Meet Silicon Valley’s Biggest Fraud, Elizabeth Holmes, Many Still Think She’s a Genius Ahead of Her Time
In 2015, the Wall Street Journal published an explosive article by John Carreyrou in which he exposed Theranos was for the sham it was. He claimed that the diagnostic devices had not made a single accurate diagnosis yet. Moreover, all the samples that were submitted to the company were actually sent to large laboratories for analysis – the same laboratories Holmes criticized. The company’s shares fell almost tenfold in value.
After the initial article, Carreyrou kept publishing successive articles with more incriminating evidence and facts. Holmes appeared on several TV shows to appeal to the public. In January 2016, the Centers for Medicare and Medicaid Services (CMS) found irregularities with staff proficiency, procedures, and equipment, in Theranos’ Newark lab. CMS placed a two-year ban on Holmes from owning or operating a lab after she had failed to fix the problems in March.
The company had to pay back all customers who had bought the diagnostic device after the state of Arizona and several other states initiated lawsuits against Theranos for false advertising and misrepresenting the product. It had to lay off almost all its workforce. In September 2018, the company stated that it had begun the process of formally dissolving and paying back its creditors.
On June 15th, 2018, the U.S. Attorney’s Office in San Francisco ended its two-year long investigation. A grand jury indicted Holmes and former COO Ramesh Balwani on nine counts of wire fraud and two counts of conspiracy to commit wire fraud. Prosecutors alleged that Holmes and Balwani engaged in two criminal schemes – one to defraud investors and the other to defraud patients and doctors. The case is proceeding in the District Court insane Jose and both miscreants have pleaded not guilty. They face up to 20 years in prison.
17The moral of the story
There is a reason why medical startups are not frequent in Silicon Valley – because they are not that easy to create and have too many risks. Holmes’ lack of specialist knowledge and authoritarian style of running the company sealed her fate. While some experts saw her as a joke from the beginning, she managed to fool millions of others with her smooth talk and visions. Dressing like Jobs does not make one a genius. Expertise and knowledge cannot be replaced. Confidence and persuasiveness can only take you so far (in Holmes’ case, to jail).