Investors have decided to settle a lawsuit with Theranos and founder Elizabeth Holmes, aiming to get whatever they can from the struggling blood testing company.
According to a report in Bloomberg, the settlement also includes Ramesh “Sunny” Balwani, who is the former president of Theranos. The lawsuit has been going on for some time — and as it progressed in 2016, it became clear to investors that there wasn’t much to recover. By the end of last year, Theranos was about to become bankrupt and has been surviving on a loan secured by the value of its patents, which are now in question. In late December it received a $100 million loan from Fortress Investment Group. Citing an email sent to shareholders by Elizabeth Holmes, the founder and chief executive officer of Theranos, The Wall Street Journal reported at the time the loan is subject to the company hitting product and operational milestones. The money will enable the company to avert a potential bankruptcy filing due to a depletion of what’s left of its cash.
In June CNBC reported Holmes was indicted on criminal wire fraud charges. The company said Holmes remains chairman of the Theranos board despite the charges. The indictment was also lobbed by the Feds at ex-Theranos President Balwani. The two former executives appeared in court in California to be arraigned on two counts of conspiracy to commit the aforementioned fraud and nine counts of actual wire fraud. CNBC noted that the charges come three months after a previous legal action, where Holmes was on the receiving end of a civil lawsuit from the Securities and Exchange Commission (SEC), amid allegations of “massive fraud” at the company. The scope of the fraud? The firm, as the SEC noted, raised more than $700 million from investors over a two-year period that ended in 2015. Investors were deceived, said the SEC, about the Theranos diagnostic offerings. The two executives had lied about the firm’s work with the United States military and inflated revenue projections. The initial civil suit led to Holmes’ surrendering 19 million shares she’d received from the firm, agreeing to a half-million dollar fine and not to serve as an officer or director of a public company for 10 years.