Theranos founder Elizabeth Holmes jailed for fraudon November 19, 2022 at 2:25 am

Theranos founder Elizabeth Holmes has been sentenced to over 11 years in prison for defrauding investors in her blood testing start-up that was once valued at $9bn (£7.5bn).

The former Silicon Valley star falsely claimed the technology could diagnose disease with just a few drops of blood.

Holmes, 38, who is pregnant, tearfully told the court she felt “deep pain” for those misled by the scam.

She was found guilty in January after a three-month trial.

Holmes is expected to appeal against the sentence, which was handed down on Friday in a California court.

Once hailed as the “next Steve Jobs”, she was at one time said to be the world’s youngest self-made billionaire.

She launched Theranos after dropping out of Stanford University at age 19, and its value rose sharply after the company claimed it could bring about a revolution in the diagnosal of disease.

But the technology Holmes touted did not work and – awash in lawsuits – the company was dissolved by 2018.

At Holmes’ trial in San Jose, California, prosecutors said she knowingly misled doctors and patients about Theranos’ flagship product – the Edison machine – which the company claimed could detect cancer, diabetes and other conditions using just a few drops of blood.

They also accused Holmes of vastly exaggerating the firm’s performance to its financial backers.

Jurors ultimately found her guilty on four counts of fraud, with a maximum sentence of 20 years in prison. But they found her not guilty on four other charges, and failed to reach a verdict on three more.

Before Judge Edward Davila issued his sentence on Friday, Holmes read a speech to the court in which she tearfully apologised to investors and patients.

“I am devastated by my failings. I have felt deep pain for what people went through, because I failed them,” she said.

“I regret my failings with every cell of my body,” she continued.

The judge referred to Holmes as a “brilliant” entrepreneur, and told her: “Failure is normal. But failure by fraud is not OK.”

Silicon Valley is a place where fortunes can be made and squandered. It’s not unusual for investors to lose big sums of money. 

It’s also not unusual for founders to make grandiose claims about their tech. 

What is so unusual about Holmes’ case, though, is that Theranos’ unwinding actually led to fraud charges that stuck. 

It is notoriously difficult to get successful prosecutions in cases of white-collar fraud in the US. 

When investors lose money, they often simply write it off, or pursue compensation privately. 

Holmes’ punishment is a warning for Silicon Valley executives that there are real consequences for misleading investors.  

This isn’t a slap on the wrist, it’s significant time. 

She is required to surrender to begin serving her sentence on 27 April.

Holmes and Ramesh “Sunny” Balwani, her former business partner and lover, were charged in 2018 with wire fraud and conspiracy to commit wire fraud. Balwani, who was tried separately, was found guilty of fraud this summer. He will be sentenced next month.

Prosecutors requested that she face 15 years in prison and pay some $800m in restitution to investors, including several high-profile figures such as former US Secretary of Defense James Mattis, who testified against her at trial, and software tycoon Larry Ellison.

But Holmes’ defence team – who argued she was well-intentioned and trying to help people – said she should spend 18 months under house arrest.

The judge on Friday determined that she had caused $121m in losses to investors, including Rupert Murdoch and the family that owns Walmart. The amount she will be required to repay will be determined at a later court hearing.

Over 130 friends, family and former Theranos employees wrote to the judge to appeal for clemency.

The group noted that Holmes is a young mother. She had a son in July 2021 and is currently pregnant with her second child.

It is not known when she is due to give birth. Her lawyers are expected to try to keep her from entering prison until after the baby is born.

Her partner Billy Evans, in his sentencing memo to the court, told the judge that he fears for “a future in which my son grows up with a relationship with his mother on the other side of glass armed by guards”.

Eileen Lepera, a Silicon Valley secretary who lost a chunk of her life savings by investing in Theranos, told the BBC she was “happy” with the sentence.

“I think it’s fair, considering all the facts of the case,” Ms Lepera said. “She [Holmes] knew it was fraud, and she put people’s lives at risk.”