Theranos was a biotech startup that claimed to revolutionize blood testing with its Edison device, which could supposedly perform hundreds of tests with just a few drops of blood. Founded by Elizabeth Holmes, a Stanford dropout who was hailed as the next Steve Jobs, Theranos attracted billions of dollars in investments and partnerships from prominent figures and institutions. However, in 2015, a Wall Street Journal investigation revealed that Theranos’ technology was unreliable, inaccurate, and potentially dangerous and that the company had lied to investors, regulators, and customers about its capabilities and performance. The scandal led to the collapse of Theranos, the indictment of Holmes and her former business partner Ramesh “Sunny” Balwani on multiple counts of fraud, and the exposure of one of the biggest corporate frauds in history.
The Rise of Theranos
Elizabeth Holmes founded Theranos in 2003 when she was 19 years old and had dropped out of Stanford University. She had a vision of creating a device that could perform multiple blood tests with a simple finger prick, instead of the conventional method of drawing blood from a vein. She believed that this would make blood testing more accessible, affordable, and convenient for people, and potentially save lives by detecting diseases earlier.
Holmes raised millions of dollars from venture capitalists and wealthy investors, such as media mogul Rupert Murdoch, former Secretary of State Henry Kissinger, and former Secretary of Defense James Mattis. She also secured partnerships with major companies and organizations, such as Walgreens, Safeway, Pfizer, and the US military. She assembled a board of directors that included influential political and military leaders, such as former Senators Bill Frist and Sam Nunn, former Secretary of State George Shultz, and former Secretary of Defense William Perry.
Holmes cultivated a charismatic and secretive persona, dressing in black turtlenecks like Steve Jobs, rarely blinking or showing emotion, and speaking in a deep voice. She appeared on the covers of magazines such as Forbes, Fortune, and Inc., which praised her as a visionary and a genius. She gave TED talks, delivered keynote speeches at prestigious events, and received honorary degrees and awards. In 2014, Forbes named her the youngest self-made female billionaire in the world, with an estimated net worth of $4.5 billion.
The Fall of Theranos
However, behind the scenes, Theranos was struggling to make its technology work. The Edison device was plagued by technical problems, such as inaccurate results, contamination issues, and frequent malfunctions. Theranos also faced regulatory challenges from the Food and Drug Administration (FDA) and the Centers for Medicare & Medicaid Services (CMS), which questioned the validity and safety of its tests. Theranos resorted to using conventional machines from other companies to run most of its tests while hiding this fact from its investors and customers. Theranos also created a culture of secrecy and intimidation within the company, silencing whistleblowers and critics with threats of lawsuits and retaliation.
The truth about Theranos began to unravel in October 2015, when investigative journalist John Carreyrou published a series of articles in The Wall Street Journal that exposed Theranos’ deception and fraud. Carreyrou interviewed former employees, doctors, patients, and experts who revealed that Theranos’ technology was unreliable at best and dangerous at worst. He also obtained internal documents that showed that Theranos had manipulated data, falsified reports, and misled regulators.
The Wall Street Journal’s investigation triggered a cascade of legal actions, investigations, and sanctions against Theranos. The FDA ordered Theranos to stop using its Edison device for all but one test. CMS revoked Theranos’ license to operate its main laboratory in California and banned Holmes from owning or operating a lab for two years. Walgreens terminated its partnership with Theranos and sued it for breach of contract. Investors sued Theranos for fraud and misrepresentation. Patients sued Theranos for negligence and harm.
By 2018, Theranos had shut down its operations, laid off most of its employees, settled most of its lawsuits, and filed for bankruptcy. Holmes and Balwani were indicted by the US Department of Justice on multiple counts of wire fraud and conspiracy to commit wire fraud. They were accused of defrauding investors out of more than $700 million and endangering patients’ health with false claims about their technology.
The Trial of Elizabeth Holmes
The trial of Elizabeth Holmes began in August 2021, after several delays due to the COVID-19 pandemic and Holmes’ pregnancy. Holmes pleaded not guilty to all charges and faced up to 20 years in prison if convicted. Her defense team argued that she was a visionary entrepreneur who had a genuine belief in her technology and a sincere desire to help people. They also claimed that she was the victim of a decade-long abusive relationship with Balwani, who allegedly controlled every aspect of her life and business, and impaired her mental state.
The prosecution presented evidence and witnesses that showed that Holmes knowingly lied to investors, regulators, customers, and employees about Theranos’ technology, performance, and finances. They also showed that Holmes benefited personally from the fraud, living a lavish lifestyle and enjoying fame and power. They argued that Holmes was not a naive or coerced victim, but a sophisticated and ruthless fraudster who deceived everyone around her.
The trial lasted for four months and involved more than 30 witnesses, including former employees, investors, customers, experts, and journalists. The jury deliberated for seven days before reaching a verdict on January 3, 2022. They found Holmes guilty on four counts of wire fraud related to deceiving investors, but not guilty on four counts of wire fraud related to deceiving patients. They failed to reach a verdict on three counts of conspiracy to commit wire fraud.
On February 4, 2022, Holmes was sentenced to 11 years and three months in prison by US District Judge Edward Davila. She was also ordered to pay $500,000 in fines and forfeit her remaining shares in Theranos. Holmes expressed remorse for her actions and apologized to the victims of her fraud. She said she hoped to use her time in prison to learn from her mistakes and become a better person.
The Legacy of Theranos
The Theranos scandal has been widely regarded as one of the biggest corporate frauds in history and a cautionary tale for the tech industry. It has raised questions about the role of media, investors, regulators, and consumers in enabling and challenging the hype and claims of startups. It has also sparked debates about the ethics, accountability, and responsibility of entrepreneurs and innovators who seek to disrupt and transform industries and society.
The Theranos scandal has also inspired a number of books, documentaries, podcasts, TV shows, and movies that have explored the story and its implications from different perspectives. Some of the most notable works include:
- Bad Blood: Secrets and Lies in a Silicon Valley Startup by John Carreyrou, the book that expanded on his Wall Street Journal investigation and won several awards.
- The Inventor: Out for Blood in Silicon Valley by Alex Gibney, an HBO documentary that featured interviews with former employees, journalists, and experts.
- The Dropout by Rebecca Jarvis and ABC News, a podcast that followed the rise and fall of Holmes and Theranos.
- The Dropout by Hulu, an upcoming TV series starring Amanda Seyfried as Holmes.
- Bad Blood by Adam McKay, an upcoming movie starring Jennifer Lawrence as Holmes.
