Elizabeth Holmes, the founder of the embattled health startup Theranos, on Friday was charged in federal court with wire fraud with prosecutors alleging that the company was a “multi-million dollar scheme to defraud investors.”
Holmes and Ramesh “Sunny” Balwani, the former president and chief operating officer of Theranos, were both charged with two counts of conspiracy to commit wire fraud and nine counts of wire fraud.
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Holmes founded Theranos in 2003 to develop technology that she claimed was able to conduct clinical tests on small amounts of blood. Starting in 2013, the Justice Department’s indictment alleges, Holmes and Balwani started making grand claims to investors about the company and its technology that were false or misleading.
According to the 15-page court filing, the two lied about the company’s partnerships with the Pentagon and Walgreens, its financial health and the capabilities of its products.
Many of the allegations in the indictment have been previously reported by The Wall Street Journal.
The pair faces up to 20 years in prison and a $250,000 fine for each count.
Shortly before the charges were announced, it was reported that Holmes had stepped down as the company’s CEO.
The Justice Department alleges that the two founders knew that their technology could not deliver on the promises they had been making to the media, investors and doctors.
According to the indictment, the company gave doctors — and through them, their patients — “materially false and misleading information concerning the accuracy and reliability of Theranos’s blood testing services.” After signing up patients for blood tests with the promise that the technology could detect a range of diseases, Holmes and Balwani would transmit them results despite knowing that the tests were unreliable.
The Securities and Exchange Commission also charged Holmes and Balwani with “massive fraud” in March.