Former Theranos CEO Elizabeth Holmes’ fraud conviction could teach Silicon Valley’s culture of hubris and hype some valuable lessons.
On Monday, Holmes was found guilty of deceiving investors into believing that Theranos had developed a revolutionary medical device capable of detecting a wide range of diseases and conditions from a few drops of blood. She faces up to 20 years in prison for each charge, but legal experts believe she will not receive the maximum sentence.
According to federal prosecutors, Holmes was a charlatan obsessed with fame and fortune. She portrayed herself as a visionary trailblazer in male-dominated Silicon Valley who was emotionally and sexually abused by her former lover and business partner, Sunny Balwani, over the course of seven days on the stand.
As the verdicts were read, Holmes remained seated and showed no visible emotion. She bowed her head several times before U.S. District Judge Edward Davila polled the jury.
The audacious dream Holmes pursued when she founded Theranos at the age of 19 in 2003 had turned into a nightmare by the time she was indicted on felony charges in 2018.
During that time, Holmes progressed from an unknown to a Silicon Valley sensation with a $4.5 billion fortune on paper to a reviled failure. Her downfall has been chronicled in documentaries, books, and podcasts, and it will soon be retold in a Hulu TV series called “The Dropout,” starring Amanda Seyfried.
Holmes set out to develop a less painful, more convenient, and less expensive method of scanning for hundreds of diseases and other health issues by taking a few drops of blood with a finger prick rather than inserting a needle into a vein. She aimed to disrupt an industry dominated by giant testing companies like Quest Diagnostics and Labcorp by establishing “mini-labs” in Walgreens and Safeway stores across the United States that would use a small Theranos device called the Edison to run faster, less intrusive blood tests.
The concept — and the way Holmes presented it — captivated wealthy investors eager to get a piece of a game-changing company early on. It aided Theranos in raising over $900 million from savvy billionaires such as media mogul Rupert Murdoch and software magnate Larry Ellison, as well as well-to-do families such as Walmart’s Waltons and Amway’s DeVos clan.
Holmes also drew a well-connected board of directors that included two former US secretaries of state, Henry Kissinger and the late George Shultz; two former defense secretaries, Gen. James Mattis and William Perry; former Sen. Sam Nunn; and former Wells Fargo CEO Richard Kovacevich. In an on-stage presentation, she charmed former President Bill Clinton and impressed then-Vice President Joe Biden, who lavished praise on her during a tour of a Theranos lab in 2015.
What most people didn’t realize at the time was that Theranos’ blood-testing technology was producing misleading results. As a result, instead of the promised finger sticks, patients were forced to undergo regular blood draws, prompting Theranos to secretly test those samples using conventional machines in a traditional laboratory setting. Evidence presented at the trial also revealed that Holmes lied about alleged deals made by Theranos with large pharmaceutical companies such as Pfizer and the US military.
The deception backfired in 2015, when a series of explosive articles in The Wall Street Journal and a regulatory audit of Theranos revealed potentially dangerous flaws in the company’s technology, eventually leading to the company’s demise.
During her testimony, Holmes expressed regret for her handling of a number of issues, but she frequently claimed that she had forgotten the circumstances surrounding some of the key events highlighted by the prosecution. She insisted that she had never given up hope that Theranos’ technology was on the verge of being refined.
Instead, she blamed Balwani, with whom she secretly lived from 2009 to 2016, while he was Theranos’ chief operating officer.
Holmes testified that Balwani let her down by failing to address laboratory issues that he had promised to fix, and that he had turned her into a pawn through a long-running pattern of abuse while exerting control over her diet, sleeping habits, and friendships. This all happened after she was raped by an unidentified assailant while still enrolled at Stanford, she claimed.