Who Is Elizabeth Holmes?
Born in 1984, Elizabeth Holmes was the founder and former CEO of Theranos, a Silicon Valley-based health technology company that marketed a cheaper, non-invasive blood testing technology. After seeing the valuation of the company soar to more than $9 billion, a series of reports emerged that Holmes’ technology was faulty, and that many of the 7.5 million tests it ran may have been inaccurate. In June 2018, Holmes and ex-Theranos COO Ramesh “Sunny” Balwani were indicted on 11 federal charges, including wire fraud and conspiracy to commit wire fraud.
Founding of Theranos
Holmes’ inspiration for her company came during a summer internship at the Genome Institute of Singapore, in 2002, where she worked on research and testing for Severe Acute Respiratory Syndrome, or SARS. Her initial plan, for which she received a U.S. patent in 2003, was for a drug delivery system that would administer drugs, test their effectiveness and then adjust the drug’s dosage as needed — all in one small patch.
Holmes left Stanford in 2004, at age 19, and using her college tuition money as seeding, founded a company called “Real-Time Cures.” Over the next several years, Holmes shifted her focus to creating a new form of blood testing, claiming it was based on her own terror of needles. The company was named Theranos, an amalgamation of the words “therapy” and “diagnosis.” One early investor was venture capitalist Tim Draper, the father of a childhood friend and founder of Draper Fisher Jurvetson.
Theranos soon claimed to have developed several proprietary methods. One eliminated the need to collect blood samples through traditional needles, instead using a fingerstick that collected tiny amounts of blood into a small tube called a “nanotainer.” Another was a laboratory machine that was able to run dozens of tests on the same, minute amount of blood, testing for everything from diabetes to cancer to heart disease. Theranos also pushed for new legislation in several states that would allow the tests to be administered without a doctor’s note.
Both technologies would have revolutionized the blood testing industry, a $75 billion annual business. Theranos offered these blood tests at a significantly lower cost than traditional testing labs and hospitals; whereas some conventional tests could cost hundreds of dollars, Theranos’ offered them for less than $5, and offered faster results.
Although the company refused to divulge its methods and technology (even to investors), claiming its proprietary nature made the company vulnerable to would-be competitors, it signed several lucrative deals, including one with the Walgreens Company that saw Theranos labs introduced in nearly 50 of the chain’s locations, with expansion plans for thousands more. The company also claimed to have a partnership with the U.S. Department of Defense and pharmaceutical giants like Pfizer and GlaxoSmithKline, although those claims were later disproven. A planned $350 million deal with Safeway fell through as allegations against the company emerged.
Media Profile and “Fake Voice” Accusations
Holmes became a popular media figure, and was featured in dozens of newspaper and magazine profiles. Dressed in all black, including a mock turtleneck, Holmes was frequently compared to visionary Apple tech guru Steve Jobs, a comparison Holmes cultivated. Holmes worked seven days a week, and claimed to have never taken a vacation, traits she strongly encouraged in her employees. One of her most notable features, her deep-pitched voice, came under scrutiny, with several press accounts noting that she purposefully lowered it, possibly as a means of gaining respect in the male-dominated world of Silicon Valley.
Net Worth and Theranos’ Value
Just as high-profile was the company’s board of directors, which included former Secretaries of State Henry Kissinger and George Schultz, former Senators Bill Frist and Sam Nunn, lawyer David Boies and former Secretary of Defense James Mattis, who joined in 2013 and left when he moved to the Trump administration.
Theranos also saw a series of successful fundraising initiatives, eventually raising more than $700 million from Oracle’s Larry Ellison, Rupert Murdoch, Carlos Slim and others. By 2014, the company was valued at $9 million. Retaining 50 percent of the privately held company, Holmes had a net worth estimated at $4.5 billion, making her the youngest female self-made billionaire. By 2017, however, as accusations about the company gained steam, Forbes Magazine dropped its valuation of the company to just $800,000, and Holmes’ personal worth at $0. By mid-2018, the company, which had employed hundreds, had fewer than two dozen employees.
Relationship with Sunny Balwani
Holmes met Ramesh “Sunny” Balwani while she was studying in China as a teenager. Balwani, a software engineer with no experience in health care or medicine, became the president and chief operating officer of Theranos, managing its day-to-day business. Holmes and Balwani were romantically involved, though they kept their relationship a secret from investors and most employees.
Balwani was forced out of Theranos in 2016, and his relationship with Holmes ended. Both of them were implicated in the March 2018 Securities and Exchange Commission case (which accused Theranos of perpetrating a “massive fraud”) and the June 2018 federal indictment on wire-tapping charges. Balwani has denied these charges, and unlike Holmes, he has not settled with the SEC (Holmes paid a $500,000 SEC fine, but did not admit guilt).
Unravelling of Theranos
The purported fraud began to unravel in the fall of 2015, when a series of articles in the Wall Street Journal and other media outlets revealed serious issues with the company. Among the bombshell revelations: That many of its blood samples were being tested on standard diagnostic machinery (purchased from another company), rather than the so-called landmark “Edison” machine Holmes claimed to have perfected; that the small percentage of tests that were performed on the Edison machines delivered sometimes highly inaccurate results; and that the company had vastly overestimated its annual revenue forecasts to attract investors.
Several former employees came forward as well, exposing the company’s strict ring of secrecy. They alleged that Holmes and Balwani were aware of the technologies' flaws, and that the Edison machines and the tests were not ready for widespread public use, but forced employees to falsify testing data and run fake demonstrations of the machines for potential investors. Several employees were also threatened by Theranos attorneys.
Investigations and Legal Charges Against Theranos
Both the Food and Drug Administration (FDA) and the Centers for Medicare & Medicaid Services (CMS), a healthcare industry regulator, began investigations. In October 2015, the FDA stated that Theranos’ “nanotainer” vial was an “uncleared medical device,” and in January 2016, the CMS shut down Theranos’ Newark, California, laboratory, citing an “immediate jeopardy to patient health and safety.” By the end of the year Theranos had shut down its “Wellness Centers.” Investors were out millions of dollars, with several suing for restitution, including Walgreens.
In early 2018, Theranos settled with the CMS, paying a $35,000 fine and refunding more than $4.5 million to testing customers in Arizona. As part of the settlement, the company was forbidden to work in the blood-testing industry for two years. The SEC settlement, for which Holmes paid a $500,000 fine, also barred her from holding a leadership position at any publicly traded company for 10 years.
Holmes continued to deny these allegations, but on June 15, 2018, she and Sunny Balwani were charged by the U.S Attorney’s Office with 11 federal counts, nine counts of wire fraud and two counts of conspiracy to commit wire fraud. The charges carry a maximum sentence of 20 years in prison, a $250,000 fine, plus restitution for each charge.
On September 5, 2018, it was reported that Theranos would dissolve after attempting to pay creditors with its remaining cash. "We are now out of time," CEO David Taylor emailed shareholders.
In February 2020, a federal judge overseeing the criminal case against Holmes and Balwani partially dismissed one count of conspiracy to commit wire fraud and three counts of wire fraud, on the grounds that the government failed to allege that the duo had a specific intent to defraud doctors and patients who were fully covered by insurance.
An expansive look at Holmes and her company's deceptions came in the 2018 best-seller Bad Blood: Secrets and Lies in a Silicon Valley Startup by John Carreyrou, who first broke the story for the Wall Street Journal. Its film rights were sold even before the book was published, with The Big Short's Adam McKay on board to direct and Jennifer Lawrence attached to star as Holmes.
HBO followed suit with the March 2019 premiere of the documentary The Inventor: Out for Blood in Silicon Valley, by Oscar-winner Alex Gibney.
Early Life and Education
Born on February 3, 1984 in Washington, D.C., Holmes was the daughter of Noel, a former Capitol Hill committee staffer, and Christian, who worked for a series of governmental agencies, including the United States Agency for International Development (USAID). The family moved from Washington, D.C. to Houston, Texas when Holmes was young.
Holmes began her entrepreneurial career early, when her teenaged interest in computer programming led her to start a business selling coding translation software to Chinese universities. She also began studying Mandarin Chinese at a young age, which allowed her to attend a series of college-level classes while still in high school. She began attending California’s Stanford University in 2002, where she studied chemical engineering and worked alongside Channing Robertson, a dean who would become one of Theranos’ first board members.
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