Theranos founder Elizabeth Holmes indicted on wire fraud charges

Theranos founder Elizabeth Holmes indicted on wire fraud charges

Theranos founder Elizabeth Holmes indicted on wire fraud charges

Federal prosecutors have indicted Theranos founder Elizabeth Holmes and the company's former president Ramesh "Sunny" Balwani with nine counts of wire fraud and two counts of conspiracy to commit wire fraud.

Holmes and Theranos reached a settlement with the SEC, while the SEC said it would take its case against Balwani to court. They are also accused of defrauding doctors.

As the charges were announced Friday, Theranos said Holmes would step down as CEO of the company and its general counsel, David Taylor, would become the company's next CEO.

The indictment alleges that the pair used marketing, press interviews and financial statements to defraud potential investors on behalf of their company.

The founder of a USA start-up that promised to revolutionise blood testing has been hit with criminal charges. Holmes remains the company's chairman. Holmes settled with the SEC.

Holmes, who founded Theranos as a college dropout, ran her company with extreme secrecy, claiming the close hold on data and information was essential because large laboratory testing companies were threatened by her proprietary technology.

"Based on these representations, many hundreds of patients paid or caused their medical insurance companies to pay Theranos for blood tests and test results, sometimes following referrals from their defrauded doctors", the indictment states.

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Holmes said Theranos had discovered a new way of doing blood testing, one able to do dozens of tests with just a prick of a finger and few droplets of blood.

An attorney for Holmes did not immediately respond to a request for comment.

The wire fraud and conspiracy charges could lead to prison terms up to 20 years and fines up to $250,000 if they are convicted.

Balwani, 53, of Atherton, was employed at Theranos from September of 2009 through 2016. The indictments are the result of a federal investigation lasting over two years that was originally sparked by investigations from the Wall Street Journal's John Carreyrou.

"Today's indictment alleges that through their company, Theranos, CEO Elizabeth Holmes and COO Sunny Balwani not only defrauded investors, but also consumers who trusted and relied upon their allegedly-revolutionary blood-testing technology".

Holmes and Balwani also told investors that Theranos had used its own system to conduct tests on patients, when it had actually bought third-party analyzers and used those for patient testing.

Regulators claim that at the same time, Holmes was using the company's glowing profile in the media to raise more money.

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