The U.S. Securities and Exchange Commission accused the founder/CEO and the former president of Theranos, a Silicon Valley blood-testing startup, of "massive fraud." The SEC alleges that the two officers defrauded investors of more than $700 million.
According to the SEC, the two leaders lied about the organization's technology, business, and financial performance for years. The SEC alleges the CEO told investors that Theranos had new technology for testing blood for diseases more inexpensively than any other method and with only a prick, when it in fact sent blood to third-party companies for testing.
The CEO also allegedly told investors that the organization "was on track to make $100 million by the end of 2014," when it was actually making around $100,000. Articles in support of the organization, which the officers told investors were written by pharmaceutical executives. were actually written by the company's own employees.
At its peak, Theranos was valued at nine billion dollars.
The CEO paid $500,000 to settle with regulators. The SEC consent order also prohibits the CEO from being a director or officer of a public company for 10 years, and from profiting from Theranos until it has paid $750 million back to investors.
Theranos disclosed to investors in 2016 that it was under a criminal probe, but no criminal charges have been filed. Kevin Dugan "SEC accuses Theranos CEO Elizabeth Holmes of 'massive fraud'" nypost.com (Mar. 14, 2018).