Theranos and Elizabeth Holmes Charged With Years-Long Fraud Totaling More Than $700 Million

Theranos Founder Elizabeth Holmes was once thought to be the next Steve Jobs. Now, the SEC has charged Holmes and her company with fraud. Andrew Burton/Getty Images

On Wednesday, the U.S. Securities and Exchange Commission charged healthcare technology startup Theranos Inc. with fraud. Included in the charge is founder and CEO Elizabeth Holmes as well as previous president Ramesh "Sunny" Balwani. According to a release, the SEC says the company received more than $700 million from investors by falsifying claims about their performance and product.

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The Silicon Valley-based Theranos was founded in 2003 and claimed its portable blood analyzer could perform comprehensive tests nearly anywhere with only a few drops of blood from the finger. However, the SEC says the product could perform just a small sample of tests and used tools made by other companies.

The SEC also asserted that Theranos's claim that their product was used by the U.S. Department of Defense in Afghanistan is not true. The charge also highlights the company's declaration that it would make more than $100 million in revenue in 2014; in reality Theranos made less than $200,000 in revenue from operations that year, according to the release.

News release: Theranos, CEO Holmes, and Former President Balwani Charged With Massive Fraud

— SEC_News (@SEC_News) March 14, 2018

The SEC says that Theranos and Holmes will pay a penalty. In addition, Holmes will give up her majority voting control and reduce her equity in the company.

According to Fortune magazine, Theranos secured a $100 million loan in December 2017 after the company was on the brink of bankruptcy. A 2015 Wall Street Journal investigation showed that the company, once valued at $9 billion had been using the technology of other companies to perform its tests. That investigation led to a series of stories that took down the company, including a Financial Times piece that questioned the validity of certain partnerships and numerous stories on quality issues. Holmes had previously been dubbed "The next Steve Jobs."