Elizabeth Holmes Sentenced to 11+ Years in Prison for Defrauding Investors

Elizabeth Holmes, one of Silicon Valley’s most celebrated and subsequently vilified startup founders, has been sentenced to 135 months, or more than 11 years, in prison for defrauding investors out of hundreds of millions of dollars.

Holmes, the founder and CEO of since-failed blood testing startup Theranos, was at one point the world’s first-ever self-made woman billionaire.

Didn’t Exist

Theranos collapsed in the wake of a 2015 report by The Wall Street Journal (WSJ) revealing that the, by-all-accounts revolutionary, healthcare company was lying and obfuscating how it was conducting its array of innovative blood tests, and that the technology to run the tests through finger pricks of blood, a solution Holmes created her company around, simply did not exist.

Holmes promised Theranos would revolutionize healthcare, falsely telling her investors that the company’s proprietary blood analyzer could run conventional laboratory tests from a small finger stick blood sample. This relatively quick and painless approach was viewed by investors as much more attractive than traditional marketplace methods requiring much larger volumes of patient blood taken using traditional vein draws.

Such a revolutionary blood testing capability did not exist. It was entirely dreamed up by Holmes and her team. The $1.4 billion in funding she raised was meant to help create the solution in Theranos labs before people on the outside began to look too closely.

Neither time nor reality were on Holmes’ side, and she was found guilty in January of three counts of wire fraud and one count of conspiracy. In addition to the 135-month sentence she received Friday (Nov. 18), she must complete an additional three years of supervised release.

Other falsehoods peddled by Holmes include claims that the diagnostics company’s technology had been comprehensively validated by multiple major pharmaceutical companies and that her “Edison” testing device was deployed overseas by the Department of Defense to treat wounded soldiers.

She was also wrong each time she declared, wearing her Steve Jobs black turtleneck, that Theranos was a profitable company.

Prosecutors said that Holmes risked the lives of patients who received faulty Theranos tests. Blinded by ambition, Holmes prioritized deceit that brought her “spectacular fame, adoration and billions of dollars of wealth.”

In a memo, Holmes’ own lawyers said she should be spared a strict sentence. Her team stated that the former Theranos founder “advanced healthcare accessibility; she built a real company with real value; she did not cash in her stock despite opportunities to do so; she acknowledged and sought to address the many errors that she and others at the company made; and she has made efforts outside Theranos to help others.”

Perhaps the only salient point the memo makes is that Holmes really did not cash in her stock, despite what must have been attractive opportunities to take the money while she still could.

Cool Kids in Hot Water

As PYMNTS’ CEO Karen Webster noted with respect to the current situation unfolding with FTX, we’ve seen this movie before. The cast of characters changes, but the ending is always the same. The business implodes, the cool kids flame out, and people say that we should have seen the red flags and done something sooner.

But when the story is good enough, it seems that the tough questions simply don’t get asked.

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