The saga of Elizabeth Holmes, the founder of blood-testing startup Theranos, has likely come to a close. After the Securities and Exchange Commission charged Holmes with wide ranging fraud, Holmes settled with the SEC.
Holmes will pay a $500,000 fine, return her 18.9 million shares, and be restricted from serving as an officer or director of a public company for 10 years.
Regarding the complaint, Steven Peikin, the SEC’s co-director of enforcement, told USA Today, “…In reality, we allege that after years of development, Theranos was able to process just a small number of blood tests upon its proprietary analyzer, and instead conducted the vast majority of its patients’ tests on modified commercial analyzers that were manufactured by others.”
Here is what we wrote about Theranos back in 2016 when the company announced it was shutting down its blood testing lab and cutting its workforce:
On October 5, Theranos declared that it is shutting down its blood testing services and laying off 40 percent of its workforce. This comes a year after the Food and Drug Administration ordered they limit their testing service, and three months after federal regulators banned the CEO from owning or operating a laboratory for three years.
Theranos has been rocked by scandals. Forbes wrote in June 2016 that the company “has been hit with allegations that its tests are inaccurate and is being investigated by an alphabet soup of federal agencies.” A critical report from The Wall Street Journal, published in October 2015, raised concerns about the accuracy of the company’s tests and potential violations of federal rules regarding medical laboratories.
Since then, things have gotten worse. In January 2016, the Centers for Medicare and Medicaid Service sent the company a letter in which the regulator alleged that Theranos’ tests “pose immediate jeopardy to patient health and safety.”
In June 2016, Forbes revised its net worth estimate of founder Elizabeth Holmes – from $4.5 billion to zero. The new lower estimate is due to the company’s declining valuation and the fact that Theranos’ investors own preferred stock while Holmes herself owns common stock – meaning investors will get repaid before Holmes herself does.
Theranos debuted the “Edison” machine in 2013, claiming to offer consumers cheap, accurate blood testing with only a few drops of blood. Theranos hoped to increase transparency in blood testing, lower costs, and make testing more accessible to consumers. In May, Theranos voided all of its blood testing results from 2014 and 2015.
Theranos is now focusing its efforts on a new product, the MiniLab. The MiniLab is a printer sized blood-testing lab meant for sale to small clinics. Although the company applied to the FDA to include a test for the Zika virus in this new product, they later withdrew that application due to findings by the FDA that the product lacked essential safeguards.