Diagnostics

Theranos founder, former COO face criminal charges in blood testing company’s latest chapter

Federal prosecutors from the U.S. attorney’s office in San Francisco have charged Holmes and COO Sunny Balwani with fraud over allegedly lying to investors and misleading doctors and patients about their technology and its accuracy, according to The Wall Street Journal.

Elizabeth Holmes (L) and Alan Murray speak at the Fortune Global Forum on Nov. 2, 2015 in San Francisco.

Elizabeth Holmes (L) and Alan Murray speak at the Fortune Global Forum on Nov. 2, 2015, in San Francisco.

The next edition of Bad Blood, charting the rise and fall of blood testing business Theranos by The Wall Street Journal reporter John Carreyrou may have to add another chapter, or at least expand on the epilogue. Three months after Theranos founder Elizabeth Holmes reached a settlement with the U.S. Securities and Exchange Commission on civil fraud charges, federal prosecutors from the U.S. attorney’s office in San Francisco have charged Holmes and COO Sunny Balwani with fraud over allegedly lying to investors and misleading doctors and patients about their technology and its accuracy, according to The Wall Street Journal.

Holmes and Balwani were each charged with two counts of conspiracy to commit wire fraud and nine counts of wire fraud, according to the report.

“This indictment alleges a corporate conspiracy to defraud financial investors,” said Special Agent in Charge John F. Bennett of the Federal Bureau of Investigation in San Francisco. “More egregiously, this conspiracy misled doctors and patients about the reliability of medical tests that endangered health and lives.”

A lawyer for Balwani claimed his client hasn’t defrauded anyone, was innocent and looked forward to clearing his name in a trial,  according to a press release.

In another development, Theranos named the company’s general counsel David Taylor as CEO after Holmes stepped down today, the Journal noted.

As part of the SEC settlement earlier this year, Holmes agreed to a $500,000 fine, a 10-year ban from serving as an officer or a director of a company, and surrendered voting control of the company she founded in 2003. But neither Holmes nor Theranos admitted or denied the allegations in the SEC’s complaint, as part of the settlement.

Theranos had risen to prominence on its claims that it could disrupt the blood testing industry and take some of the pain away from these tests by only requiring a small amount of blood to conduct them. Despite convincing Walgreens and others it could do these tests, Theranos was later forced to make void or correct thousands of blood test results.

Although there are people still employed by Theranos, after cuts earlier this year, the company has subsisted on a loan from Fortress Investment Group. If the company isn’t able to meet the requirements of the loan, Theranos faces liquidation.

Photo: Getty Images

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