SEC Charges Theranos Founder Elizabeth Holmes with Fraud

SEC accuses Theranos CEO Elizabeth Holmes of ‘massive fraud

Modal Trigger Theranos CEO Elizabeth Holmes REUTERS

Elizabeth Holmes, CEO of Theranos, attends a panel discussion during the Clinton Global Initiative's annual meeting in New York, September 29, 2015.

Theranos, along with its CEO Elizabeth Holmes and former president Sunny Balwani have been charged by the SEC with "massive fraud".

The SEC's complaint claims that Theranos, Holmes and Balwani made several false and misleading statements in investor presentations, product demonstrations and media articles. Theranos, based in Palo Alto, California, misled investors for years, once telling them its machines were being used by the Defense Department when they were not. The SEC complaint said that Holmes and Balwani lied about the extent of Thernos' involvement with the military, but the company - which Holmes pitched as a salvation to those fearful of needles like herself - in truth never delivered on its grand vision.

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Holmes also cedes her voting control of the company she founded in 2003 at the age of 19.

Ms Holmes had claimed Theranos' analyser could run dozens of diagnostic tests on just a single drop of blood, promising to upend the entire lucrative testing industry.

As part of the resolution, Holmes has to pay a $500,000 fine and can not be a director or officer of a publicly traded company for 10 years. The SEC said it would take its case against Balwani to federal court in San Francisco.

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The company has had its fair share of ups and downs, and raised hundreds of millions of dollars on the promise of revolutionizing medicine.

U.S. securities regulators on Wednesday charged the chief executive of the blood-testing company Theranos, Elizabeth Holmes, and a former president at the onetime soaring Silicon Valley startup with an "elaborate, years-long fraud".

For her part, Holmes has agreed to: pay a $500,000 penalty; be barred from serving as an officer or director of a public company for 10 years; return the remaining 18.9 million shares that she obtained during the fraud; and relinquish her voting control of Theranos by converting her super-majority Theranos Class B Common shares to Class A Common shares.

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Theranos released a statement on Wednesday quoting its independent directors as saying that the company "is pleased to be bringing this matter to a close and looks forward to advancing its technology".

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