- Theranos’ founder, Elizabeth Holmes, is stepping down as CEO as she faces criminal charges.
- The Department of Justice on Friday charged Holmes and Sunny Balwani, Theranos’ former president, with nine counts of wire fraud and two counts of conspiracy to commit wire fraud.
- Holmes founded the blood-testing company in 2003 and remains the chair of the board.
- David Taylor, Theranos’ general counsel, has been named CEO.
Elizabeth Holmes is no longer the CEO of Theranos as she faces charges of wire fraud.
Holmes, who founded the blood-testing company in 2003, will be replaced by David Taylor, the company’s general counsel, the board said in a statement Friday. She remains chair of the board.
Holmes and Sunny Balwani, Theranos’ former president and chief operating officer, are charged with nine counts of wire fraud and two counts of conspiracy to commit wire fraud, stemming from allegations that the two engaged in a scheme to defraud investors and a separate scheme to defraud doctors and patients, the US Attorney’s Office for the Northern District of California said Friday.
“Today’s indictment alleges that through their company, Theranos, CEO Elizabeth Holmes and COO Sunny Balwani not only defrauded investors, but also consumers who trusted and relied upon their allegedly-revolutionary blood-testing technology,” the Justice Department said in a statement.
Balwani’s lawyer, Jeffrey Coopersmith, said in a statement Friday that Balwani had committed no crimes. “Mr. Balwani looks forward to trial because he did not defraud anyone, and it will be an honour to defend him vigorously,” Coopersmith said.
The department said Holmes and Balwani could face 20 years in prison and a $US250,000 fine if convicted. The charges are the result of investigations by the Food and Drug Administration, the FBI, and the US Postal Inspection Service.
Theranos initially came under fire in 2015 over the accuracy of its blood tests. At one point, it was valued at $US9 billion, but in recent months it has laid off most of its employees and is pleading with investors for more cash as it faces setbacks in the lab on its Zika virus test.
In March, the Securities and Exchange Commission charged Holmes and Theranos with “massive fraud.” As part of a settlement, Holmes paid a fine and cannot be a director or officer of a publicly traded company for 10 years.
The Justice Department is alleging that Holmes and Balwani developed technology that they claimed could run a full range of blood tests using a small amount of blood more accurately than traditional blood-testing methods.
It also alleges that Holmes and Balwani knew that their claims were false and that they knew that their analyser technology had problems with accuracy and couldn’t run as many tests as they claimed to run.