Theranos’ Holmes indicted by feds over blood-test ‘fraud’

Theranos founder Elizabeth Holmes resigns from firm she founded

If convicted, they each face a maximum sentence of 20 years in prison and a fine of $250,000, plus restitution to those found to have been defrauded, on each count.

While Theranos touted the technology as revolutionary, the blood analyzer had only been successfully tested a few times, the Securities and Exchange Commission concluded.

Holmes stepped down as chief executive of Theranos on Friday, the company announced, shortly before the indictment was released. Holmes remains chairman of the company's board.

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The company did not immediately respond to a message seeking comment on Friday's indictments. Mr.Balwani committed no crimes. He did not defraud consumers, but instead worked tirelessly to empower them with access to their own health information.

Peter Henning, a former senior attorney in the enforcement division of the SEC, said Theranos' statement came close to breaking a stipulation in its agreement with the SEC that prohibits it from denying the agency's allegations. Unfortunately, in the end, Theranos was unable to execute on its business plan - although it still created tremendous value. The company had claimed to have developed revolutionary blood-testing technology that could use as little as a single drop of blood to generate more accurate and much faster results than traditional testing, at a lower cost. The ads "explicitly" claimed that Theranos blood tests were cheaper than blood tests from conventional laboratories, the indictment says.

Holmes was once lauded as the youngest self-made female billionaire. The company has repeatedly laid off employees in an effort to cut costs and is staring down debts that could force it to liquidate as early as this summer, the Wall Street Journal has reported.

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Based on "misrepresentations and omissions" by Holmes and Balwani, many patients paid for blood tests with results that were "inaccurate, unreliable, and improperly validated." . The SEC said Theranos, Holmes and Balwani misled partners and investors about the company's technology, misrepresented revenue projections and falsely claimed it didn't need regulatory approval for its testing technology.

Also indicted was Ramesh Balwani, who along with Ms. Holmes ran the company that at one point was the darling of Silicon Valley, earning glowing write-ups in newspapers and magazines and soaring to a market value in the billions of dollars.

The indictment also alleged that Holmes and Balwani made numerous misrepresentations about Theranos' financial condition and futures prospects.

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Investors in Theranos included Oracle founder Larry Ellison, venture capital firm Draper Fisher Jurvetson, now Secretary of Education Betsy DeVos and media mogul Rupert Murdoch.

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