Federal prosecutors have charged Theranos Inc. founder Elizabeth Holmes and former president and COO Ramesh Balwani with two counts of conspiracy to commit wire fraud and nine counts of wire fraud, reports the Wall Street Journal. They allege Holmes and Balwani defrauded investors, doctors, and patients out of millions of dollars. The indictments are the culmination of a 2½ year investigation into the blood-testing company. Theranos is a cautionary tale for red-hot startups. Once lauded as the youngest self-made female billionaire, Holmes sold investors on unproven claims that the company’s devices could test for conditions such as cancer and cholesterol with just a pinprick of blood, reports BBC. If convicted Holmes and Balwani face up to 20 years in prison, a fine of $250,000, and restitution, per CNN.
The Wall Street Journal first sounded an alarm about the company in a series of articles beginning in October 2015. They found that Theranos’s much-hyped blood-testing technology was unreliable, and in fact the company relied mostly on commercial products purchased from other companies. Compounding the problem, the company altered the products they purchased in ways that compromised the accuracy of the testing results. Prosecutors say Holmes, 34, and Balwani, 53, knew their product was faulty. Eventually, the company was forced to void or correct nearly a million test results and reimburse tens of thousands of customers. Theranos is nearing the liquidation stage. Fortress Investment Group, which loaned Theranos $65 million last year, is expected to seize the company’s assets soon. (Read more Theranos stories.)