Start-up Fraud: Theranos CEO Goes to Prison

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Elizabeth Holmes being escorted by her lawyer from court
Elizabeth Holmes being escorted by her lawyer from court

Disgraced Theranos CEO Elizabeth Holmes was sentenced Friday to more than 11 years in prison for duping investors in the failed startup that promised to revolutionize blood testing but instead made her a symbol of Silicon Valley ambition that veered into deceit.

The sentence imposed by U.S. District Judge Edward Davila was shorter than the 15-year penalty requested by federal prosecutors but far tougher than the leniency her legal team sought for the mother of a year-old son with another child on the way.

Elizabeth Holmes was found guilty of lying to investors about her blood testing start-up—once valued at $9 billion.

Although her imprisonment is a cautionary tale for entrepreneurs everywhere, it’s a devastating outcome for the many Theranos employees who believed in her and worked hard to make the company successful.

At the trial of Holmes in San Jose, California, prosecutors said that she misled doctors and patients about Theranos’ main product—the Edison machine—which supposedly could detect cancer, diabetes, and other conditions using only a few drops of blood.

Holmes first gained attention as a 19-year-old Stanford University dropout who claimed she could revolutionize the medical field with her invention. Her technology was meant to detect diseases at early stages with a few drops of blood, providing a cheaper alternative to traditional lab tests. Holmes and her team raised millions of dollars from venture capitalists and eventually persuaded industry giants like Walgreens to partner with the company.

However, in 2015, an investigation by The Wall Street Journal revealed that the technology was not working as advertised, and in 2018, Holmes was charged with fraud.

Jurors found Holmes guilty of four counts of fraud.

She is said to have completely ignored the interest of the stakeholders affected by her company’s actions. Many of those harmed by Theranos’ practices were customers and investors—those who had put their trust and money in the company.

Holmes’ defense suggested she was naive but ambitious in the trial’s opening statement. But the Securities and Exchange Commission (SEC) argued that Holmes was responsible and therefore accountable for her actions.

Before her sentencing, Holmes, through tears, expressed regret for her actions. “I am devastated by my failings,” she said. “I have felt deep pain for what people went through because I failed them. I regret my failings with every cell of my body.”

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