In 2015 Theranos Founder Elizabeth Holmes Had A Net Worth Of $4.5 Billion. Today, The Fortune Has Evaporated And She's Settling Fraud Charges

By on March 14, 2018 in ArticlesEntertainment

Once upon a time, Elizabeth Holmes was the biotech industry's darling. She was glowingly written about in dozens of outlets (including CelebrityNetWorth). Thanks to the incredible success of her company, she had amassed a $4.5 billion net worth (on paper). She was heralded as an innovator and genius. Unfortunately, those days are over. Today, the fortune is gone and the Securities and Exchange Commission has charged Elizabeth and her blood testing company Theranos with massive fraud.

As a quick refresher, during its heyday, Theranos promised it could perform a variety of very specialized tests and screenings using a tiny blood prick that could be performed at your local CVS. The results would be ready almost instantly. This was seen as a miracle because up to that point, the prevailing system involved patients visiting a blood lab where a vial of blood would be drawn with a needle and results wouldn't be known for days.

Unfortunately, the miraculous Theranos blood tests were not miraculous at all and today the Securities and Exchange Commission filed fraud charges against Holmes and Theranos. It's kind of interesting actually, the charges have already been settled. As part of the fraud announcement, Holmes agreed to give up majority voting control and reduce her equity stake in the company. She is also paying a $500,000 fine.

Neither Theranos nor Holmes admitted or denied any wrongdoing, according to a statement from the company.

Lisa Lake/Getty Images

Theranos has been on the hot seat since a Wall Street Journal article came out in October 2016 that questioned the accuracy and legitimacy of its blood test. That led to an investigation that resulted in the shut down of one of Theranos' labs where blood was tested as well as barring Holmes from running a clinical lab for two years.

Last year the company settled with the Centers for Medicare and Medicaid Services, which is the government agency that oversees the regulation of blood testing labs. In the settlement, Theranos agreed not to own or operate a clinical lab for two years.

The SEC's allegations against Theranos and Holmes are below.

-Theranos "made numerous false and misleading statements in investor presentations, product demonstrations, and media articles" about its blood-testing technology while raising more than $700 million.

-That included claims that the Department of Defense was using Theranos' technology and that Theranos would bring in more than $100 million in revenue in 2014. The SEC said that in reality, the department never used the technology and the company made about $100,000 in revenue that year.

Steven Peikin, a director of the Enforcement Division of the SEC said in a release:

"Investors are entitled to nothing less than complete truth and candor from companies and their executives. 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."

Holmes is now required to pay a fine of $500,000. She also cannot be an officer or director of a publicly traded company for 10 years and must return 18.9 million shares of Theranos stock. This way, she cannot profit in the event the company sells, unless the $700 million it raised has been paid back.

Given the $700 million size of the fraud, Holmes could still face jail time.

Articles Written by Amy Lamare
Amy Lamare is a Los Angeles based writer covering business, technology, entertainment, philanthropy, and pop culture. She spent 8 1/2 years covering the entertainment industry for www.hsx.com. She has written for Los Angeles Magazine, Your Tango, Thinknum Media, and various airline magazines. Follow her on Facebook.
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