back to article Bad blood: Theranos CEO charged with massive fraud

The woman heralded as "the next Steve Jobs" has been charged with massive fraud, forced to pay a $500,000 fine and been stripped of control of the company she founded. Theranos CEO Elizabeth Holmes was once pictured on the front pages of numerous tech and business magazines as a future leader in the industry. At one point was …

  1. Anonymous Coward
    Anonymous Coward

    Liz Holmes, may I introduce Bernie Madoff as you may have a lot in common and a few things to chat about during your long stay.

    I'm all for female equality, I hope the sentence is of similar length.

    1. The Man Who Fell To Earth Silver badge
      FAIL

      She should do serious jail time

      This business of settling and just paying a trivial fine ($500k when she claimed her company was "worth" $9B to investors) is ridiculous. She'd have been more likely to do jail time had she shoplifted a $700 item from a store, yet she just gets a small fine and no jail time for stealing $700M.

      1. kain preacher Silver badge

        Re: She should do serious jail time

        I dont know were you live ar but first time shopper lifter is no likely to jail time. Then lets look at pharma bro Martin Shkreli who is doing a 7 year bid for the same thing. Oh and the SEC can referrer criminal charges over to the DOJ

      2. Mark 85 Silver badge

        Re: She should do serious jail time

        She'd have been more likely to do jail time had she shoplifted a $700 item from a store, yet she just gets a small fine and no jail time for stealing $700M.

        Re-read the article... The SEC can't impose jail time. However, the state can and is apparently investigating. So, there's still that hanging over her.

        1. Phukov Andigh Bronze badge

          Re: She should do serious jail time

          if she contributed significant political money, which most famous start-ups do around here in order to hopefully score some big government pork contracts, she'll be allowed to fade into obscurity. Especially if she "reinvests" her 750m into political contributions. Talk of jail time will eventually fade away and nothing served in the Gray Bar Hotel even if they do slap some probation or "house arrest" on.

          Unless some local and state pols lost a lot of money on her company. thats the only chance the state will actually prosecute someone of wealth.

      3. sprograms

        Re: She should do serious jail time

        "she just gets a small fine and no jail time for stealing $700M," and the forfeit of most of her shares....so far.

        The criminal cases, those which can yield jail time, are still being warmed and spiced on the prosecutorial stove.

    2. Anonymous Coward
      Anonymous Coward

      "Liz Holmes, may I introduce Bernie Madoff2

      It looks more she attempted a Magic Leap...

    3. Oh Homer Silver badge
      Childcatcher

      Not sure what's worse

      The fact that she's a brazen con-artist, or the perverse idea that profiteers can make $4.5bn just testing blood samples.

      1. Michael Wojcik Silver badge

        Re: Not sure what's worse

        the perverse idea that profiteers can make $4.5bn just testing blood samples

        To be fair, they mostly made that by not testing blood samples. They optimized the process. That's gotta be worth something.

    4. Updraft102 Silver badge

      @AC: The length of her stay will be on par with yours. Probably. I'm assuming you're not charged with anything!

      1. Anonymous Coward
        Anonymous Coward

        >@AC: The length of her stay..

        Did you not read the article and the bit about possible further criminal charges after the SEC civil case ?

        By the way Jimmy Savile was never charged with anything, does that mean he was never guilty of anything ?

        1. Natalie Gritpants

          > By the way Jimmy Savile was never charged with anything, does that mean he was never guilty of anything ?

          Yes, in the criminal law sense. But there as been an enquiry which pretty much wiped out any doubt that he would have been found guilty were he alive.

          Dead bodies don't get tried because 1) they can't defend themselves and that would weaken the legal system if that was allowed, 2) they can't be punished in any way 3) they would smell worse than the judges

  2. EveryTime Silver badge

    After years of doubling down on false claims and years of destroying people that pointed out the claims couldn't possibly be true, the only penalty is 'you can't do that again for 10 years'.

    1. Anonymous Coward
      Anonymous Coward

      >the only penalty is 'you can't do that again for 10 years'.

      More is yet to come, as stated in the article.

      "The SEC is only able to bring civil cases, however it has been reported that the US Attorney for Northern California is also investigating Theranos and could bring criminal charges - complete with a jail sentence - as part of that investigation."

    2. Pascal Monett Silver badge

      Re: the only penalty is 'you can't do that again for 10 years'

      Um, no. She is also stripped of "most" of her shares - although that is probably not really important as her shares are worth less than peanuts.

      The really important thing is that she won't be able to negociate another golden parachute before 10 years from now. Do you really think anyone will be interested ?

      Honestly, they might as well have put her on the electric chair. Her days as a high-flyer are over.

      1. dan1980

        Re: the only penalty is 'you can't do that again for 10 years'

        @Pascal Monett

        "Honestly, they might as well have put her on the electric chair. Her days as a high-flyer are over."

        Somehow, I suspect that her financial resources are still far larger than those enjoyed by the VAST majority of people in the rest of the US. In other words, while her house of cards has crumbled and she may well (and should) face additional penalties, it is likely that she has more money and assets than most of us could hope for.

        1. Naselus

          Re: the only penalty is 'you can't do that again for 10 years'

          "Somehow, I suspect that her financial resources are still far larger than those enjoyed by the VAST majority of people in the rest of the US."

          IIRC, that's not actually the case. About a year or so ago she had to take a $25 million loan (from Theranos itself, since by that point no bank would touch her or regarded her substantial share holdings as worth a damn thing as collateral), since she's basically bankrupt. She has sizable bank loans from when she was considered a billionaire, but has no actual income to speak of, and has never offloaded any of her (non-preferential) Theranos shares so despite the epic scale of the fraud, she's not made a penny from all this.

          Holmes actually lives a fairly cheap and unadorned lifestyle - she'd be able to manage her living expenses on an average salary without much trouble and doesn't really seem overly interested in taking money out of the company. I don't think this was a scam for personal profit, since she doesn't actually seem interested in cashing in; more just someone over-promising enormously and then desperately trying to keep the charade going long after it was clear that the original idea wasn't deliverable.

          1. JohnFen Silver badge

            Re: the only penalty is 'you can't do that again for 10 years'

            " I don't think this was a scam for personal profit"

            I think it was a scam for personal profit -- just one that didn't work. But even if I'm wrong, it's still a scam. Whether it was for personal profit or not isn't that important.

            1. Naselus

              Re: the only penalty is 'you can't do that again for 10 years'

              "I think it was a scam for personal profit -- just one that didn't work. But even if I'm wrong, it's still a scam. Whether it was for personal profit or not isn't that important."

              I'm not trying to absolve her - what she did was defraud a stunning amount of money off some incredibly stupid investors (like Rupert Murdoch, for instance). But Holmes has run profitable businesses previously, and had no real reason to dump those for Theranos. She could quite easily have dumped just 10% of her shares when the company was valued at $10 billion and done a runner; if it was a scam, it worked beyond the wildest dreams of most scammers and she never pulled the trigger.

              The only way that her behaviour makes sense is if she hoped to achieve her claims and never really accepted that she couldn't do it, and so lied through her teeth to get more funding to piss away attempting the impossible. That's still wrong - she took people's cash, pissed it away, and then lied about having done so - but it's somewhat less reprehensible than taking other people's money and keeping as much of it as you can.

      2. JohnFen Silver badge

        Re: the only penalty is 'you can't do that again for 10 years'

        "Honestly, they might as well have put her on the electric chair. Her days as a high-flyer are over."

        What?

        Even if her days as a "high-flyer" really are over, that's not terribly severe in comparison with the crime. Not even in the same ballpark as real prison time, and certainly nothing in the same universe as the death penalty.

        1. veti Silver badge

          Re: the only penalty is 'you can't do that again for 10 years'

          "Real prison time" may still be on its way. Her comeuppance hasn't ended yet.

      3. Oh Homer Silver badge
        Holmes

        Re: "Do you really think anyone will be interested ?"

        In 10 years time, once she has exercised her legal "right to be forgotten", I'm sure another round of suckers will be duped by her con-artistry.

        1. JohnFen Silver badge

          Re: "Do you really think anyone will be interested ?"

          "once she has exercised her legal "right to be forgotten""

          Fortunately, there is no RTBF in the US. At least not yet.

          1. Michael Wojcik Silver badge

            Re: "Do you really think anyone will be interested ?"

            Fortunately, there is no RTBF in the US.

            Yes, and it probably wouldn't apply in her case even if there were, since she's clearly a public figure[1] and the SEC case is notorious. With this kind of media coverage, you surrender much of the expectation of privacy.

            [1] Cover of a commercial magazine counts, even if it's Inc.

  3. Alan J. Wylie Silver badge

    "Innovators who seek to revolutionize and disrupt an industry must tell investors the truth about what their technology can do today, not just what they hope it might do someday."

    Magic Leap are you listening?

  4. inmypjs Silver badge

    Just goes to show how dumb...

    investors are and how dumb people and the media were fawning over this useless entrepreneur because it had tits.

    Waiting for the similarly dumb/dishonest Meredith Perry to finally be found out - at least there is much less money involved.

    1. Ledswinger Silver badge

      Re: Just goes to show how dumb...

      how dumb people and the media were fawning over this useless entrepreneur because it had tits

      I was going to object that your assertion was irrelevant and sexist. And then I considered that Madoff and Abovitz were both sufficiently overweight that you have a very valid point.

    2. Voyna i Mor Silver badge

      Re: Just goes to show how dumb...

      Investors are not dumb; it's just that very often they misjudge exactly when to sell to mugs and take the profit. It's like the people who invested in the Albanian Ponzi schemes; they did know about Ponzi schemes, they thought that the government would have to bail them out. Their error was not to realise that the government didn't have enough money.

      1. Les Matthew

        Re: Just goes to show how dumb...

        "Investors are not dumb"

        The years 2000/2 and 2007/8 contradict that statement on an epic scale.

    3. Anonymous Coward
      Anonymous Coward

      "media were fawning over"

      Your comment is sexist, but it is true that a nice face to be sold to media is always a good PR tactic - usually works because there are too many male jerks in the media, and some female one as well. If she was someone regarded "uglier" by current standards - despite being a mammal or not, it wouldn't have worked so well. Appearance does work.

      Today I was ashamed that on the site of one of the main national newspapers here, just below the news about Hawking death, you could watch "the embarrassing fall of Kate Perry". You really need a lot of jerks, mostly male but some female too, to think it was something worth to be put there.

      You could really see the abyss...

      1. Anonymous Coward
        Anonymous Coward

        Re: "media were fawning over"

        >Your comment is sexist

        I heard a comment once from a female friend who is a sales rep, "Tits sell bits".

        In the sales world, any edge is an edge.

        I don't think his comment is sexist more a comment on sex sells.

        1. dan1980

          Re: "media were fawning over"

          'Even the SEC recognizes the saga as a lesson for the hype-driven tech industry. "The Theranos story is an important lesson for Silicon Valley . . ."'

          It should be.

        2. JimboSmith Silver badge

          Re: "media were fawning over"

          I heard a comment once from a female friend who is a sales rep, "Tits sell bits".

          In the sales world, any edge is an edge.

          I don't think his comment is sexist more a comment on sex sells.

          In a showroom I was working on the cabling at, one lady with larger than average breasts was talking to a male customer. The male customer then bought a fair bit and the lady was telling me that she was having a good morning of it sales wise. I pointed out that a button had come undone on her shirt and there was more on show than perhaps she intended. She said she was wondering why he wasn't looking her in the face. One of her female colleagues who was passing said that she should do it more often. She was told to "Think of the showroom bonus" as they'd had the same sales by Wednesday as they normally did during an average week.

        3. Anonymous Coward
          Anonymous Coward

          " more a comment on sex sells."

          It work for males too - you don't really need a breast - someone who looks appealing is easily to sell and bring in investments than someone who looks uglier. Media are obsessed with appearance - and just look at how PR people are selected - and often, not only them. Con "artists" also know how much appearance matters.

          People have a strange tendency to think "beautiful" people can't be evil - of course only ugly ones are. We are brainwashed into thinking that since childhood.

          1. tfewster Silver badge
            Trollface

            Re: " more a comment on sex sells."

            > People have a strange tendency to think "beautiful" people can't be evil - of course only ugly ones are. We are brainwashed into thinking that since childhood.

            My theory is that "beautiful" people don't have to develop a nice personality or intelligence to attract others, and my gut reaction is to mistrust what they're selling. Of course, as an uggo, I'm biased. And I'm not a nice person either, but hopefully I have something to make up for all that...

      2. inmypjs Silver badge

        Re: "media were fawning over"

        "true that a nice face to"

        "Had tits" was to indicate her sex in my delightfully crude style. They didn't fawn because of her tits or pretty face (although neither hurt) they fawned because she is a woman succeeding in a man's world, she was aspirational, a cause to champion, and a winner, the next Steve Jobs FFS (until she wasn't big time).

        You can watch Meredith Perry in a couple of TED videos talking and presenting utter crap and the audience gush and fawn because she also has tits.

        1. VikiAi Bronze badge
          Go

          Re: "media were fawning over"

          Inmypjs, that's how I read your 'Had tits' : not intended as sexist in itself but intentionally using sexist language to highlight the sexism of the situation.

    4. ecofeco Silver badge

      Re: Just goes to show how dumb...

      Which always beg the question: how do stupid investors have so much money to begin with?

      Seriously. WTF?

      1. JohnFen Silver badge

        Re: Just goes to show how dumb...

        Despite what certain circles of wealthy people keep saying, there is no correlation between wealth and intelligence.

    5. Charlie Clark Silver badge

      Re: Just goes to show how dumb...

      The VC fraternity keep on getting the rules rewritten so that they don't have to worry about things like due diligence and are hence happy to pump money (often belonging to other people) into harebrained schemes knowing that if there is an exit they will make loads of money and even if it flops their losses will be minimal.

      In summary: expect more Theranoses in the future.

      1. imanidiot Silver badge

        Re: Just goes to show how dumb...

        This. There are too many safeguards in many cases. Yes, this was a case of blatant bullshitting and fraud, on the other hand for VC's it should always be a case of buyer beware. They claim millions of euros of turnover, but not where they are getting that. A VC working in that field should be able to contact some clients and see if ANYONE is actually using Theranos. Why are they protected from being idiots if they are clearly being idiots.

      2. Michael Wojcik Silver badge

        Re: Just goes to show how dumb...

        expect more Theranoses in the future

        Yes, but do we want to cut off the Theranoses to spite our Therafaces?

      3. Jonathan Richards 1

        Theranoses...

        ...Theranoi?

        This is as good a place as any to second the comment waaay above, about how can the blood-testing market be worth all these billions of dollars? How many of the 326 MegaYanks get their blood tested in any given day?

  5. a_yank_lurker Silver badge

    Second Shoe

    The first shoe was the FDA, now the SEC, next DOJ with felony charges. She and her cronies are not out of the woods yet.

    1. Natalie Gritpants

      Re: Second Shoe

      How many legs have you got?

  6. sprograms

    The tech investor world clearly has a very weak spot for reasonably attractive blondes who attended Stanford CS.

    What she had in common with Steve Jobs (see "The Next Steve Jobs) is just this, that with a very different set of verbal and visual tools, she had the ability, for a time, to create a "reality distortion field." She did. It's over.

    1. imanidiot Silver badge

      The main difference there being that HER "reality distortion field" created tech that she knew didn't exist and which apparently couldn't exist. Steve Jobs was much more aware of what could be done and (mostly) kept his mouth shut to investors and the outside world about what alternate reality they were developing.

    2. Anonymous Coward
      Anonymous Coward

      What she had in common with Steve Jobs

      And black turtlenecks, in what seems to be a conscious imitation of Mr Jobs.

      I think the investors created their own reality distortion fields.

  7. This post has been deleted by its author

  8. Nick Kew Silver badge

    Contrast the SEC with the FCA here in Blighty.

    The SEC cast a severe eye on her. The FCA would've turned a blind eye instead.

  9. Schultz
    Boffin

    "Any sufficiently advanced technology is indistinguishable from magic."

    (A.C. Clarke)

    In this case, the investors just followed the money, assuming someone else had checked the magic. Holmes was happy to lead them along.

    Technology will continue to give us great advances in medical diagnostics and treatment, but it takes a lot of work and time to make each little step. Theranos promised it all at once and right now -- that's usually not how science progresses.

  10. Anonymous Coward
    Anonymous Coward

    Theranos, ...

    meet Thanatos...

  11. Anonymous Coward
    Anonymous Coward

    2014: "...simply made up figures."

    2018: Now it's called 'accrual' and it's the latest Generally Accepted Accounting Practice.

    1. tony2heads

      Re: 2014: "...simply made up figures."

      aren't they just 'alternative figures' just as we now have 'alternative truth' ?

      BTW how did this stuff get past accountants for so long?

      1. BebopWeBop Silver badge

        Re: 2014: "...simply made up figures."

        BTW how did this stuff get past accountants for so long?

        Carrilion (in the UK) and many others demonstrate that for PWC and many accountants, large fees will make most things fly until they make the accountants personally responsible.

  12. bobajob12

    Buh-bye

    Funny that it took a gumshoe from a traditional media outlet (an olde-timey newspaper, no less) to break the reality distortion field around this one. Ars Technica, El Reg, Wired, etc etc, why did the WSJ see through it and not you?

    I'm also curious about how Theranos managed to recruit heavyweights (and not, generally, stupid people, even if you detest what they have done in public life) to the board of directors. I mean, I can't just call up Henry Kissinger and say "join my company". Very odd.

    1. Guus Leeuw

      Re: Buh-bye

      Dear Sir,

      do you really wonder?

      Can I just say that I read 3 articles on ElReg this morning, and I've had my share of bad English for the day... Outfits like ElReg simply regurgitate news (whether that news was already regurgitated or not) for us to swallow. I mean, why in the world would one use the word "artificial" as an adjective to the word "satellite"? Is it to indicate that there are also naturally occuring satellites? In a story about the Keppler Satellite??

      It's clear that random people ran write for these media outfits. Nobody needs journalism training anymore... Any twat can write whatever he/she wants and publish it as well (I mean, look at me)... No need for making sure that, at least, the language is sound, never mind the actual contents of the publication.

      So old-school journalism *still* is vital to the world, and I for one am happy to see it!

      Regards,

      Guus

      1. Anonymous Coward
        Anonymous Coward

        Re: Buh-bye

        I'm pretty sure that "satellite" is being used correctly. The Moon is also a satellite of Earth, as the Earth is a satellite of the Sun.

        https://www.merriam-webster.com/dictionary/satellite

      2. rmason Silver badge

        Re: Buh-bye

        @Guus,

        Next time it goes dark outside (and isn't cloudy) nip out side and see if you can spot any natural satellites.

        Several are visible to the naked eye, at worst you'll see one, but others are often visible. One is a *our* natural satellite, the others are our fellow satellites around the sun.

      3. Jamie Jones Silver badge

        Re: Buh-bye

        You miss his point: On a techie site, talking about Kepler, they felt the need to say "artificial", as if the clarification is needed.

        He's still a grumpy old git though!

    2. Anonymous Coward
      Anonymous Coward

      Funny that it took a gumshoe from a traditional media outlet

      That really was an excellent series in the WSJ. What was really fascinating were the comments in the online edition. Ms Holmes had her staunch defenders all through the series, because: sexism, persecution of a visionary, big business is out to get her, etc.

    3. Fruit and Nutcase Silver badge

      Re: Buh-bye

      @bobajob12

      why did the WSJ see through it and not you?

      El Reg seems to have covered this firm from over a couple of years ago...

      https://search.theregister.co.uk/?q=Theranos&advanced=1&date=the+dawn+of+time&results_per_page=100

  13. ShelLuser

    Not all is lost ;)

    Next time she should just stick with Indie Go Go for her future fundraiser company campaign. There people more or less expect to scammed (or so it sometimes looks to me at least) so she should fit right in.

  14. Anonymous Coward
    Anonymous Coward

    Perhaps she'll drive away into the sunset

    in a Tesla (because her Delorean is the garage being repaired).

  15. Anonymous Coward
    Anonymous Coward

    One would think such catastrophic events would alter the appearance of the CEO. I mean look at how Bill Gates aged like 10 years within 2 years around 1998/99, when US vs MSFT almost split MSFT in two companies. Nope. No grey hair, no wrinkles, no indication of stress at all, nothing. This CEO girl has apparently no ethics at all. She seemingly doesn't care. Next stop for her, start the next fraudulent over hyped gig.

  16. Miss_X2m1

    Investors actually believed her??? P.T. Barnum was right.

  17. Anonymous Coward
    Anonymous Coward

    Actual victims

    As with the Shkreli case it seems that you can fleece your desperate customers (who need your drugs or are relying on your blood tests) and the US legal systems goes "Meh". But as soon as you annoy the people with the money then, uh oh, you're in big trouble now...

  18. Eddy Ito Silver badge

    Poor, stupid girl, maybe dropping out of college to start this company wasn't the best move after all.

    The part I don't understand is where was the FDA in all this? Considering all the hoops most medical manufacturers have to jump through to get something as simple as a blood glucose monitor or wheelchair approved, where was the data on this company's products? We'd be better off if we replaced the FDA with an independent third party like UL or FM

    1. JohnFen Silver badge

      " where was the FDA in all this?"

      The FDA had the company under investigation, and already began to sanction it for related issues.

    2. Anonymous Coward
      Anonymous Coward

      where was the FDA in all this?

      In the WSJ series, they detail the problems Theranos was having with the FDA. That included "hiding" test equipment from the FDA inspectors.

  19. anonymous boring coward Silver badge

    Pretty face, ugly brain.

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