Revolutionary: Holmes claimed her technology could test for diseases from a single drop of blood
She was once the world’s youngest self-made female billionaire and was touted as the next Steve Jobs. But entrepreneur Elizabeth Holmes, 37, now faces up to 20 years in jail after she was charged with fraud against patients and investors of her medical tech company.
Rupert Murdoch and former US secretary of state Henry Kissinger were just some of the backers who bought into the extraordinary story of her blood testing start-up that at one stage was valued at £6.6bn.
The blockbuster trial, which will draw some of the biggest names in American public life to the witness stand, kicked off in the Californian city of San Jose yesterday. Prosecutors alleged she lied about her technology to investors and patients, and ramped up claims about the company’s financial performance.
Holmes, who was chief executive before it went bust in 2018, will hit back with claims her ex-boyfriend and former business partner Ramesh ‘Sunny’ Balwani was controlling, sexually abusive, and hid the fraud from her. The tale has already spawned documentaries and podcasts while the award-winning book Bad Blood: Secrets and Lies in a Silicon Valley Startup is now being made into a film starring Jennifer Lawrence (pictured bottom).
Holmes was born in Washington DC, to parents who held senior jobs at Enron and government agencies. Her business, Theranos, dates back to 2003 when she dropped out of Stanford University, one of the US’s top colleges, at the age of just 19 to file a patent for a new blood test technology. Inspired by her own fear of needles, she promised to revolutionise the medical industry with a method to test for diseases from a single drop of blood on a microchip, slashing costs and removing the need for large blood samples.
She promised a revolution in healthcare – or ‘a world in which no one ever has to say, “If only I’d known sooner”.’ Investors flooded in with more than £500m in the hope of grabbing a slice of the £54bn US labs diagnostics industry. As she started to promote the product from 2013, then aged 29, her youth and apparent genius led to a media frenzy which saw her appear on the cover of business magazines Forbes, Fortune and Inc.
Her choice of a black turtleneck helped create the myth of geeky genius, leading one editor to label her ‘The next Steve Jobs’ – a reference to the Apple boss. It was claimed she lowered her voice to lend gravitas. Her ideas and image garnered a following of rich and powerful men including former US presidents Bill Clinton and Barack Obama, who appointed her as a presidential ambassador for global entrepreneurship.
Holmes was once the world’s youngest self-made female billionaire and was touted as the next Steve Jobs
She also, for a time, won over the biggest names in the industry. Boots-owner Walgreens hosted the diagnostic machines, named after inventor Thomas Edison, in its stores on the bank of true claims they could diagnose 200 diseases.
Her success brought in more big-name investors and led to rocketing wealth as her 50pc stake grew to £3.3bn. Holmes enjoyed the super-rich lifestyle of her business heroes, flying by private jet and commanding an entourage that included a swarm of executive assistants and a personal chef. But by 2015 cracks started to show. Reports in American newspapers revealed tests that were supposed to be carried out by Theranos’s own technology, the Edison machine, were actually being conducted elsewhere, while the machine itself was found to be inconsistent.
Regulators moved in, forcing the company to pull test results and recall its machines. Holmes stepped down in September 2018 and the company collapsed three months later, setting in train a series of civil and criminal claims in the US. Holmes has already settled for $500,000 with the US Securities and Exchange Commission, the financial regulator, although she was not required to admit any fault.
Holmes will hit back with claims her ex-boyfriend and former business partner Ramesh ‘Sunny’ Balwani was controlling and hid the fraud from her
But she now faces two counts of conspiracy to commit wire fraud and ten counts of wire fraud. Prosecutors claim that ‘Holmes and Balwani knew that Theranos’s technology was not capable of consistently producing accurate and reliable results for certain blood tests’. It was also claimed that investors were misled with inflated targets, which predicted £730m of revenues by 2015 when in fact it only produced ‘modest revenues’ of a ‘few hundred thousand dollars’, the indictment read.
If she is found guilty of fraud at trial she could receive up to 20 years in jail and a £1.6m fine, on top of any money owed to investors. The trial comes just a month after Holmes and her husband – the hotel heir Billy Evans, 29, whom she married in 2019 – had their first child. The courtroom showdown promises to unravel the extraordinary tale behind the rise and fall of the blood queen, and may even see her take the witness stand in her defence.
John Carreyrou, the Wall Street Journal reporter who broke the story, said that there was ‘something pathological about Holmes’s coldness’. Defence documents revealed she will blame emotional and sexual abuse from Balwani for what happened. She will claim her 56-year-old former partner controlled her every move down to what she wore and ate, and when she slept, according to court filings.
She believed the claims about her products to be true, her defence added, saying that Balwani’s ‘manipulation’ impaired her ability to make decisions. He has responded by saying Holmes’s allegations are ‘outrageous, salacious and inflammatory’. Yesterday, the court started the laborious task of selecting jurors, from a pool of 170. The trial is expected to last several months.
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