In this episode, Matt Kelly and I take a deep dive into the recent SEC enforcement action against Elizabeth Holmes, the disgraced founder of Theranos, for her massive fraud around the former unicorn. Holmes claimed to have developed a proprietary system of blood testing so that with only one pin-prick of blood over 200 diagnostic tests could be performed. It turned out to be completely smoke and mirrors as the company never came close to developing the technology. In fact, the company and Holmes specifically hid the true nature of the company’s technology from investors using an elaborate deceit.

Holmes was one of the most famous women to come out of Silicon Valley. She founded Theranos, hyped the fraudulent blood testing scam and became for a short time a billionaire. Now all of that is gone, gone, gone. According the SEC Compliant, Holmes agreed to a civil penalty of $500,000, returned some 18.9 million shares that she obtained during the fraud and relinquished her voting control of Theranos by converting her super-majority Theranos Class B Common shares to Class A Common shares and she is banded for 10 years from holding office in a publicly traded company.

We explore the questions surrounding this massive fraud and the penalty assessed by the SEC. Was the fine and penalty enough or should Holmes have been criminally prosecuted? Is there enough money left in Theranos to pay off all those the company defrauded? Where was the Board of Directors in all of this miasma? At what point does a start up with a revolutionary or innovative idea actually have to prove the idea works? Should the SEC regulate private companies which go into the market for capital? Matt and I take a deep dive into these and other questions in this fascinating look at one of the former highest-flying unicorns who fell to other with a resounding thud.

For additional reading check out my blog post Black Holes, Theranos and Elizabeth Holmes.

0 comments