Former tech company CEO Elizabeth Holmes, who has been called the "the next Steve Jobs," has been hit with fraud charges by the Securities and Exchange Commission, according to Mashable. As founder of medical technology company Theranos, Holmes faces charges stemming from allegations they acquired over $700 million in investor funds by making false statements about the company's financial performance, partnerships, and abilities of its blood-testing technology.
"The complaints further charge that Theranos, Holmes, and [former company president Ramesh] 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," said the SEC in a press release. "In truth, Theranos’ technology was never deployed by the U.S. Department of Defense and generated a little more than $100,000 in revenue from operations in 2014."
While most expect companies to pad the truth just at least slightly, this is pretty egregious. The SEC complaint alleges that testing done using their technology was inaccurate, with plenty being done by separate machines altogether. "Theranos’s proprietary analyzer could complete only a small number of tests," the complaint says, "and the company conducted the vast majority of patient tests on modified and industry-standard commercial analyzers manufactured by others."
SEC Enforcement Division co-director Stephanie Avakian explained what the next steps will be in the press release. "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."
The grand reveal has also apparently been a long time coming. A 2015 Wall Street Journal story claimed that the company's technology was unable to do all that it claimed. Holmes would shoot back at this initial report, referring to it as misleading. "This is what happens when you work to change things," she said of the story to CNBC. "First they think you're crazy, then they fight you, then you change the world." In 2015, the company also faced a lawsuit over similar accusations. This caused Forbes to reevaluate the company from an initial $9 billion to only $800 million. The $700 million in investments it's being investigated for brings Holmes' personal net worth down from $4.5 billion to virtually nothing.
While Holmes hasn't confirmed or denied the allegations, she did agree to pay the $500,000 penalty on top of relinquishing control of the company she started in 2003.