Elizabeth Holmes, the founder of Theranos, is on trial for defrauding investors over the

company's blood testing product ABC News Australia 6th September 2021

Former billionaire Elizabeth Holmes

aspired to be the next Steve Jobs, but the
founder and chief executive of defunct
biotech company Theranos is facing trial
for allegedly swindling investors out of
hundreds of millions of dollars.

Theranos promised to revolutionise

blood testing by performing clinical
tests with the prick of a finger, and raised billions on the promise of doing so. But it all fell
apart as it became clear the technology didn't work.

Now Ms Holmes and Ramesh "Sunny" Balwani are facing charges of fraud that carry a
potential 20-year prison sentence. The key question: did the pair lie to investors, doctors and
patients, knowing they were promoting a dud?

From $4.5 billion to 'essentially nothing'

Elizabeth Holmes and her ex-partner (in both a romantic and business sense) Sunny Balwani
amassed billions on the back of her vision to create a finger-prick blood test.

Opening arguments are imminent in Ms Holmes's trial for fraud and conspiracy, while Mr
Balwani will be tried separately. Both have pleaded not guilty.

Theranos chief operating officer and president Ramesh

"Sunny" Balwani has also been charged. (Reuters: Stephen
Lam)
According to the 2018 indictment against the pair, they
claimed their Theranos Sample Processing Unit (TSPU)
machine, also known as an Edison or a Minilab, could
provide faster, more accurate, easier and cheaper blood
testing than traditional methods.

If successful, the idea would eliminate the need for blood tests as we know them, using a few
drops of blood from the fingertip rather than a needle.

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The enticing potential of a revolutionary medical product attracted investors including Rupert
Murdoch, the family of former US education secretary Betsy Devos, and the Walton family
behind Walmart.

The company's board included high-profile political figures like Henry Kissinger and James
Mattis. The success of Theranos, which Ms Holmes started when she was just 19, propelled
her profile globally, with Time magazine naming her one of 2015's 100 most influential
people.

In the same year, business magazine Forbes named the then-31-year-old the youngest and
richest self-made woman in the US, putting her net worth at $4.5 billion.

But the company's success also brought scrutiny, and a Wall Street Journal investigation
exposed the alleged lie at the heart of Theranos. In 2016, after problems with Theranos
technology became apparent, Forbes revised its $4.5 billion estimate of Ms Holmes's net
worth.
Their new estimate was "essentially nothing". What was the problem with Theranos
technology? Put simply, it didn't work as described.

While public statements by Ms Holmes and Mr Balwani suggested the TSPU could be used
to diagnose a range of illnesses, US prosecutors allege they knew it was not capable of
competing with other bloodwork technology.
But the indictment alleges it:
 Had accuracy and reliability problems
 Could only perform a limited number of tests
 Was slower than some competing devices
 Could not compete with larger, conventional machines in high throughput
 Could not cope with simultaneously testing blood from many patients

Did Elizabeth Holmes lie?

The indictment against Ms Holmes and Mr Balwani alleges they intentionally misled
investors, doctors and patients, because they knew their technology didn't live up to the hype
they created.

The allegations don't just cover claims about the TSPU machine, but the company's finances,
too. The indictment alleges Ms Holmes and Mr Balwani told investors to expect more than

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$100 million in revenue in 2014, and about $1 billion in 2015. But in reality, the company
generated "negligible" revenue in those years, the indictment said. It's alleged the pair also
lied about the nature of a contract with the US Defense Department, and used misleading
technology demonstrations with a machine that only appeared to be operating.

What do Holmes and Balwani say to all this? Both Ms Holmes and Mr Balwani have pleaded
not guilty to the charges and will be tried separately. They were in a relationship for a time
while working together, and that may become a key factor in the trial of Ms Holmes.

Recently unsealed documents filed by her lawyers allege she was abused and manipulated by
Mr Balwani during their relationship, and that his alleged misconduct "explains some of her
statements and behaviour as chief executive".

Ms Holmes's lawyers said her "deference" to Mr Balwani led her to believe allegedly false
statements about parts of Theranos that he controlled, including a claim about a partnership
with pharmacy chain Walgreens. The documents suggest a possible defence strategy of
blaming Mr Balwani and leave open the option that Ms Holmes could take the stand during
her trial to defend herself.

Mr Balwani denied allegations of abuse in a 2019 court filing.

https://www.youtube.com/watch?v=vMQlj9TZQfE

What things would you do the same as this whistleblower, Erika Cheung? What would you
do differently? Do you agree or disagree with her? Explain.

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