What Happened To Theranos? The Theranos Fraud In A Nutshell

Theranos was an American health technology company founded in 2003. The Theranos business model and company culture were based on unproven technology, fraud, secrecy, and authoritarian leadership. The CEO and co-founder Elizabeth Holmes portrayed herself as the next Steve Jobs, while in reality there was no product underneath, and it was one of the greatest frauds in American history.


Theranos was a former American health technology company founded in 2003 by Elizabeth Holmes.

The company reached a peak valuation of $9 billion in 2015 after claiming it had developed automated and rapid blood testing technology requiring a very small amount of blood. Holmes, who styled herself like revolutionary Steve Jobs, became the world’s youngest female self-made billionaire at age 20.

And she really managed to fool a lot of people!

However, Theranos subsequently caught the attention of medical research professors and investigative journalists who questioned the validity of its technology. 

And yet, also in front of the evidence, she kept acting:

Just three years later, Theranos announced to investors that it would be ceasing all operations and relinquishing its cash and assets to creditors. Below is a look at the sordid story of what happened to Theranos, with particular emphasis on the role that Holmes and former president Ramesh Balwani played.

Theranos business model

Theranos was built on the premise that it performed blood tests using proprietary technology in a less invasive way. In fact, the company claimed a small pinprick on the finger could diagnose anything from high cholesterol to cancer.

Holmes secured hundreds of millions in venture capital funding based on this premise. But she only accepted funding with the proviso that she wouldn’t have to reveal how the technology worked. 

Company culture

This culture of secrecy pervaded every aspect of the company culture. Holmes maintained total and absolute control over operations for years, even taking three former employees to court and claiming they had stolen intellectual property.

In 2006, then-CFO Henry Mosley was fired for questioning the reliability of the blood-testing technology and also the integrity of Theranos itself.

Safeway and Walgreens contracts

Five years later, Theranos released a new device capable of performing multiple classes of blood tests. The device was called the miniLab and nicknamed the 4s after the iPhone model.

Theranos then secured a deal with Safeway to run its employee health clinic. Safeway’s chief medical offer expressed concerns around discrepancies in the test results but was brushed off by the CEO who soon retired.

In 2012, Theranos signed a deal to sell its devices in Walgreens stores but routinely missed deadlines. Holmes also approached a high-ranking military official regarding potential who then raised regulatory concerns with the U.S. Food and Drug Administration (FDA). 

After a surprise inspection, Holmes and Balwani had to concede the technology was not ready for release.

Unethical practices and criticism

A Wall Street Journal received a tip about Theranos in early 2015 and was subsequently told about the working conditions with the company.

Theranos had been operating at a limited capacity and had been generating false patient results. Holmes and Balwani had also wanted to conduct HIV tests before being talked out of it by a former lab director.

Theranos received FDA approval in July 2015, with the scientific community asking serious questions about the company’s technology. Despite this, Holmes embarked on a media campaign to publicly dispel any criticism.

Lawsuits and departures

In a visit to Theranos labs, the FDA told the company it was shipping an “uncleared medical device”. One month later, its collaboration with Safeway was over with the Walgreens deal following suit in June 2016.

The company continued to face intense scrutiny from regulatory bodies, with Theranos labs found to pose a safety risk to patients. Branded wellness centers were closed in California and Arizona.

The Centers for Medicare & Medicaid Services (CMS) then banned Holmes from the lab-testing industry for two years. As clinical labs shut down and hundreds of employees terminated, a series of lawsuits from patients, investors, and Walgreens began materializing.

Fraud charges and closure

After a separate investigation by the Securities and Exchange Commission (SEC), Theranos together with Holmes and Balwani were charged with fraud.

On June 15, 2018, both individuals were found guilty on nine separate counts of wire fraud and two counts of conspiracy to commit wire fraud. Holmes was later accused of destroying evidence shortly before the company ceased operations in September 2018.

In the multi-million dollar scheme, investors, doctors, and patients were all defrauded as baseless claims were made around the company’s proprietary technology. Venture capitalists and investors alone committed some $724 million based on these claims.

Key takeaways:

  • Theranos was an American health technology company founded in 2003. The Theranos business model and company culture were based on unproven technology, fraud, secrecy, and authoritarian leadership.
  • Theranos entered into a partnership with Walgreens and Safeway before its product was ready for release. It subsequently attracted the attention of various regulatory bodies, including the CMS, SEC, and FDA.
  • Theranos CEO Holmes and COO Balwani were found guilty of multiple counts of wire fraud and conspiracy, with the former also being accused of destroying evidence. The company was shut down soon after the court ruling in late 2018.

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