- The Securities and Exchange Commission has charged the blood-testing company Theranos, along with its CEO, Elizabeth Holmes, and its former president, Sunny Balwani, with fraud.
- The agency said Wednesday that Theranos and Holmes had agreed to resolve the charges against them.
- Theranos, which has been under fire since 2015, had previously said it was working with the SEC regarding its investigation into the company.
The Securities and Exchange Commission has charged the blood-testing company Theranos, along with its CEO, Elizabeth Holmes, and its former president, Sunny Balwani, with “massive fraud.”
The SEC said Wednesday that Theranos and Holmes had agreed to resolve the charges against them and that Holmes would give up majority voting control and reduce her equity in the privately held company.
The SEC says it will pursue the charges against Balwani, who left the company in May 2016, in federal district court in California.
Theranos said in a statement that “as part of the settlement, neither the Company nor Ms. Holmes admitted or denied any wrongdoing.”
Theranos has been under fire since October 2015 when The Wall Street Journal published an investigation that called into question the accuracy of its blood test. Eventually, one of the company’s lab-testing locations was shut down, and Holmes was barred for two years from running a clinical lab.
The company settled last year with the Centres for Medicare and Medicaid Services, the government agency responsible for regulating blood-testing labs, by agreeing to not own or operate a clinical lab within the next two years. Theranos said in a letter to investors in December that it was continuing to cooperate with the SEC and the Justice Department in the agencies’ respective investigations.
The SEC alleged that:
- Theranos “made numerous false and misleading statements in investor presentations, product demonstrations, and media articles” about its blood-testing technology while raising more than $US700 million.
- That included claims that the Department of Defence was using Theranos’ technology and that Theranos would bring in more than $US100 million in revenue in 2014. The SEC said that in reality, the department never used the technology and the company made about $US100,000 in revenue that year.
“Investors are entitled to nothing less than complete truth and candor from companies and their executives,” Steven Peikin, a director of the SEC’s Enforcement Division, said in a release. “The charges against Theranos, Holmes, and Balwani make clear that there is no exemption from the anti-fraud provisions of the federal securities laws simply because a company is non-public, development-stage, or the subject of exuberant media attention.”
As part of the resolution, Holmes will pay a $US500,000 fine and return 18.9 million shares of Theranos, and she cannot be a director or officer of a publicly traded company for 10 years, the SEC said.
Here’s Theranos’ full statement:
“Theranos, Inc. announced today that the Company and its CEO, Elizabeth Holmes, have resolved a previously disclosed investigation by the U.S. Securities and Exchange Commission (SEC) into the offer and sale of Theranos securities from 2013 to 2015.
“The Company and Ms. Holmes fully cooperated with the SEC throughout its investigation. As part of the settlement, the Company and Ms. Holmes agreed to comply with applicable federal securities laws. Ms. Holmes will pay a $US500,000 fine and will not be eligible to serve as a director or officer of a publicly traded company for a period of 10 years. She will also return approximately 18.9 million shares of stock and relinquish her super-voting equity rights. As part of the settlement, neither the Company nor Ms. Holmes admitted or denied any wrongdoing.
“Theranos’ independent directors said in a statement, ‘The Company is pleased to be bringing this matter to a close and looks forward to advancing its technology.'”
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