SEC charges Theranos with “massive fraud,” CEO Holmes stripped of control

Enlarge / Founder & CEO of Theranos, Elizabeth Holmes. (credit: Getty | Gilbert Carrasquillo)

The once-darling Silicon Valley startup that promised to revolutionize the blood-testing industry and fetched a valuation of $9 billion may have finally been dealt a death blow.

The Securities and Exchange Commission on Wednesday charged Theranos Inc., its founder and CEO Elizabeth Holmes, and former President Ramesh “Sunny” Balwani with “massive fraud” after a lengthy investigation. The SEC alleges that they raised $700 million in investments by orchestrating an “elaborate, years-long fraud in which they exaggerated or made false statements about the company’s technology, business, and financial performance.”

Without admitting or denying wrongdoing, Theranos and Holmes have agreed to settle the charges. As part of the settlement, Holmes will pay a $500,000 penalty, be barred from serving as a director or officer of a public company for 10 years, return her remaining 18.9 million shares obtained during the alleged fraud, and relinquish her voting control of Theranos. If Theranos is sold or liquidated, Holmes will not profit until more than $750 million is returned to allegedly defrauded investors and other shareholders.