Elizabeth Holmes, a former Silicon Valley darling whose rapid rise and fall as the founder of the life sciences company Theranos that inspired the upcoming Jennifer Lawrence film “Bad Blood,” was indicted Friday on wire fraud charges.
Also indicted was Ramesh “Sunny” Balwani, who held several high-profile positions in Theranos, a company that told investors it would revolutionize medical testing through innovative new methods for drawing and testing blood.
Holmes and Balwani were charged with two counts of conspiracy to commit wire fraud and nine counts of wire fraud, federal prosecutors said. They are accused of engaging in a multimillion-dollar scheme to defraud investors, “and a separate scheme to defraud doctors and patients,” prosecutors said in a news release.
Theranos said Holmes would step down as CEO of the company and that general counsel David Taylor would replace her.
“I have never seen a case like this one, where the government brings a criminal prosecution against a defendant who obtained no financial benefit and lost millions of dollars of his own money,” Balwani’s attorney, Jeffrey B. Coopersmith, said in a statement. “Mr. Balwani committed no crimes. He did not defraud Theranos investors, who were among the most sophisticated in the world. He did not defraud consumers, but instead worked tirelessly to empower them with access to their own health information. Mr. Balwani is innocent, and looks forward to clearing his name at trial.”
A rep for Balwani told TheWrap that no one was speaking on Holmes’ behalf. Her attorneys declined comment to numerous news outlets Friday.
Holmes charmed Silicon Valley, starting Theranos in 2003 when she was dropped out of Stanford University at 19. Prone to black turtlenecks like those worn by Steve Jobs, she said she had built the company out of her own fear of needles, and soon scored a $9 billion valuation from private investors.
Gen. James Mattis, who would later become President Trump’s Defense Secretary, personally pushed for Holmes’ technology. Theranos’ investors included Rupert Murdoch and Secretary of Education Betsy DeVos.
But a Wall Street Journal investigation found evidence that Theranos couldn’t back up its promises. In June 2016, Forbes downgraded Holmes’ estimated worth from $4.5 billion to zero. As a result, her Wikipedia page currently lists her net worth as “$0.”
Also in June 2016, Legendary Pictures won a bidding war for a film about Theranos with Jennifer Lawrence attached to star as Holmes. “The Big Short” veteran Adam McKay will direct. It is based on the book “Bad Blood” by Pulitzer Prize-winning journalist John Carreyrou, who broke the story for the Journal.
In March of this year, Theranos announced that it and Holmes had resolved an investigation by the U.S. Securities and Exchange Commission into the offer and sale of Theranos securities. Holmes paid a $500,000 fine and agreed she would not be eligible to serve as a director or officer of a publicly traded company for 10 years. She also agreed to return roughly 19 million shares of stock. Neither she nor the company admitted any wrongdoing.