Security & Fraud

Holmes Out As Theranos CEO, Faces Fraud Charges

The bloodletting continues at Theranos. Now it has claimed the company’s founder and CEO, Elizabeth Holmes.

CNBC reported late Friday (June 15) that Holmes, who left the CEO post that same day, was indicted on criminal wire fraud charges. The company said Friday that Holmes remains chairman of the Theranos board.

The indictment was also lobbed by the Feds at ex-Theranos President Ramesh “Sunny” 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.

The site 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 to serve as an officer or director of a public company for 10 years.

Investors in the firm which could be liquidated as early as August included high-flying names, such as the Walton family (aka the founders of retailing giant Walmart), and the highest-level investors had sunk as much as $100 million each into the company.

The promise and the premise of the firm had been that just a few drops of blood could be analyzed to diagnose several diseases. The Theranos machine, however, could not live up to claims.

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