Elizabeth Holmes, Theranos Founder, Charged With Fraud

Elizabeth Holmes, the founder and CEO of Theranos, has been charged with fraud, the Securities and Exchange Commission said on Wednesday. Along with Holmes, Theranos' former president, Ramesh "Sunny" Balwani, was also charged.

The SEC said the company raised more than $700 million from investors through an elaborate, years-long fraud in which they exaggerated or made false statements about the company's technology, business and financial performance. Theranos, the blood-testing company, was once hailed as possibly revolutionizing and simplifying blood testing.

Theranos and Holmes have agreed to resolve the charges against them, the SEC said.

The SEC's complaints allege that Theranos, Holmes and Balwani made numerous false and misleading statements in investor presentations, product demonstrations and in news articles, deceiving investors that is key product could conduct comprehensive blood tests from finger drops of blood. According to the SEC, in reality, the product could only complete a small number of tests. Theranos conducted the vast majority of tests on modified and industry-standard commercial analyzers manufactured by others, the SEC said.

The company also claimed its products were deployed by the Department of Defense to Afghanistan and on medevac helicopters, generating the company more than $100 million in revenue, the SEC says. The technology was never used by the DOD, according to the complaint.

Holmes has agreed to pay a $500,000 fine, is barred from serving as an officer or director of a public company for 10 years and will return any remaining shares, the SEC said. She will also relinquish voting control of Theranos. Holmes would not profit from a sale of the company until over $750 million is returned to defrauded investors and preferred shareholders, the SEC said.

Theranos and Holmes neither admitted not denied the allegations in the complaint. Balwani's case will be litigated in federal court in the Northern District of California.

Patch will update this report.

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