood samples collected in the Dominican Republic when it announced the miniLab earlier this month.

Theranos CEO Elizabeth Holmes made an appearance at a scientific convention today, but it wasn't to allay the many concerns about the company's previous blood tests, the results of which were thrown out earlier this year. Holmes also chose not to address the federal criminal and civil investigations against her company, instead announcing a new Theranos product: a blood-testing kit that could serve as the successor to its controversial Edison machines.

By presenting data publicly before the new machine is available, Theranos is changing its approach, lifting the veil of secrecy that it kept around its operations since its foundation in 2003. However, the clinical data presented onstage was not independently verified, relying instead on Theranos' own studies, and the miniLab machine has yet to be approved by the US Food and Drug Administration. Only one Theranos blood testing product has been approved by the FDA so far — a herpes test — while the company's others were covered by a regulatory loophole that allowed them to be sold as lab-developed tests.

Elizabeth Holmes, the founder of blood-testing company Theranos, has been banned from operating labs in the US for two years, the Silicon Valley company announced in a press release. Theranos has been fined an undisclosed amount of money. The announcement is vindication for The Wall Street Journal, which first reported on irregularities at the company eight months ago.

Only one of Theranos's blood tests received federal approval. The rest — more than 80 — were sold under a regulatory loophole as lab-developed tests. So the supervising agency for most of the tests wasn't the US Food and Drug Administration — it was, instead, the Centers for Medicare and Medicaid Services. That's the agency that imposed the sanctions.

Walgreens has announced that it's terminating its partnership with blood-testing startup Theranos. All 40 of the "Theranos Wellness Centers" in Walgreen's Arizona drugstores will be shut down immediately, closing what has been a primary link between Theranos and would-be consumers, and further wounding the troubled startup's revenue.

"In light of the voiding of a number of test results, and as the Centers for Medicare and Medicaid Services (CMS) has rejected Theranos’ plan of correction and considers sanctions, we have carefully considered our relationship with Theranos and believe it is in our customers’ best interests to terminate our partnership," said Walgreens senior vice president Brad Fluegel in a press statement.

It's hard to imagine a core duo better suited to bring the Theranos saga to the big screen. Holmes is one of the most fascinating people to emerge out of Silicon Valley in recent memory, a confident and precise leader whose star rose dramatically before her company fell apart; Lawrence has the chops to bring her to life. McKay's work on The Big Short proved he can juggle comedy, drama, and complicated conceptual fodder with relative ease. And the company's story has been filled with twists and turns right out of an original script: evading federal regulators! Years of voided test results! Government bans! Compelling dramas have been spun out of much less. The project's still early in development — it doesn't have a release date, a title, or any other announced cast members — but it's one worth watching as it develops.