On January 3, Elizabeth Holmes, the former CEO of Theranos was found guilty on four counts of fraud, specifically three counts of wire fraud and one count of conspiring to commit wire fraud. But who is Elizabeth Holmes, what is Theranos, and who did she scam? We got those answers for you here.
What did Elizabeth Holmes do?
Over the last several years, you’ve likely heard or seen Holmes’ name in the news. Prior to her legal woes, Holmes was the CEO of Theranos, a company that promised to “revolutionize” the way the world does blood testing.
According to NPR, Theranos promised innovative technology that would only require a small amount of blood, acquired via a finger prick, rather than the vials of blood we are used to now, to test for thousands of diseases. However, in order to make this technology possible, she needed to raise funding.
In 2005, while a guest on the radio show Tech Nation, Holmes explained Theranos as this:
“We focused on creating a customized medicine tool that could be used in the home by every patient, so that every day, a patient can get real-time analysis of their blood samples.”
As The New York Times reported, Holmes said the technology was still “in the production phase” during this interview, but hoped to issue it to various pharmaceutical representatives “around mid-to-late this year.” As we would come to know today, that would never happen.
Who got scammed by Theranos?
While you could easily say, everyone got scammed by Theranos, as the prosecution argued in court, Holmes used her charisma to secure hundreds of millions of dollars in investments. In total, Holmes raised nearly $1 billion.
And some of her most notable investors are ones you likely heard of. They include the Walton family, who owns Walmart, Betsy DeVos, our former Secretary of Education, and billionaire Rupert Murdoch.
Elizabeth Holmes is 37, how old was she when this all started?
Perhaps the most stunning fact about it all is that Holmes was just 19 years old when she dropped out of Stanford and founded Theranos. As BBC reported, Holmes was just 30 years old when Forbes named her “the world’s youngest self-made female billionaire.” And she was 31 when she was exposed as a fraud in 2015.
According to NPR, her ideas “befuddled” biotech experts who had been in the industry for years, and for good reason. Despite the large funding, Holmes was never able to create a working medical device that would allow her to deliver on her promises.
Despite failing to provide, Holmes kept going…
Despite the Theranos technology being present in Walgreens across California and Arizona, as witnesses revealed in court, the tests ran by the machinery often issued false test results. According to testimony, one person said the Theranos equipment led her to believe she was having a miscarriage, although her pregnancy was viable, and another said that she was told her cancer had come back even though it had not.
One of the fraud charges was that Holmes intentionally deceived patients into believing they had various health issues, but the jurors did not believe that. However, it was eventually discovered that the machines developed by Theranos were the “miracle” technology it promised, NPR reports, instead, the technology mimicked “commercially available blood analyzer machines.”
Holmes claimed that this was a “trade secret” that she would refuse to brief anyone about, even Theranos’ biggest investors. As The New York Times reported, it was this very cry of “trade secrets” that allowed Holmes to keep so many people in the dark for so long.
While it is normal for startups to fail and dissolve, the issue was that when Holmes knew she failed, the prosecution claims she simply just covered it up and kept telling her investors that the machines she was creating “would transform how diseases are diagnosed through blood tests,” NPR reports. Eventually, Theranos collapsed in 2018.
Does Holmes accept responsibility for her actions?
Holmes pleaded not guilty to the 11 charges against her, and over the last four months, Holmes denied the various claims against her while under oath.
During her nearly 20 hours on the stand, Holmes made several claims to the jury, including her former business partner and ex-boyfriend sexually abusing her. Holmes said the alleged emotional and physical abuse by Theranos’ deputy, Ramesh “Sunny” Balwani, “clouded her judgment.” Balwani’s fraud trial is set to begin in February.
Holmes also admitted that she wished she would have handled some aspects of the business differently, and although she seemed remorseful, often blamed others for the ultimate demise of Theranos. She claimed that it was Balwani who looked over Theranos’ financials, which were found to be crudely inflated, and she blamed the lab directors, who were reportedly the closest to the technology they delivered.
Nonetheless, prosecutors argued that it was Holmes who continued to recruit investors under the false pretenses of the company, knowing that it did not work.
This case is one that will set a precedent for further startups, specifically in the medical sector.
Although it is rare for tech executives to be criminally charged when a start-up collapses, NPR reports that it was the magnitude of fraud committed by Theranos and that it involved the health of citizens that ultimately led to Holmes facing up to 20 years in prison for each of the four counts she was found guilty on.
In addition to the charges she was found guilty of, she was also found not guilty of four charges and the jury failed to reach a verdict on three more. Holmes has the ability to appeal the four convictions.
And as The New York Times report, it’s believed that the rise and fall of Elizabeth Holmes will also change the way of the world of Silicon Valley. “In Silicon Valley, where the line between talk and achievement is often vague, there is finally a limit to faking it.”
Why did this happen? And what was Elizabeth Holmes’ upbringing like?
According to the BBC, despite all the stories and the four-month trial, it still remains unclear why this all happened. Why did Elizabeth Holmes, under the guise of Theranos, run so hard with a technology she knew didn’t work?
Holmes was a polite, albeit somewhat withdrawn child, people who knew her said. She came from a well-off family in Washington DC.
Perhaps, as the BBC reports, the pressure to be someone got to her. At the age of 9, Holmes allegedly wrote her father a note saying what she “really want[ed] out of life is to discover something new, something that mankind didn’t know was possible to do”.
Holmes’ parents both worked on Capitol Hill but took pride in their “status” and “lived for connection,” the family’s former neighbor inventor and businessman Richard Fuisz told the BBC. According to Fuisz, Holmes’ great great great grandfather founded Fleischmann’s Yeast and it was a part of their family history they held deep.
Holmes’ need for success continued, and it is unclear if it ever subsided despite all of this. As The New York Times reported, Holmes was all business, all the time, something her defense team played into during the trial.
“I am never a minute late. I show no excitement. ALL ABOUT BUSINESS,” Holmes once wrote about herself. “I am not impulsive. I know the outcome of every encounter. I do not hesitate. I constantly make decisions and change them as needed. I speak rarely. I call bullshit immediately.”
Was it this sort of assuredness in how she lived her life that made her so successful so fast? As The Times reports, it certainly helped her fit into the culture created by Silicon Valley.
In 2002, Holmes became a student at Stanford University. She had planned to study chemical engineering when she came up with the idea to create a patch that could scan a person for infections and release the antibiotics that the patient needed.
Holmes held onto that idea with reverence and reportedly refused to listen when she was told it couldn’t possibly work. As Dr. Phyllis Gardner told the BBC, Elizabeth “just stared through” her when she told Holmes it wouldn’t work.
“And she just seemed absolutely confident of her own brilliance,” Dr. Gardner, a clinical pharmacology expert at Stanford said. “She wasn’t interested in my expertise and it was upsetting.”
Months later, she would drop out of Stanford and her whirlwind rise and fall began.
How did Holmes pull it all off?
With no real training, how did Holmes pull all this off? Especially knowing that it all started with an idea she had as a teenager, it seems unfathomable when you have all the information that is available today.
While talking with the BBC, Dr. Jeffrey Flier, the former dean of Harvard Medical School, admitted that it was mostly her “demeanor.” Flier explained that he once met with Holmes for lunch in 2015.
“I knew she’d had this brilliant idea and that she had managed to convince all these investors and scientists,” said Dr. Flier. “She was self-assured, but when I asked her several questions about her technology she didn’t look like she understood.”
“It seemed a bit odd but I didn’t come away thinking it was a fraud.” In that same year, a whistleblower would begin the demise of Theranos.
What did the whistleblower know that everyone else didn’t?
In 2015, an unknown source began to raise concerns about Theranos’ testing device known as “the Edison.” It was The Wall Street Journal that published the initial exposes that revealed the Edison produced unreliable and false results.
It further claimed that the revolutionized machinery Theranos promised was simply modified machines that were commercially available already. It was then that Theranos began receiving countless lawsuits and in 2016, regulations banned Theranos from blood-testing services for two years.
Now known to be Tyler Shultz, NPR reports that Shultz celebrated Holmes’ guilty verdicts with a champagne toast. It’s almost poetic.
Shultz was just 22 when he blew the whistle on Holmes and Theranos. Now, 31, Shultz is glad it is over. “This story has been unfolding for pretty much my entire adult life,” he told NPR. “All of a sudden, it was just a weight was lifted. It’s over. I can’t believe it’s over.”
In 2018, Theranos was no more, Holmes settled civil charges over fraudulently raising $700 million, and she and Balwani were arrested for wire fraud and conspiracy to commit wire fraud. After being released on bail, in 2019, Holmes got married to 27-year-old William “Billy” Evans, an heir to the Evans Hotel Group chain of hotels.
In July of 2021, just two months before her trial began, she and Evans welcomed a son into the world. A date for her sentencing hearing has not yet been set.