Michael Hiltzik: The Theranos verdict won't stop investors from pouring money into the next big fraud
Elizabeth Holmes, the founder and CEO of the medical device company Theranos, was convicted Monday on multiple counts of defrauding investors following a four-month trial in federal court in San Jose.
Theranos, which rode a tide of positive publicity in 2013 and 2014 after introducing what it claimed was novel technology for making blood testing simpler, cheaper and more efficient, shut down in 2018 after investigations established that the claims were false. Holmes and her second-in-command, Ramesh "Sunny" Balwani, were indicted on 12 counts of fraud in 2020; one count was later dropped. Balwani's trial is scheduled for this year.
The jury acquitted Holmes on several counts related to accusations Theranos defrauded patients who relied on the company to deliver accurate blood test results, and deadlocked on three others related to transfers of funds from investors. For the most part, the jury found against Holmes on charges that she plied investors with claims about the firm's technology that were largely fabricated. Those counts including three of fraud and one of conspiracy to defraud.
The case raises the important question of whether the testimony and result will serve as object lessons for investors confronted with cheery promises in the future. Bet your money that the answer is "no."
