SEC Charges Silicon Valley “Unicorn” with Investor Fraud
The United States Securities and Exchange Commission (“SEC”) announced today, Wednesday, March 14, 2018, that it charged private company Theranos, Inc., its CEO Elizabeth Holmes, and its former President Ramesh “Sunny” Balwani with massive investor fraud. Theranos, once a Silicon Valley “unicorn” valued at $9 billion, promised to make blood-testing easy and near-painless by using machines that could analyze small amounts of blood. According to the SEC’s complaint, “Holmes, Balwani, and Theranos raised more than $700 million from late 2013 to 2015 while deceiving investors by making it appear as if Theranos had successfully developed a commercially-ready portable blood analyzer that could perform a full range of laboratory tests from a small sample of blood.” In reality, however, Theranos’ proprietary analyzer could only perform a small number of blood tests and ran others using modified, commercially available analyzers to process the remaining tests.
The SEC’s press release states that Theranos and Holmes have agreed to settle the charges. Holmes agreed to pay a $500,000 penalty, be barred from serving as an officer or director of a public company for 10 years, return the remaining 18.9 million shares she obtained during the fraud, and relinquish her voting control of Theranos. The settlements are subject to court approval and neither Theranos nor Holmes has admitted or denied the allegations in the SEC’s complaint.
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About Katherine M. Lenahan
Katherine M. Lenahan is a Partner in the New York office of Faruqi & Faruqi, LLP and focuses her practice on securities litigation.