The founder and former chief operating officer (COO) of a US company that claimed it provided revolutionary blood tests have been charged with criminal fraud.
The US attorney’s office in San Francisco confirmed on 15 June that Theranos’ founder, Elizabeth Holmes, and its former COO, Ramesh “Sunny” Balwani, had both been charged with two counts of conspiracy to commit wire fraud and nine counts of wire fraud.
Holmes, 34, and Balwani, 53, are accused of being involved in a multi-million dollar scheme to defraud investors, and a separate scheme to defraud doctors and patients in a bid to promote the company.
Founded in 2003, the Silicon Valley-based company claimed to have technology that could run multiple tests on a raindrop-sized pinprick blood sample, rather than the multiple vials usually required.
However, according to the charge sheet, the defendants allegedly knew that “their representations about the analyser were false”.
It adds: “For example, allegedly, Homes and Balwani knew that the analyser in truth, had accuracy and reliability problems, performed a limited number of tests, was slower than some competing devices, and, in some respects, could not compete with existing, more conventional machines.”
According to Vox, Theranos was once worth around £6.9 billion ($9 billion) and employed 800 people, but now has just 20 people working for the company.
The firm also announced on 15 June that Holmes had stepped down as CEO.
Balwani worked at Theranos from 2009 to 2016 and during that time worked in a variety of roles, including being a member of the company’s board of director and its chief operating officer.
The Federal Bureau of Investigation (FBI) special agent in charge, John Bennett, said: “This district, led by Silicon Valley, is at the centre of modern technological innovation and entrepreneurial spirit; capital investment makes that possible.
“Investors large and small from around the world are attracted to Silicon Valley by its track record, its talent and its promise.
“They are also attracted by the fact that behind the innovation and entrepreneurship are rules of law that require honesty, fair play and transparency.”
He added that the indictment alleges that Holmes and Balwini “not only defrauded investors, but also consumers who trusted and relied upon their allegedly-revolutionary blood-testing technology”.
The case has been assigned to a district judge for further proceedings.