Theranos, aiming to stave off a bankruptcy, has reportedly laid off most of what is left of its employees as it tries to preserve cash.
The Wall Street Journal, citing people familiar with the matter, reported that with the workforce reductions, the company’s headcount went from roughly 125 employees to around two dozen or even less. The move comes as CEO Elizabeth Holmes agreed to settle with the Securities and Exchange Commission (SEC) over “massive fraud” charges lodged against the company.
In mid-March, the SEC announced that it had charged Theranos, the Silicon Valley blood-testing technology company, as well as Holmes and the company’s former president, Ramesh “Sunny” Balwani, with providing false information to raise more than $700 million from investors.
In a press release, the SEC said the company and its top executives engaged in years-long fraud in which they exaggerated or made false statements about the business’ technology and financial performance. As part of a settlement, Holmes agreed to pay a penalty and to give up majority voting control over the company, as well as to reduce her equity – which, combined with shares she previously returned, will lower her equity stake by a material amount.
According to the SEC, the complaints contend that the company, Holmes and Balwani made several false and misleading statements at investor conferences, product demos and in media interviews, tricking investors into thinking its portable blood analyzer, the company’s key product, could conduct a comprehensive analysis of blood just from the drops collected from a user’s finger — a claim that if true, would revolutionize the blood-testing industry.
However, the reality, according to the SEC, was that the company’s blood analyzer technology could only do a small number of tests. What’s more, the SEC contends that Theranos conducted most of its patient tests with modified and industry-standard commercial analyzers that weren’t made by the company.
The executives also falsely claimed that the U.S. Department of Defense used its product on the battlefields of Afghanistan and on MEDEVAC helicopters, and that the company collected $100 million in revenue in 2014. The product was actually never used by the Department of Defense, and revenue was only a little more than $100,000 in 2014.