Silicon Valley’s Scapegoat: Theranos Fraudster Elizabeth Holmes Faces Guilty Verdict
“This is what happens when you work to change things,” Theranos founder Elizabeth Holmes said in a CNBC TV interview in 2015. “First they think you’re crazy, then they fight you, and then all of a sudden you change the world.”
Once hailed as the “world’s youngest self-made female billionaire,” Holmes is known as the con artist behind Theranos, a medical startup that claimed to offer “breakthrough advancements” using a device that could “quickly process the full range of laboratory tests from a few drops of blood.”
Holmes’ cocksure statement was made in response to an early exposé written by John Carreyrou, a Wall Street Journal reporter who would go on to publish Bad Blood: Secrets and Lies in a Silicon Valley Startup. Carreyrou’s initial inquiry into the validity of Theranos technology, titled “A Prized Startup’s Struggles,” illuminated Holmes’ deception at the peak of her career.
Armed with insider information supplied by former Theranos employees, Carreyrou revealed that “the lab instrument developed as the linchpin of its strategy handled just a small fraction of the tests then sold to consumers,” and the company manipulated its proficiency testing in order to be approved for use by the federal Centers for Medicare and Medicaid Services (CMS).
Exactly one year later, following increased scrutiny by the CMS and FDA, Theranos closed its clinical labs and wellness centers in October 2016. Theranos then ceased operation entirely in 2018, when the FDA released a statement that Holmes and her business partner, Ramesh “Sunny” Balwani, would be charged with nine counts of wire fraud, and two counts of conspiracy to commit wire fraud.
“According to the indictment returned yesterday and unsealed today, the charges stem from allegations that Holmes and Balwani engaged in a multi-million dollar scheme to defraud investors, and a separate scheme to defraud doctors and patients,” the FDA statement read.
As of Monday, January 3, 2022, we finally have a verdict.
After seven days of jury deliberation, Holmes was convicted with one count of conspiracy to commit wire fraud and three counts of wire fraud against Theranos investors. According to ABC News, Holmes was acquitted on all four counts of wire fraud against patients, as she didn’t communicate with patients directly. The jury deadlocked on three remaining charges.
At 37, Holmes faces decades in prison.
Interestingly, Silicon Valley’s hustle culture was signaled often throughout Holmes’ trial. Judge Edward J. Davila “allowed [Holmes’] lawyers to discuss the tech industry’s overly optimistic puffery as part of her defense.” She was cast as an ambitious idealist, a “wide-eyed believer” that sought to validate her claims in the near future. She was not flat out lying, they claimed. She was forward-thinking.
Her defense speaks to the pitfalls of Silicon Valley’s hyper-idealism and “toil glamour.” These aspects of hasty progress may have served Holmes’ hero, Steve Jobs, but they prove dangerous when applied to the medical industry. In a 2018 interview, Carreyrou told ABC7 News, “The main lesson of the Theranos scandal is this fake it ’till you make it ethos that has been embedded in the way of doing business in the valley for 30 or 40 years is not applicable to medicine or medical products.”
This is cautionary wisdom for those who risk being blinded by their own ideals, especially in a forward-thinking city like San Francisco.