US charges Theranos founder Elizabeth Holmes with criminal fraud
As of today, she's also no longer CEO.
Theranos founder Elizabeth Holmes.
Elizabeth Holmes is no longer running Theranos, the company that promised a portable blood analyzer that could have changed blood testing, if it had been what the company promised.
That's what a brief press release from the company announced -- moments before a Department of Justice press release revealed even bigger news: Holmes and former Theranos President Ramesh Balwani are now being charged with criminal wire fraud.
Three months ago, the US Securities and Exchange Commission (SEC) charged Theranos, Holmes and Balwani with civil fraud, charges that they agreed to settle. In Holmes' case, that meant agreeing to pay a $500,000 penalty, returning 18.9 million shares of company stock, giving up majority voting control, and being prohibited from serving as an officer or director of a public company for 10 years.
But with new criminal charges, the US government is attempting to punish Theranos execs for both defrauding investors and knowingly endangering people's lives with inaccurate blood test results, a penalty that could discourage other companies from lying about new products. The DoJ says the charges could put them in prison for up to 20 years and add additional fines of $250,000 for each count of wire fraud.
The DoJ alleges that Holmes and Balwani "engaged in a multimillion dollar scheme to defraud investors, and a separate scheme to defraud doctors and patients."
Theranos had been under investigation since early 2016, after a Wall Street Journal report revealed the company's testing tech wasn't yet working as promised. Walgreens cut ties with Theranos in June 2016, closing all 40 of its Theranos blood testing sites in Arizona. (The company settled with Walgreens last August, and settled two investor lawsuits last May.) In July 2016, Holmes was banned from running labs for two years.
According to Theranos's press release on Friday, Holmes is staying with the company as chair of the board, but General Counsel David Taylor is taking over as CEO. The Wall Street Journal reported that Theranos laid off most of its remaining employees in early April. So there may not be much of a Theranos left to run.
Theranos didn't immediately respond to a request for comment.