Elizabeth Holmes: From Forbes’ 400 to Federal Criminal Charges

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Elizabeth Holmes: From Forbes’ 400 to Federal Criminal Charges

By Sophie Thornton

Elizabeth Holmes founded her company, Theranos, with one principle idea backing her: having your blood drawn and tested is painful and expensive.[1] So Holmes decided to create a solution to the problem by founding Theranos. Theranos was put forward as a laboratory sporting brand new technology in which a patient would give a few drops of blood, no more than a finger prick, and an onsite testing machine would run over 240 diagnostics tests.[2] This solution was supposed to make patients less reluctant to get blood tests, lead to earlier diagnoses, and ultimately save lives.[3] Investors loved the idea and over the years, Holmes raised over $945 million to fund her venture.[4] However, by January 3rd, 2022, Holmes was convicted of four federal counts of wire fraud.[5] What was the missing ingredient in what should have been a great success for Holmes? The technology.

In theory, the Theranos technology was supposed to be simple.[6] The Theranos machine, Edison,[7] would accept a sample of blood and analyze it on the site of a local clinic, like Walmart or Walgreens.[8] What was remarkable about the proposed technology was that it purported to be capable of doing such a blood analysis within minutes and with only a finger prick worth of blood.[9] Investors poured in, wowed by the media coverage of Holmes’ vision and Theranos’ revolutionary technology.[10] By 2014, Theranos’ board of directors contained two former secretary of states and two United States senators. Theranos’ technology was rarely questioned at the start of the company despite Holmes being a college dropout herself[11] because she hired scientists and claimed they could actuate her vision.[12]

In practice, it is nearly impossible for the Theranos technology to work.[13] One problem was that in order to run tests, the Edison machine would have needed a specific volume of blood.[14] But Holmes was set on a single finger prick, and that small volume of blood would create a need to dilute the blood and diluted blood would “skew the data on analysis.”[15] There also simply was not enough blood to run this many tests because some tests require chemical reactions that alter the blood to the point that it cannot be reused.[16] This small amount of blood would also lack a common concentration of molecules like lipids and proteins like what would exist in a blood sample drawn from a vein.[17] This too would further distort the data.[18] Finally, one of the biggest hurdles was that even if Theranos had this technology, each one of the tests would have needed FDA approval because blood is a bodily fluid.[19] The only Theranos test that ever received FDA approval was a Herpes test.[20] The other 240 claimed diagnostics tests never got any approval.[21]

Not only did the science behind the blood tests not work, neither did Theranos’ Edison machine.[22] The Edison was designed to mimic the work of a chemist by using a robotic arm to “take samples, dilute them, add antibodies, and a reagent, and reveal a result.”[23] However, the Edison was extremely flawed.[24] “Pieces of the machine would fall off, doors wouldn’t close, and the device couldn’t properly regulate its temperature.”[25]

Ultimately, flawed technology is not what caused Holmes to face federal criminal charges. What got Holmes in trouble was lying about that technology and subsequently defrauding investors.[26] Holmes lied to investors and told them that the Edison was working, gave excuses as to why it wasn’t working when she made demonstrations,[27] and fervently denied media reports that the technology did not do what Holmes claimed.[28]  All the while, she was aware of the issues with the technology because her employees raised those red flags and in response, Holmes fired them.[29] Holmes additionally told investors that the Edison and Theranos’ technology had been used on the U.S. battlefield and that it had been validated by many big pharmaceutical companies.[30] But none of this was true.[31] In 2022, a jury determined that Holmes “intentionally misled investors” and found her guilty of “ten counts of wire fraud in violation of 18 U.S.C. § 1343.” [32]

In a post-pandemic world where new medical technology is much needed, Holmes’ actions have been taken very seriously. Holmes could face up to 80 years in federal prison because of her lies.[33] Although Holmes’ fraud was an insult to investors, the promise of new and groundbreaking medical technology was perhaps an even greater insult to the public in light of recent health concerns. The government may have pursued such harsh remedies against Holmes in light of such concerns. Even though Holmes was charged pre-pandemic, the jury announced their verdict in the post-pandemic landscape.[34] Some of those jurors or their family members may have even benefitted from Theranos’ technology had it been real. The sting of Holmes’ actions in lying about the nature of Thernos’ technology has never been more personal to the public and she is facing the consequences.

[1] John Carreyou, Hot Startup Theranos Has Struggled With Its Blood-Test Technology, Wall Street Journal (Oct. 16, 2015), https://www.wsj.com/articles/theranos-has-struggled-with-blood-tests-1444881901 [https://perma.cc/DT5W-AYBP].

[2] Id.

[3] Id.

[4] Erin Griffith & Erin Woo, How Elizabeth Holmes Soured the Media on Silicon Valley, New York Times (Nov. 23, 2021), https://www.nytimes.com/2021/11/18/technology/elizabeth-holmes-theranos-trial.html [https://perma.cc/K9X9-NMJN].

[5] Sara Randazzo & Heather Somerville, Elizabeth Holmes Found Guilty on Four Counts, Wall Street Journal (Jan. 3, 2022), https://www.wsj.com/livecoverage/elizabeth-holmes-trial-theranos [https://perma.cc/6P5D-F5HE].

[6] Neil Jurkiewicz, What Went Wrong with Theranos?, eCampus Ontario (2019), https://ecampusontario.pressbooks.pub/bio16610w18/chapter/what-went-wrong-with-theranos/#:~:text=One%20of%20the%20big%20problems,data%20on%20analysis(6) [https://perma.cc/FA58-7NXL].

[7] Carreyou, supra note 1.

[8] Jurkiewicz, supra note 6.

[9] Id.

[10] Griffith & Woo, supra note 4.

[11] Id.

[12] Carreyou, supra note 1.

[13] Jurkiewicz, supra note 6.

[14] Id.

[15] Id.

[16] Nicole Wetsman, Thernos Promised a Blood Testing Revolution- Here’s What’s Really Possible, The Verge (Dec. 15, 2021), https://www.theverge.com/22834348/theranos-blood-testing-innovation-drop-holmes [https://perma.cc/QM87-9U3A].

[17] Id.

[18] Id.

[19] Id.

[20] Id.

[21] Id.; Carreyou, supra note 1.

[22] Cory Stieg, What Exactly Was The Theranos Edison Machine Supposed To Do?, Refinery 29 (Mar. 12, 2019), https://www.refinery29.com/en-us/2019/03/224904/theranos-edison-machine-blood-test-technology-explained [https://perma.cc/55NU-674X].

[23] Id.

[24] Id.

[25] Id.

[26] Theranos Founder Elizabeth Holmes Found Guilty of Investor Fraud, U.S. Dep’t of Just. (Jan. 4, 2022), https://www.justice.gov/usao-ndca/pr/theranos-founder-elizabeth-holmes-found-guilty-investor-fraud#:~:text=Holmes%20was%20initially%20charged%20on,%C2%A7%201343 [https://perma.cc/H768-QAXP].

[27] Stieg, supra note 22.

[28] Griffith & Woo, supra note 4.

[29] Stieg, supra note 22.

[30] Theranos Founder Elizabeth Holmes Found Guilty of Investor Fraud, supra note 26.

[31] Id.

[32] Id.

[33] Randazzo & Somerville, supra note 5.

[34] Theranos Founder Elizabeth Holmes Found Guilty of Investor Fraud, supra note 26.

Image source: https://www.dallasnews.com/business/health-care/2021/10/24/dallas-companys-recording-of-theranos-founder-elizabeth-holmes-emerges-as-prosecution-jackpot/