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Founder of blood testing company Theranos goes to court for fraud

Elizabeth Holmes

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The founder of the bankrupting US blood research company Theranos, Elizabeth Holmes, will be sued for serious fraud. The federal prosecutors filed an indictment against the resigning CEO and her former deputy Ramesh Balwani. The duo is accused of deception of investors, politicians, doctors, and the public at least since 2013, for the effectiveness of supposedly revolutionary start-up technologies. Also Theranos announced that Elizabeth Holmes resigned as CEO. At the top of the company now stands the current legal adviser David Taylor.

The 34-year-old Elizabeth Holmes founded Theranos in 2003 in Palo Alto, California. She marketed her company as a pioneer in biotechnology. Theranos had found a new method for blood tests. Dozens of tests were possible only by a few drops of blood. Holmes revealed that the fear of needles inspired her to found the company. She carefully build up her image of a rising star on the technological scene, appearing almost always in public places with a black dress, earning her the nickname “the next Steve Jobs”.

The investors have brought hundreds of millions of dollars to its startup company. It was temporarily estimated at more than 10 billion USD, and Holmes was considered the youngest billionaire in the United States.

The blood testing machine of Theranos, called Edison, was kept in secret and the company barely admitted any information about it to the public or the professionals. Two years ago, the Wall Street Journal revealed doubts about the effectiveness of the technology. For example, it became clear that Theranos only used standard equipment for most blood tests. The patients who rely on the company’s methods are at risk of being misdiagnosed or unaware of their disease.

The journalistic investigation marks the beginning of the end of Theranos. The pharmacy chain Walgreens terminated its partnership with the company. In 2016, the Ministry of Health banned the startup from carrying out blood tests. Three months ago, the Securities and Stock Exchange Commission filed a lawsuit against Elizabeth Holmes and her former deputy Ramesh Balwani. The founder agreed to enter into a 500,000 USD out-court settlement. Only at the beginning of the year, Theranos cut off most of its workforce and it is expected to begin bankruptcy proceedings soon.

Holmes and Balwani are facing life imprisonment and fines of 2.75 million USD.