The founder and CEO of former tech unicorn Theranos has been charged with “massive fraud” by the US Securities and Exchange Commission (SEC).
Theranos, its founder and CEO Elizabeth Holmes and its former President Ramesh Balwani have been charged today with fraudulently raising more than $700m (£502m) from investors.
Holmes has agreed to settle the charges against her, accepting a $500,000 fine, returning the 18.9m shares she received during the alleged fraud and agreeing to be barred from serving as an officer or director of a public company for 10 years.
Theranos also agreed to settle the charges against it while Balwani is set to fight the charges in court.
As part of their agreement with the SEC Theranos and Holmes neither admitted or denied the charges against them.
At its height the blood testing company was valued at a massive $9bn, but the SEC alleges that Theranos and its owners misled investors about the efficacy of its key product, a portable blood tester.
The SEC alleges that Holmes, Theranos and Balwani deceived investors into thinking that its portable blood analyser could conduct accurate blood tests from small drops of blood.
However, Theranos’ blood tester was allegedly less effective than claimed and it actually used industry standard blood testers for the majority of its analysis.
The SEC also alleges that Holmes, Balwani and Theranos claimed that their products were used on the battlefield in Afghanistan by the US Department of Defence (DoD) and that the company would generate $100m in revenue in 2014.
The SEC said that Theranos’ technology was never used by the DoD and the company generated a little more than $100,000 from operations in 2014.
Director of the SEC’s San Francisco office Jina Choi said: “The Theranos story is an important lesson for Silicon Valley. Innovators who seek to revolutionise and disrupt an industry must tell investors the truth about what their technology can do today, not just what they hope it might do someday.”
Theranos’ independent directors said: “The company is pleased to be bringing this matter to a close and looks forward to advancing its technology.”