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The Securities and Exchange Commission on Wednesday charged Theranos and CEO Elizabeth Holmes with fraud, capping off a remarkable downfall for a once high-flying company that promised to revolutionize the blood testing industry but instead became a parable for Silicon Valley hype and hubris.

The SEC’s complaint alleges that the privately held company deceived investors by exaggerating or falsifying everything from who it was working with to how much revenue it was bringing in. At the center of Theranos’s deceit: misleading investors about what its technology could do.


While the company told investors it could provide quick, accurate medical test results from just a few drops of blood pricked from a finger, it was in fact running most of its tests on machines manufactured by other companies. These and other deceptions were first reported in a series of investigative stories by the Wall Street Journal’s John Carreyrou.

Both Holmes and her company have agreed to settle the cases, neither admitting nor denying the SEC’s allegations. Holmes, the charismatic young Stanford dropout who once adorned the cover of magazines in Steve Jobs-esque black turtlenecks, must pay a $500,000 penalty, give up voting control of the company, return the shares she obtained during the alleged fraud, and cannot be part of the leadership of a public company for a decade.

The SEC’s complaint highlights in remarkable detail the lengths to which Theranos went to sell investors on a pitch that was too good to be true. For example, the company distributed binders to investors containing printouts of sunny articles from The Wall Street Journal, Wired, and Fortune quoting Holmes making statements about the company’s progress that would later prove false. Also in the binder: two reports about Theranos’s pharma collaborations emblazoned with the logos of top pharma companies — which were written not by those drug makers, but by Theranos staffers.


Theranos also falsely told investors that its products were used in the field by the Department of Defense and that the company would bring in roughly a thousand times more revenue in 2014 than it actually did, the SEC alleged.

The SEC also charged the company’s former president and No. 2 executive, Sunny Balwani, in a case that will be litigated in federal court in California.

Separate from the civil settlement announced on Wednesday, in or around early 2016 federal prosecutors launched a criminal investigation into whether Theranos misled investors. The Department of Justice declined STAT’s request for comment on the status of that investigation, but the Wall Street Journal reported that that investigation is ongoing and has involved interviews with former Theranos employees and doctors who ordered the company’s blood tests.

In 2014, Theranos reached a valuation of $9 billion, the most of any venture-backed company working in health care. But in June 2016, Forbes estimated that its value had fallen to close to zero.

The company announced in August 2016 that it was pivoting to focus on developing a “MiniLab” to carry out a variety of tests in different locations. Theranos recently published a paper on the MiniLab — with Holmes listed as the senior author — in the journal Bioengineering & Translational Medicine. The study reports on data from blood samples collected in the customary way— a needle stuck in the arm — rather than the finger pricks that built the Theranos mystique.

Theranos last year settled lawsuits from the hedge fund Partner Fund Management, which invested more than $96 million in the company in 2014, and from Walgreens, a former Theranos partner that at one point had about 40 Theranos blood-testing centers in its stores.

Last December, the company told its investors that it had secured a $100 million loan from an investment group to avert bankruptcy.

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.”

Damian Garde contributed reporting.

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