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SEC has charged Theranos and CEO Elizabeth Holmes with ‘massive fraud’

SEC has charged Theranos and CEO Elizabeth Holmes with ‘massive fraud’

The SEC is charging Theranos, Elizabeth and Ramesh “Sunny” Balwani with fraud related to the startup’s fundraising activities. CEO Holmes and former president Balwani to have allegedly raised more than $700 million from investors through “an elaborate, years-long fraud.” Through their methods, it involved making “false statements about the company’s technology, business and financial performance.”

Theranos and Holmes have reportedly already agreed to resolve the charges against them, which involves the CEO paying a penalty and giving up effective control fo the company she founded. Holmes must pay a $500,000 fine and return 18.9 million shares in Theranos that she owned, and downloading her super-majority equity into common stock. In addition, the CEO is barred from serving as the office or director of a public company for 10 years.

In the event that Theranos is liquidated or acquired, Holmes cannot profit from her remaining shareholding unless $750 million is handed back to investors that were defrauded. For Balwani, he is facing a federal court case int he Northern District of California. That’s where SEC will litigate its claims against him.

The deals between Holmes and Theranos are still subject for approval by the court, and neither part has admitted any wrongdoing.

According to SEC’s statement, they say that the company and the two executives misled investors about the capability of its blood testing technology. The biggest selling point of the devices was that it could scan for a number of diseases with a single, small drop of blood, compared to the usual vials that are used. It was later understood that the company was never ale to demonstrate the system’s capabilities and used transitional equipment to conduct majority tests they performed.

This story is breaking news and continuously being developed. Please refresh for more information. 

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Hamza Khalid

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