Securities and Exchange Commission has charged Elizabeth Holmes, the chief executive of Theranos. Holmes is claimed to have committed large-scale fraud, allegedly lying to investors about Theranos’s unique technology of taking blood tests. As a result of her actions, she is currently facing sanctions that include a $500,000 penalty, as well as being barred from serving ahead of any public company.
Once viewed as the next Steve Jobs, Holmes started the company in 2003. She was determined to create a groundbreaking technology that would make it possible to take more indicative blood tests using just a single drop of blood. The machines in her laboratories were supposed to conduct hundreds of different tests using as little blood as possible. Holmes was able to present her vision to the investors and the media, receiving $700m and widespread coverage on social media.
However, in 2015 the technology was revealed to be fake. As it turned out, Theranos was using their competitors’ blood-testing machines instead of their own Edison machines. At first, the company made attempts to defend the technology, but eventually, it consented to close all its labs and testing centers. Regulators barred Holmes from running the labs for two years.
The question of how Holmes attracted investors is discussed in the SEC complaint. Theranos performed blood tests for potential investors, even though the machines used by the company were not capable of conducting the tests using such a small amount of blood. Lying to the media, Holmes was also able to make them advertise the company and its technology, using the advertisement as a funding mechanism.
The biggest mistake made by Elizabeth Holmes as the founder and CEO of Theranos was claiming to use technologies that the company was only planning to use in the indefinite future. They had been defrauding their clients, investors, and mass media, acting against the law. As a result of Holmes’ actions, and the actions of other top officials of the company, they are now facing the consequences.
Reference
Theranos and its founder Elizabeth Holmes charged with ‘massive fraud’. (2018). The Guardian.