Has Elizabeth Holmes, the founder of Theranos, pleaded guilty to defrauding investors?

Elizabeth Holmes remains free on bail pending sentencing, which has not yet been scheduled.

Theranos founder Elizabeth Holmes, who became the world’s youngest billionaire seven years ago, has been found guilty of fraud and misleading investors. Her case has been on trial in California federal court since late August this year.

For years, Theranos had been developing a universal device that it claimed could diagnose diseases with a single drop of blood. However, according to the prosecution’s version of events, the device turned out to be a sham, and the company’s CEO, Holmes, knowingly misled the project’s investors. The jury found them guilty on four of 11 counts, including conspiracy to commit fraud against investors, misleading the public, and fraud by electronic means. The jury deliberated for seven days but was unable to reach a consensus on most of the charges.

However, she faces up to 20 years in prison for each count on which there was agreement, and the total sentence could be up to 80 years. However, the judge will most likely sentence her to a much shorter term.

Theranos investors included some of the most prominent politicians and businesspeople in the United States. In particular, former President Bill Clinton, Secretary of Education under the Trump administration Betsy DeVos, media mogul Rupert Murdoch, technology magnate Larry Ellison, and others. The company’s board of directors includes former U.S. Secretaries of State Henry Kissinger and George Shultz and former Secretary of Defense James Mattis. Joe Biden, who was serving as vice president in Barack Obama’s administration at the time, was also interested in Theranos. In total, Elizabeth Holmes has raised more than $900 million to develop her startup. She founded her company as a teenager, shortly after dropping out of Stanford University’s prestigious chemical engineering program. Theranos was considered one of the top Silicon Valley projects of the past few decades.

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The company Theranos (the name combines the words “therapy” and “diagnostics”) was valued at $9 billion at the height of its popularity. The device it was developing was supposed to provide a wide range of diagnoses with just a drop of blood from the finger. Elizabeth Holmes and the company’s management promised to revolutionize the world of medicine and healthcare. But in 2015, Wall Street Journal journalist John Carreyrou published a series of investigative articles about Theranos’ activities. In particular, he was drawn to the company’s extreme secrecy, and he conducted his investigation over several years, ultimately proving that the technology being developed at Theranos was a fraud. Under strict secrecy, he met with a number of the company’s employees, some of whom had already left their positions. According to Carrera, they were all intimidated. From their stories emerged a picture of a horrific situation in which people were literally forced to lie under the threat of termination in conditions that meant ruin. In 2018, John Carreiro released a book called Bad Blood, which became a bestseller, and then the story of Elizabeth Holmes caught the attention of filmmakers.

During the four-month trial, some 30 witnesses, including lab managers, testified that Holmes repeatedly alerted them to defects in the company’s product.

Witnesses at the trial testified that Theranos’ leadership, including Elizabeth Holmes, preferred to turn a blind eye to expert testimony about technological flaws in the company’s developments. However, according to their words, they were strongly advised to keep their concerns and predictions to themselves. In his closing statement at the trial, the prosecutor said that all of Holmes’ actions were aimed at preventing losses in her business, which is why she chose the path of deceiving everyone involved, including potential patients. “And that choice was not only heartless, it was criminal,” the prosecutor said. Holmes herself has acknowledged flaws in Theranos’ developments, but insists she never intentionally misled anyone. Her defense also emphasized that Elizabeth Holmes is a dedicated and determined businesswoman who, thanks to her qualities, managed to break into an industry that has always been dominated by men. Not everything worked out for her, the lawyers said, but her goals and intentions were noble. Holmes herself, at the height of her career, declared that she wanted to change the world with her technology.

James Clayton, a correspondent for the BBC in North America who covers technology issues. Elizabeth Holmes claimed that her diagnostic devices could detect hundreds of diseases. In reality, they couldn’t. Given that she was the founder and CEO of Theranos, one might assume that the prosecution would easily win the case. However, for several reasons, not all of the charges were guaranteed to result in convictions. Holmes recently gave birth to a child, and many commentators believed that this circumstance would elicit sympathy from the jury. The complexity of this process is fully reflected in their decisions, which are ambiguous and sometimes difficult to reach. But considering how difficult it is in principle to bring fraud cases against “white collar” criminals, the government should be quite satisfied with the result. Her former partner, Sunny Balwani, will appear in the same court in February on the same charges. And most likely, Holmes’ sentence will not be handed down until his case is completed. The jury’s verdict sends a direct and clear message to all of Silicon Valley: there are serious consequences for misleading investors.

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