Theranos Founder Settles Federal Fraud Charges

Theranos Founder Settles Federal Fraud Charges

Embattled blood-testing company Theranos Inc and its Chief Executive Elizabeth Holmes agreed to settle "massive fraud" charges in a deal that strips her of majority control among other penalties, USA regulators said on Wednesday.

Holmes went on Jim Cramer's Mad Money show on CNBC and, riffing on a line first uttered by her idol Steve Jobs, voiced righteous indignation: "This is what happens when you work to change things".

Theranos and Holmes have agreed to resolve the charges against them.

"As a result of Holmes' alleged fraudulent conduct, she is being stripped of control of the company she founded, is returning millions of shares to Theranos, and is barred from serving as an officer or director of a public company for 10 years".

Holmes, 34, was the founder and CEO of Theranos, a privately owned Silicon Valley health tech company once valued at $9 billion. At the center of Theranos' mystique was its "Edison" machine, which the company claimed could test for a variety of diseases through only a few drops of blood from a person's finger. Mattis later joined Theranos' board but left when he became the US defense secretary. The group was criticized for lacking expertise in science or medicine.

Ms Holmes will lose control of the firm and be fined $500,000.

Last year Attorney General Mark Brnovich got the company to enter into a consent decree to refund more than $4.6 million to Arizonans who got the tests.

Theranos was separately sued by Walgreens which had allowed the company to make its tests available directly to its chain's customers at 40 of its Arizona stores.

After the Journal's investigation, Theranos and Holmes pushed back hard, and for months refused to acknowledge that its machines were effectively a sham.

Attorneys for the company denied violating the state's Consumer Fraud Act in selling blood tests where the tests were not always accurate. In 2016 the Centers for Medicare and Medicaid Services, which oversees blood testing labs in the USA, banned Holmes from operating a lab and revoked Theranos' blood testing license. Two were written by Theranos employees.

The SEC said Theranos and Holmes were cooperating. Under the terms of the settlement, still subject to court approval, neither Theranos and Holmes admitted to the SEC allegations.

"The complaints further charge that Theranos, Holmes, and Balwani claimed that Theranos' products were deployed by the U.S. Department of Defense on the battlefield in Afghanistan and on medevac helicopters and that the company would generate more than $100 million in revenue in 2014", reads the press release.

"The Theranos story is an important lesson for Silicon Valley", Jina Choi, director of the SEC's San Francisco Regional Office, said in a statement Wednesday.