Founder and CEO Elizabeth Holmes and President Ramesh “Sunny Balwani” have both stepped down from their positions at Theranos Inc. following fraud allegations. Holmes initially claimed to have technology that could run thousands of blood tests from a single finger prick. This technology offered a cheaper alternative for patients by diagnosing conditions such as cancer easily at their local drug store. Despite their claims of advanced technology, Theranos has no such thing- they actually faked blood results and outsourced many of their tests.
Holmes raised $700 million from investors while misrepresenting and overexaggerating the capabilities of her technology. Not only did they acquire hundreds of millions of dollars from investors, they fooled patients and companies into using their products in their homes and businesses, and in return, gave them faulty blood test results
In 2015, the FDA called Theranos technology an “uncleared medical device.” In 2016, centers offering Medicare and Medicade called out Theranos for not complying with federal blood testing rules. Regulators then banned Theranos’ certification, forcing it to close its labs and lay off 340 employees. Following this, Walgreens pulled out of its partnership with Theranos in 2016 despite a three year contract. Less than a year later, Theranos laid off another 155 employees right before failing a lab inspection. Finally, this year both Holmes and Balwani have been charged for criminal wire fraud and are accused of conspiracy to defraud investors, doctors, and patients. If they are convicted, both Holmes and Balwani each face up to 20 years in prison on top of $250,000 fine.
After starting Theranos at the age of 19, Holmes quickly became a popular name in Silicon Valley. Her promised solution to the high cost of healthcare in America enticed investors and patients alike. She quickly assembled a powerful board of directors comprised of secretaries of state and senators. She was featured in magazines and quickly became one of Americas Silicon Sweethearts. She usually wore a black turtleneck which likened her to Steve Jobs. However, Holmes and Theranos were too good to be true: the foundation of the company was build on lies and exploited both its stakeholders and consumers.
This story highlights the importance of being candid with your investors, stakeholder, and most importantly. customers. Holmes’ failed promise of an easier way to conduct blood tests hurts more than just the company and its investors—it hurts the patients who put their trust in Theranos technology. When starting a company, you need to put your customers and employees FIRST! This con artists cost patients their health, employees their jobs, and investors their money! It is far easier to start your business based upon ethics and transparency than it is to con your way to the top!