In the latest moment in a disastrous chain of events for the company, blood-testing startup Theranos and its CEO, Elizabeth Holmes, have been charged by the SEC with defrauding investors, the agency announced today.
Holmes will relinquish voting control of the company
To resolve the charges, the SEC said, Holmes has agreed to pay a $500,000 penalty, will give up majority voting control of the company, and will be barred from serving as an officer at a public company for a decade. The SEC has also charged the company’s former president, Ramesh “Sunny” Balwani, who has not resolved the charges.
According to the SEC, Theranos raised more than $700 million from investors through fraudulent claims, notably by saying its portable blood-testing machine could conduct complex tests through just a few drops of blood. Meanwhile, most tests were conducted on machines built by other companies. Theranos also falsely claimed that its technology was in use by the Department of Defense, according to the SEC. In 2014, as the company claimed it would generate $100 million in revenue, it ultimately earned nearer to $100,000, the agency said.
Theranos became a Silicon Valley darling for its blood tests, garnering glowing media coverage and propelling Holmes to stardom. But in a series of articles beginning in 2015, The Wall Street Journal catalogued the company’s internal troubles. A federal investigation was later launched, leading to today’s announcement. The settlements are still subject to approval from a court.