Theranos Founder Elizabeth Holmes Convicted of Investor Fraud | USAO-NDCA

SAN JOSE – A jury has found Elizabeth A. Holmes guilty of one count of conspiracy and three counts of wire fraud in connection with a multi-million dollar scheme to defraud investors in Theranos, Inc., the report said. American lawyer Stephanie M. Hinds; Federal Bureau of Investigation (FBI) Special Agent Craig D. Fair; Acting Food and Drug Administration (FDA) Commissioner Janet Woodcock; and the inspector in charge of the United States Postal Inspection Service (USPIS), Rafael Nuñez. The verdicts follow a 15-week trial before the Honorable Edward J. Davila, United States District Judge.

“The jurors in this 15-week trial have navigated a complex case amid a pandemic and schedule hurdles,” US Attorney Hinds said. “I thank the jurors for their attentive and determined service which made it possible to render verdicts. The guilty verdicts in this case reflect Elizabeth Holmes’ guilt in this large-scale investor fraud and she now faces a conviction for her crimes.

“Elizabeth Holmes chose fraud over business failure. A jury determined, beyond a reasonable doubt, that she intentionally misled investors,” said Special Agent in Charge Craig Fair. “I would like to thank the FBI San Francisco agents and analysts who have spent years investigating allegations of fraud within Theranos to uncover the truth and ensure justice in this matter.”

“The FDA’s Office of Criminal Investigations (OCI) will continue to investigate and help bring to justice individuals and companies responsible for endangering public health,” said Catherine A. Hermsen, Deputy Commissioner of Investigations FDA criminals. “The FDA-OCI is proud to have partnered with the United States Attorney’s Office and its law enforcement counterparts in initiating this lawsuit. ”

“The United States Postal Inspection Service is committed to protecting consumers and investors from fraud,” USPIS Inspector-in-Charge Nuñez said. “We are proud of the dedication shown by postal inspectors and our US FDA and FBI partners in bringing this case to a verdict. ”

Holmes, 37, of Woodside, Calif., Founded Theranos in 2003. Theranos was a blood testing company based in Palo Alto and Newark, Calif. Holmes has used a combination of direct communications, marketing materials, media statements, financial statements, models, and other information to drive investments. She claimed that Theranos had developed an analyzer, called, among others, the Theranos Sample Processing Unit (TSPU), Edison or minilab. She claimed the analyzer was able to perform a full range of clinical tests using small samples of blood taken from a finger. She also indicated that the analyzer could produce more accurate and reliable results than those obtained by conventional methods, all at a faster rate than before.

Evidence submitted during the trial showed that Holmes knowingly made materially false statements to investors and potential investors about the analyzer. For example, evidence showed Holmes knew the analyzer had problems with accuracy and reliability, performed a limited number of tests, was slower than some competing devices, and in some ways was ‘it couldn’t compete with the more conventional machines out there. Evidence also showed that Holmes used conventional machines purchased from third parties to perform a large portion of Theranos’ blood tests.

The lawsuit included evidence that Holmes made numerous inaccurate statements to potential investors about Theranos’ financial condition and its future prospects. For example, the evidence showed that Holmes told investors that Theranos would generate over $ 100 million in revenue and breakeven in 2014 and that Theranos expected to generate around $ 1 billion in revenue in 2015 while in truth, she knew that Theranos would generate negligible income. or modest income in 2014 and 2015.

Further, the evidence showed that Holmes told investors that Theranos has a profitable and revenue-generating business relationship with the United States Department of Defense and that Theranos technology has been deployed in the field of. battle when in reality Theranos had limited income from military contracts and his technology was not deployed on the battlefield. Evidence showed Holmes told investors that Theranos had been fully validated by many large drug companies and provided investor reports with drug company logos falsely suggesting that the drug companies endorsed Theranos. Further, evidence showed Holmes told investors that Theranos would soon dramatically increase the number of wellness centers in Walgreens stores, even though Theranos’ retail Walgreens rollout stalled due to several issues. .

Holmes was originally indicted on June 14, 2018. On July 28, 2020, a federal grand jury released a substitute indictment charging Holmes with two counts of conspiracy to commit wire fraud, in violation of 18 USC § 1349 , and ten counts of wire fraud. , in violation of 18 USC § 1343. One of the conspiratorial counts alleged that Holmes defrauded investors while the second count alleged that Holmes defrauded patients using Theranos’ services. Likewise, the indictment charged Holmes with ten counts of wire fraud, several of the counts alleging investor fraud and several alleging that Holmes defrauded patients who were tricked into purchasing services. Theranos.

The jury found Holmes guilty on one count of conspiracy of investor wire fraud and three counts of substantial wire fraud relating to the scheme to defraud investors, including wire transfers totaling more than 140 millions of dollars. The jury acquitted Holmes of one count of conspiracy-related wire fraud and three other counts of wire fraud. A charge of wire fraud involving a Theranos patient was dismissed during the trial. The jury was unable to reach a unanimous verdict on three counts relating to investor fraud.

Holmes faces a maximum sentence of twenty (20) years in prison and a fine of $ 250,000, plus restitution, for the count of conspiracy and each count of wire fraud. However, any post-conviction sentence would be imposed by the court after reviewing the United States Sentencing Guidelines and Federal Sentencing Law, 18 USC § 3553.

Judge Davila has yet to schedule Holmes’ sentencing hearing. She remains free on bail, pending further hearings.

Assistant US Attorneys Robert S. Leach, Jeff Schenk, John C. Bostic and Kelly Volkar are pursuing the case with the assistance of Lakisha Holliman, Madeline Wachs, Elise Etter, Susan Kreider and Leeya Kekona. The charge is the result of an investigation by the FBI, USPIS, and the FDA’s Bureau of Criminal Investigations.

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