Theranos founder Elizabeth Holmes charged with elaborate, years-long fraud by SEC

Theranos and Holmes agreed Wednesday to settle the case and pay a $500,000 fine. She is barred from serving as an officer or director of a public company for 10 years. The Securities and Exchange Commission said it will take its case against the president of the company, Ramesh “Sunny” Balwani, to federal court.

The SEC says Holmes, 34, Theranos, and Balwani, 52, misled investors for years about the performance of its blood testing technology. Theranos, based in Palo Alto, California, misled investors for years, once telling them its machines were being used by the Defense Department when they were not.

Holmes was once heralded as a tech pioneer and a billionaire after Theranos claimed to have developed a ground-breaking way to test blood.

Federal regulators allege Holmes and Thernos president Balwani defrauded investors of $700 million when raising money from 2013 to 2015, "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," charging documents say.

"They deceived investors by, among other things, making false and misleading statements to the media, hosting misleading technology demonstrations, and overstating the extent of Theranos’ relationships with commercial partners and government entities, to whom they had also made misrepresentations," the documents said.

Because of those claims, the SEC said, investors believed Theranos had developed a way to analyze blood samples with just a few drops of blood from a finger.

But Theranos did not develop the technology, and relied on other technology it modified, the SEC alleged.

Holmes agreed to pay a $500,000 penalty to resolve the case, surrender voting control of Theranos, and be barred from serving as an officer of a public company for 10 years, the SEC said. The agency’s suit against Balwani, who didn’t settle, is pending in federal court in California. The SEC made no mention in its statement of a penalty imposed on Theranos.

Holmes, who quit college after founding Theranos, was once estimated to be worth $4.5 billion. In 2016, Forbes stripped of her billionaire title, revising her estimated net worth to zero.\