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COO of failed bio-biz Theranos found guilty on all twelve fraud counts
What a prick ... of blood was ever going to work in these machines?
After a four-month trial, Ramesh "Sunny" Balwani, former chief operating officer of the utterly failed blood-testing startup Theranos, was found guilty of fraud on Thursday by a jury in California.
Balwani's ex-companion, Theranos founder and former CEO Elizabeth Holmes, received a similar though less severe verdict when she was convicted of fraud in January.
Balwani was found guilty on 12 counts – 10 of wire fraud and two of conspiracy to to commit wire fraud – while Holmes was found guilty of four counts of fraud and acquitted of four. Another three fraud counts against Holmes were dropped when the jury could not decide, and one more was dropped during Holmes's trial.
United States Attorney Stephanie Hinds in a statement to the media welcomed the verdict and thanked the jury for its service following the conclusion of Balwani's trial.
Holmes has appealed, and Balwani may do so, too – his attorney Jeff Coopersmith, with Orrick Herrington & Sutcliffe, told CNBC he is disappointed with the verdict and is considering an appeal as a possible option.
Sentencing for Holmes is scheduled for September, 26, while Balwani's sentencing is set for November 15. The punishment for a single count of wire fraud can run as high as 20 years in prison.
Theranos was founded by Holmes in 2003 and raised more than $700 million from prominent investors based on claims the company had developed technology capable of diagnosing diseases from a drop of blood drawn by a finger-prick.
By 2014, Theranos was valued at $9 billion and Holmes, who made a habit of wearing a black turtleneck because of her admiration for Apple co-founder Steve Jobs, was being celebrated in the press as a similar corporate visionary.
But in 2015, then Wall Street Journal reporter John Carreyrou published an article challenging the startup's finances and technology. And then things began to fall apart.
A study published March 28, 2016 in the Journal of Clinical Investigation found that Theranos tests deviated from expected ranges and from tests conducted by two other clinical testing services. These differences, the study said, could alter diagnoses and clinical outcomes. Additional scrutiny of Theranos' technology was advised.
Later that year, after Theranos failed to provide data about its tests, Walgreens ended its partnership with the company.
- Theranos CEO Elizabeth Holmes found guilty of fraud: Blood-testing machines were vapourware after all
- Founders of medical science upstart uBiome once likened to Theranos now indicted for, you guessed it, fraud
- SEC drags Silicon Valley AI upstart to court over claims of made-up revenues, investors swindled out of $11m
- Theranos CEO: $4.5bn to $0
The US Securities and Exchange Commission filed and settled civil charges against Holmes and Balwani in March, 2018. Holmes was fined $500,000, gave up her shares in the company, and lost control of Theranos.
In June, 2018 the Department of Justice filed the above criminal charges. Three months later, Theranos announced it was shutting down. Those charges have now resulted in two sets of guilty verdicts.
Prosecutors said Holmes and Balwani claimed to have developed revolutionary blood analysis technology – the Theranos Sample Processing Unit (TSPU), Edison, and miniLab – that could perform a wide range of clinical testing on a drop of blood. They argued that the pair knew their blood testing hardware was unreliable, couldn't perform the advertised tests, and was slower and less capable than commercial blood analyzers.
The jury for the most part agreed.
The fall of Balwani, Holmes, and Theranos may look like comeuppance for Silicon Valley hucksterism and hubris, but the cryptocurrency industry's floundering effort to get people to trade fiat currency for speculative tokens governed by buggy code suggests nothing has changed. ®