Theranos

On January 3, 2022, Elizabeth Holmes was found guilty of four counts of wire fraud and one count of conspiracy to commit wire fraud, sentenced to 11 years and 3 months in prison. Co-defendant Ramesh Balwani was convicted of 12 counts of fraud and sentenced to nearly 13 years. Evidence showed Theranos systematically concealed that its Edison devices produced inaccurate results, used traditional blood testing machines while claiming proprietary technology, and ignored internal warnings about test reliability.

In March 2018, the SEC charged Theranos, Elizabeth Holmes, and Sunny Balwani with raising more than $700 million through an elaborate years-long fraud involving false statements about the company's technology, business, and financial performance. Holmes settled with the SEC for $500,000 penalty and 10-year officer/director bar. In January 2022, Holmes was convicted on one count of conspiracy to commit investor fraud and three counts of wire fraud involving $140 million. She was sentenced to 135 months (11 years, 3 months) in prison in November 2022, with $452 million in restitution ordered. Balwani was convicted on all 12 counts and sentenced to nearly 13 years.

Theranos equipment provided inaccurate results for an estimated one out of ten tests, causing thousands of negative patient experiences. Patients were misdiagnosed with conditions including diabetes, cancer, and heart attacks. A pregnant woman was falsely told she was miscarrying; another received incorrect results about a life-threatening ectopic pregnancy. In January 2016, CMS declared the Theranos Newark lab posed 'immediate jeopardy to patient health and safety' due to dangerously unreliable warfarin dosage testing. CMS revoked Theranos's CLIA certificate in July 2016 and the company was forced to invalidate two years of blood test results for tens of thousands of patients.

Theranos, led by Elizabeth Holmes and Sunny Balwani, conducted an elaborate years-long fraud claiming its proprietary Edison blood analyzer could perform comprehensive blood tests from tiny finger-prick samples. In reality, the device could only perform a small number of tests, and the company secretly ran the vast majority of patient tests on modified third-party commercial analyzers. Theranos falsely claimed $100 million in 2014 revenue when actual revenue was approximately $100,000, and falsely stated its technology was deployed by the US military in Afghanistan. The fraud raised over $700 million from investors.

Theranos exhibited comprehensive corporate governance failures. Holmes maintained complete control of the board through super-majority voting shares and did not tolerate dissent. The board had no system to monitor regulatory compliance. The laboratory operated for months without a qualified director, violating licensure requirements; when one was appointed, it was a dermatologist unqualified to run a clinical lab who served as an absent figurehead. Unlicensed personnel were allowed to conduct quality control procedures and process patient samples. The company concealed shortcomings through elaborate deception including locking laboratory doors during regulatory inspections and selectively reporting results to evade oversight from CMS.

Theranos operated blood testing services in Walgreens stores in California and Arizona despite knowing its technology could not consistently produce accurate results for tests including calcium, potassium, HIV, and sodium. The company falsely advertised cheaper and faster blood tests. Walgreens terminated the partnership in June 2016 and sued for breach of contract. Patients received inaccurate medical test results that could have led to harmful treatment decisions.

Theranos systematically retaliated against employees who raised concerns about test accuracy and safety. Tyler Shultz, a research engineer who discovered significant quality control failures including 20% false-positive syphilis test rates, faced years of legal threats, private investigator surveillance, and pressure to sign affidavits and identify other whistleblowers after reporting concerns to CEO Holmes and being rebuffed. He incurred $500,000 in legal fees. Co-whistleblower Erika Cheung faced similar treatment. The company employed aggressive tactics including surveillance, legal threats, and NDAs to silence employees. A microbiologist was fired for pushing for required environmental health and safety protections. The toxic culture created an environment where unquestioning loyalty to Holmes superseded scientific integrity and ethical considerations.