Holmes clearly lied to investors, and even if she may have "believed" in the long term prospects of her company, she also clearly intentionally lied to investors to get their money. The investors were also obviously harmed (they lost their money). Also, the fact that VCs expect a lot of their companies to fail is totally irrelevant. VCs (and more importantly, the law) also expect founders to tell the truth on simple statements of fact, e.g. "We recieved this much revenue" or "This machine can perform X, Y, Z tests now". Again, Holmes didn't just exaggerate or say "This machine can perform X, Y, Z tests in the future". She flat out lied about the current capabilities of her company.
With patients, most of the tests were done on standard equipment. I don't believe patients were ever told "we will test your blood on Edison", and more importantly, they probably wouldn't have cared that much - they just wanted their test results. So with the tests done on standard equipment, hard to argue there was much harm done there.
Now, some tests were done on Edison, and I know Walgreens invalidated a whole bunch of Theranos tests. But even then, it's harder to say Holmes intended to deceive in that case (a prerequisite for the fraud charge) - presumably they chose to run them on Edison and not the other equipment because they thought Edison could handle those tests. The fact that the lab was sloppy, the fact that Edison had issues, that in my mind wouldn't be enough to assert wire fraud on the part of Holmes. All in all it's just kind of hard to say that patients were really defrauded at all. If Theranos had instead just completely made up some of their test results, and Holmes directed that behavior, then yes, that would have been fraud against patients, but that's not what happened.
Also, I agree that it seems likely Ms. Holmes will face criminal charges. It would have been one thing if Theranos simply substituted venous blood draws for nanodraws, pivoting to not use Edison. However, they not only did that, they denied this publicly, promised to release data showing the validity of their platform (neither of this are lawsuit-worthy) and then proceeded to provide false test results at a very high rate. The problem here is that Ms. Holmes would have to have known of this- she's the CEO of the company, in very tight contact with the labs, etc, holds nearly all the power, and is the ultimate decider. Because of that, she is the direct target of lawsuits.
I expect both government action (which is already ongoing; it's likely she will be sanctioned) and class action lawsuit.
Obviously, the above is speculation, based on my intuition of watching biotechs for 20+ years.
Wired actually did a fairly good piece on this whole thing. The links within the article link to other Wired articles, but if you keep going back their source articles cite scientific findings, federal investigators and other credible sources.[1]
If the commentor whose comment you're posting to is anything like me, he's probably incredibly mad that such a largescale fraud has happened, but more importantly that someone who represented a new hope in the tech space (Elizabeth Holmes), turned out to be just as scummy as most VC/tech sterotypes.
Theranos had the potential to truly revolutionize blood testing. Not in a super-profitable-startup-tries-to-revolutionize-world kinda way, but in a Tesla success-at-any-cost or Genentech Innovate-or-die way. And Holmes was an unconventional, relate-able, underdog character leading the charge. A lot of us put our faith in her - she would have been one of the best success stories to pass on to our daughters to help inspire them to pursue opportunities in tech. But she abused the opportunity, and it's incredibly heartbreaking. Plus, all of the patients who had been put their faith in Theranos to protect them/their loved ones have been misguided for years now.
What Holmes did is despicable. And she's hiding behind lawyers and money to maintain the charade. It's infuriating.
Is the article trying to say that the investors somehow wanted or at least tolerated that Holmes skirted the rules and scammed patients? That would seem incredibly short sighted.
It's much more likely that she misled investors, and isn't that exactly what the lawsuit is about?
> This dismal success rate is why venture capitalists historically have rarely invested in these companies. So why then did they collectively put $1.3 billion in Theranos?
> Greed.
Well in that sense, most venture capital investment stems from "greed", but surely that's the whole point, to leverage the "greed" of risk loving investors into funding new ventures?
She was convicted on charges related to defrauding investors and acquitted on charges related to defrauding patients. A juror told the WSJ “the jury concluded that prosecutors didn’t present enough evidence to show that Ms. Holmes knowingly pitched a faulty product to induce patients to pay for tests.“[1] Take that for what you will. I think it was easier to prove the defrauding the investors part. We know Holmes gave investors certain documents. We know those documents were full of lies. The juror described that as a smoking gun, and I don’t think there was any evidence so clear-cut on the patient side.
> Elizabeth Holmes followed the Silicon Valley playbook to a T.
No, what Theranos did wasn't normal.
Theranos wasn't even a Silicon Valley favorite. They were famously passed on by many respected VCs who vetted the company.
There's a reason why the bulk of Theranos' investment cames from the Walton family, Rupert Murdoch, Betsy DeVos, and the Cox family instead of traditional VC firms.
Even Theranos' board was composed of people with political or military backgrounds instead of medtech backgrounds.
The reason Elizabeth Holmes is on trial is because the company was fraudulent from the start. Let's not try to rewrite history and pretend it was business as usual.
Is it spelled out clearly what exactly Elizabeth Holmes was convicted of committing investor fraud for?
Was it this?
> Holmes admitted on the stand that Theranos was running blood tests on modified third-party machines without telling its business partners and that she added the logos of two pharmaceutical companies to studies that the company sent to investors.
This seems like everyday, standard startup procedure. Was there a lot more?
It's important to note that she defrauded investors long after it became clear that the "bells and whistles" she was selling were just smoke and mirrors.
Theranos isn't a typical case of founder hype like you describe. It was a con job through and through.
Don't harbour sympathy for Holmes. She's made it harder for good-faith actors to get access to funding.
This WSJ interview with a juror gives a very good explanation in my opinion. Again, verdicts are about what can be proven:
> Though they initially were divided, jurors soon agreed to acquit Ms. Holmes on the one count of conspiracy to commit wire fraud and three counts of wire fraud tied to patients, Ms. Stefanek said.
She said the jury concluded that prosecutors didn’t present enough evidence to show that Ms. Holmes knowingly pitched a faulty product to induce patients to pay for tests.
> The jury was in agreement, Ms. Stefanek said, that the Theranos lab was run shoddily and not in the way to be expected from a company setting out to achieve the highest quality in medical care. But jurors thought the burden of proof on defrauding patients was higher.
> “If all we’d had to prove was that she knew there might be problems in the lab and that might end up harming patients, that would be one thing,” Ms. Stefanek said.
I don't buy this at all. People at this level of power are held accountable if they make easily identified crimes where their individual culpability can be proven. Heck, even Holmes own criminal judgement shows that. I know the Internet's take on the situation was "She was only convicted for stealing from rich people, but not for defrauding normal patients, because the justice system only cares about rich people." That's BS. It's just simply that there was much more of a "smoking gun" that showed her directly lying to investors to get their money, while it's at least plausible she thought she could generate accurate results for patients since in many cases they were taking full blood draws anyway.
Besides, it's impossible that Holmes crimes wouldn't ever be discovered. I commented elsewhere, but the technology Theranos was selling was simply impossible - capillary blood at very small volumes is simply not homogeneous enough to give accurate results for quantitative tests. Holmes jumped off a cliff without a parachute and thought that if she gave enough glowing interviews to credulous news outlets that she could somehow keep from hitting the ground.
No she hasn't. She just signaled to the world all the VC funds staffed by idiots that think they are the smartest peeps in the room. All the science and life-science funds passed on Theranos b/c they could smell the bullshit from Holmes a mile away.
No one in the life-sciences or science industry was harmed by Holmes lies. The only ones hurt were the patients, un-knowing employees, and the inept vc funds.
I have some conflicting thoughts and emotions about the Holmes verdict.
I believe this case was pursued due to the flagrant disregard for the health (and thus safety) of Theranos clients. If it was 'just' financial fraud against investors, I don't believe the public would have been so angry, and the prosecutor so motivated.
However, Holmes was found not guilty on the charges related to blood tests. One of the jurors said they believed she was 'one step removed'. The blood test charges were also not directly health related, they were fraud charges, as in the patient was defrauded into believing the tests were accurate.
The comment about being 'one step removed' made me think of safety culture and how no executives at Boeing were prosecuted for the 737 MAX debacle (so far as I know).
Laws do not punish moral failings directly, no matter how big or flagrant. It is quite clear that Holmes failed to establish a safety culture that put accuracy of test results over profit or funding. But there is no law that directly addresses that particular failing, and it's hard to see how American jurisprudence and society would frame or accept such a law.
So while I do see that Holmes was punished for her lies, and those lies were related to health and safety, I do find it hard to reconcile with the idea that health and safety are more important to maintain than legitimacy and fidelity of funding a startup.
What does the Elizabeth Holmes Verdict say about Rule of Law and Safety Culture?
https://www.youtube.com/watch?v=2UXicFk5q50 - Dropout Podcast on the verdict and juror point of view.
Holmes is the product @ Theranos. It's evidently clear their blood testing machine doesn't actually work. If you look at the positive (old) media coverage of Theranos, the lion-share of it revolved around her dropping out of Stanford, female founder, and hell I for some reason know she played an instrument as a kid... The cult of personality was used to raise funds, not the Edison.
> Their process sucked unacceptably and they knew it but they didn't set out to lie with test results
They lied about what test they were doing, and people paid them based on that lie. While the jury here may be correct that that wasn't federal wire fraud by Holmes personally, it absolutely was a fraud by Theranos.
Complete scam. Her Stanford professor gave several interviews where the prof said she told Holmes her technology is not scientifically possible. All the execs at Theranos knew it didn’t work. That was why they secretly outsourced work to traditional laboratories.
Then there was the whistle blower Tyler Schultz. He got roughed up by Theranos lawyers at his own grandfathers house. His grandfather was George Schultz former US Sec of State and Theranos board member. The lawyers wanted him to admit he gave away “trade secrets”. The trade secret is Holmes and everyone at Theranos belong in prison.
> The Justice Department was only interested in the case because Theranos operated in a highly regulated industry with lots of government oversight.
I don't think so. I think there were very powerful investors and others associated with the company (like board members) who were stung and embarrassed.
> SaaS and consumer tech startup founders lie and cheat and blow up investor money every day and no one really cares.
Do you have any roughly equivalent examples on the scale of the fraud and the people associated?
> All the wealthy investors gain nothing from Holmes going to jail. In fact the lengthy trial only drags them into the spotlight, which they'd rather stay clear of.
I don't think so. It's a good way to clear their names as it were ("we aren't greedy gullible idiots, it was her fault"), and a great way to send a message not to cross the ruling class.
"Holmes and her former COO Sunny Balwani are each facing a dozen criminal wire fraud charges and 20 years in prison for falsely claiming Theranos technology could run dozens of blood tests with just a drop or two of blood.
The Silicon Valley start-up was once valued at $9 billion before shutting down in 2018."
Do you think it's easier for people to raise money in the blood testing space now after this very high profile fraud? I've heard people say that it makes things much more difficult.
Also, Holmes's lies sucked up a ton of funding at the time. Not just the money given to her, but the investors who said "theranos already dominates blood testing, so we'll invest in another space"
This was a disaster all around for everyone but her.
Holmes clearly lied to investors, and even if she may have "believed" in the long term prospects of her company, she also clearly intentionally lied to investors to get their money. The investors were also obviously harmed (they lost their money). Also, the fact that VCs expect a lot of their companies to fail is totally irrelevant. VCs (and more importantly, the law) also expect founders to tell the truth on simple statements of fact, e.g. "We recieved this much revenue" or "This machine can perform X, Y, Z tests now". Again, Holmes didn't just exaggerate or say "This machine can perform X, Y, Z tests in the future". She flat out lied about the current capabilities of her company.
With patients, most of the tests were done on standard equipment. I don't believe patients were ever told "we will test your blood on Edison", and more importantly, they probably wouldn't have cared that much - they just wanted their test results. So with the tests done on standard equipment, hard to argue there was much harm done there.
Now, some tests were done on Edison, and I know Walgreens invalidated a whole bunch of Theranos tests. But even then, it's harder to say Holmes intended to deceive in that case (a prerequisite for the fraud charge) - presumably they chose to run them on Edison and not the other equipment because they thought Edison could handle those tests. The fact that the lab was sloppy, the fact that Edison had issues, that in my mind wouldn't be enough to assert wire fraud on the part of Holmes. All in all it's just kind of hard to say that patients were really defrauded at all. If Theranos had instead just completely made up some of their test results, and Holmes directed that behavior, then yes, that would have been fraud against patients, but that's not what happened.
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