Elizabeth Holmes has been found guilty of defrauding investors in her former blood-testing startup company, Theranos, concluding a trial that has gripped both Silicon Valley and the international media outlets which initially helped propel her to stardom.
Theranos was at one point valued at approximately $9bn, but is now a byword for corporate misconduct, having wowed the tech world before collapsing in a storm over the efficacy of the technology supposedly at its core.
As the founder and former chief executive officer of the disgraced company, Holmes was accused of lying to patients about testing, and to investors about projected revenues – and had faced 11 separate fraud charges.
After a federal trial in San Jose, California, lasting nearly four months and involving some 30 witnesses, jurors on Monday found her guilty on four counts, including conspiracy against Theranos investors and wire fraud involving Theranos investors.
But she was acquitted on all four counts of fraud and conspiracy against patients who had used Theranos’s blood tests. And – despite 50 hours of deliberations spanning seven days – jurors were unable to reach a unanimous verdict on three other counts.
So as the final chapter in Holmes’ spectacular rise and fall comes to a close, how did she get into this position. And how did the legal proceedings – described by some as “Silicon Valley’s trial of the century” – unfold?
Having dropped out of Stanford’s School of Engineering in 2003, a 19-year-old Holmes used her tuition money as seed funding for a consumer healthcare technology company based on the idea of performing blood tests using only a small amount of blood – such as a finger prick – rather than drawing blood for testing into vials with needles. She cited her own fear of needles as her inspiration for the technology, which she called Edison.
Taking her idea to her medicine professor at Stanford, Holmes was told that it would not work. Several other experts repeated this warning, but she convinced her dean at the School of Engineering to back the concept and he became the first board member of Theranos (a combination of the words “therapy” and “diagnosis”).
Holmes began raising money for the firm with tech investors and adopted Steve Jobs’ look, frequently appearing in black turtleneck sweaters and speaking in a baritone voice. By the end of 2010 she had raised $92m in capital and was becoming well-known across Silicon Valley.
By 2014 she was on the covers of Fortune, Forbes, Inc, and The New York Times’ Style Magazine. When Theranos was valued at $9bn in 2014, Holmes was placed at number 100 on the Forbes 400 list of the wealthiest people in the US and named as the youngest self-made billionaire.
At this point, she had raised more than $400m in venture capital, had her name on 18 US patents and 66 foreign patents, and established business relationships with the Cleveland Clinic, Capital BlueCross, and AmeriHealth Caritas to use the company’s technology for blood testing. Among her investors were Rupert Murdoch, Carlos Slim, Larry Ellison, Henry Kissinger, and George Schultz.
In 2015, then-Vice President Joe Biden visited one of the company’s facilities in Newark, California, and declared it “the laboratory of the future”. Some 800 people were employed by Theranos at its peak.
The company’s fortunes began to turn in October of that year when John Carryrou of The Wall Street Journal wrote an article claiming Theranos had been forced to use conventional blood testing methods in its research because its own Edison technology was providing erratic and inconsistent results. He was tipped off by a medical expert who was suspicious of the technology.
Pursuing the story further, Mr Carryrou discovered that the company’s apparently innovative tech was nowhere near ready for use and had been rushed into development to meet the expectations of its influential investors. The equipment Joe Biden had been shown was allegedly not actually operational.
Holmes denied all claims and strenuously defended herself and the company in media appearances. However, problems with lab facilities, staffing, and procedures saw her banned from owning, operating, or directing a blood-testing service for two years. Pharmacy chain Walgreens ended a relationship with the company at this point.
Problems continued to mount when Mr Carryrou published an interview with whistleblower Tyler Schultz, grandson of board member George Schultz, who alleged that the company cast aside inconvenient Edison test results thereby falsifying the accuracy of the process.
Other revelations came to light including the storage of samples at incorrect temperatures and patients being placed in jeopardy because of false readings from the flawed tests.
As federal investigations into allegations about testing proceeded in 2016, Forbes announced that Holmes’ fortune, which was based on her 50 per cent share in the company had dropped to zero.
In March 2018, the US Securities and Exchange Commission charged Holmes and Ramesh Balwani, former president of Theranos and chief operating officer, with fraud for taking more than $700m from investors while advertising a false product.
Holmes settled the SEC lawsuit, surrendering voting control of Theranos, a ban on holding an officer position in a public company for a decade, and a $500,000 fine.
On 15 June 2018, following an investigation by the US Attorney’s Office for the Northern District of California in San Francisco that lasted more than two years, a federal grand jury indicted Holmes and Mr Balwani, on nine counts of wire fraud and two counts of conspiracy to commit wire fraud.
Prosecutors alleged that the pair engaged in two criminal schemes, one to defraud investors, the other to defraud doctors and patients. Both pleaded not guilty.
Mr Balwani and Ms Holmes have a long relationship, having met when she was still a teenager and at school. He is 19 years older than her and they were romantically involved from 2003 until the collapse of the company, though the relationship was kept a secret.
They have differing accounts of his exit from Theranos with Ms Holmes saying that she fired him, and Mr Balwani claiming he left of his own accord.
Holmes, who testified in her own defence during the trial and argued that the company’s failure did not necessarily mean she committed fraud, also alleged that Mr Balwani had abused her and maintained a powerful influence over her actions, affecting her mental state. He has denied the allegations.
Mr Balwani faces trial next month on similar charges to Holmes, and it is likely she will not be sentenced until after his trial has concluded.
Central to her trial was the question of whether Holmes intentionally misled investors, doctors and patients as she collected impressive investments. She was ultimately found guilty of wire fraud in connection with three wire transfers totalling more than $143m, and was found guilty of conspiring to commit wire fraud against investors between 2010 and 2015.
Assistant US Attorney Jeffrey Schenk told the jury that Holmes “chose fraud over business failure”, saying in his arguments: “She chose to be dishonest with her investors and patients. That choice was not only callous, it was criminal.”
Defence lawyer Kevin Downey told the jury that Holmes “believed that she built a technology that could change the world” and “went down with the ship when it went down”.
Holmes’s trial had suffered multiple delays – firstly as a result of the coronavirus pandemic, which saw the court system shut down.
In March of 2021, the trial was delayed by a further six weeks to the end of August after Holmes blindsided prosecutors by announcing that she was pregnant and due in July. Holmes had married William Evans, the heir to the Evans Hotel Group, in a private ceremony in 2019.
When the trial began in September, her son was just weeks old.
A dramatisation of Ms Holmes’ life is being turned into a television miniseries by Hulu called The Dropout. It is based on the podcast of the same name by Rebecca Jarvis and ABC Radio and will star Amanda Seyfried.
Ms Holmes and the Theranos scandal were also the subjects of the HBO documentary The Inventor: Out for Blood in Silicon Valley.