Elizabeth Holmes was America's youngest billionaire, the inventor whose technology would change the landscape of medicine globally, but the SEC has confirmed it was all built on lies.
She was once billed as the ‘Steve Jobs of biotechnology’ but it turns out Elizabeth Holmes is nothing but a fraudster.
On Wednesday, the founder and (soon to be) former CEO of Theranos was found to have fooled investors into injecting $700 million into the medical technology startup to help keep it afloat.
According to the US Securities and Exchange Commission (SEC) — which began an investigation into Theranos after the Wall Street Journal was tipped off about the deception by former employees — Holmes and former president Ramesh Balwani straight out lied or made exaggerated statements about the blood-testing technology’s capabilities and the company’s partnerships.
Holmes, a Stanford dropout and America’s youngest self-made billionaire in 2014, claimed to have invented a miraculous new cost-effective pinprick blood test that did away with the need for big needles and long wait times, but the whistleblowers revealed there was nothing miraculous about the so-called ‘Edison machine’ at all, it was highly inaccurate, and the bulk of the tests were outsourced to legacy labs.
One former staffer at Theranos said the machine frequently produced potassium readings so high, “patients would have to be dead for the results to be correct”.
Following the revelations, the Centers for Medicare and Medicaid Services, which oversees blood testing labs in the US, banned Holmes from operating a lab and revoked Theranos’ blood testing licence.
And now the final nail in the coffin. Holmes has agreed to pay a $US500,000 fine, surrender 19 million shares and is barred from being an officer or director of a public company for 10 years.
The SEC’s findings
The regulator found that instead of the company’s “portable blood analyser” revolutionising the industry, it was all smoke and mirrors.
“The complaints allege that Theranos, Holmes, and Balwani made numerous false and misleading statements in investor presentations, product demonstrations, and media articles by which they deceived investors into believing that its key product – a portable blood analyser – could conduct comprehensive blood tests from finger drops of blood, revolutionising the blood testing industry,” the SEC statement reads.
“In truth, according to the SEC’s complaint, Theranos’ proprietary analyser could complete only a small number of tests, and the company conducted the vast majority of patient tests on modified and industry-standard commercial analysers manufactured by others.”
Furthermore, Holmes and Balwani added an extra three zeros to Theranos’ 2014 revenue report, falsely claiming that their technology had been picked up by the US military.
“The complaints further charge that Theranos, Holmes, and Balwani claimed that Theranos’ products were deployed by the U.S. Department of Defense on the battlefield in Afghanistan and on medevac helicopters and that the company would generate more than $100 million in revenue in 2014,” the press release continues.
“In truth, Theranos’ technology was never deployed by the U.S. Department of Defense and generated a little more than $100,000 in revenue from operations in 2014.”