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Elizabeth Holmes Sentenced to More Than 11 Years for Defrauding Theranos Investors of Hundreds of Millions

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Department of Justice
Northern District of California

Friday, November 18, 2022

SAN JOSE – Elizabeth A. Holmes was sentenced today to 135 months (11 years, 3 months) in federal prison for defrauding investors in Theranos, Inc. of hundreds of millions of dollars, announced United States Attorney Stephanie M. Hinds, Federal Bureau of Investigation Special Agent in Charge Robert K. Tripp, Food and Drug Administration (FDA) Assistant Commissioner for Criminal Investigations Catherine A. Hermsen, and U.S. Postal Inspection Service (USPIS) San Francisco Division Acting Inspector in Charge Kevin Rho. The sentence was handed down by United States District Judge Edward J. Davila. 

“Silicon Valley has seen the rise of companies whose inventions have changed the world and, through intellectual prowess, hard work, and sheer determination, this region continues to innovate,” said U.S. Attorney Stephanie M. Hinds. “Capital investment is critical to that innovation. When fraud is perpetrated on those providing the necessary capital, it staunches investment and can cripple an industry. For almost a decade, Elizabeth Holmes fabricated and spread elaborate falsehoods to draw in a legion of capital investors, both big and small, and her deceit caused the loss of hundreds of millions of dollars. Her sentence reflects the audacity of her massive fraud and the staggering damage she caused.”
“Frauds such as the one perpetrated by Holmes can erode investor confidence which impacts our capital markets. Today's sentence should serve as a warning that deceiving investors will not be tolerated. The FBI is committed to investigating corporate fraud and working with our partners to help keep our capital markets working effectively,” said FBI Special Agent in Charge Robert K. Tripp. “The FBI and our partners worked tirelessly on this multi-year case and are proud justice has been served as a result.” 

“Today’s announcement should serve as a reminder that fraud related to medical products will not be tolerated,” said FDA Assistant Commissioner for Criminal Investigations Catherine A. Hermsen. “The FDA will continue to work with our law enforcement partners to bring to justice those who place profits above public health.”

“Postal Inspectors worked closely with our partners at the U.S. Attorney’s Office, the FDA Office of Criminal Investigations, and the FBI to bring this case to court,” said USPIS San Francisco Division Acting Inspector in Charge Kevin Rho. “USPIS remains committed to protecting consumers and investors from fraud.”

Holmes, 38, of Woodside, Calif., founded Theranos in 2003 and held the positions of Chairperson and Chief Executive Officer. Theranos, now defunct, was a blood testing company based in Palo Alto and Newark, Calif. Evidence at her jury trial showed that for more than a decade, Holmes claimed that Theranos had developed a revolutionary blood analyzer, variously referred to as the Theranos Sample Processing Unit (TSPU), Edison, and minilab. She asserted that the Theranos proprietary blood analyzer device could run any blood test that was run by conventional labs, all from a blood sample drawn via a fingerstick rather than the traditional draw from a vein. She asserted the Theranos analyzer produced results that were better, cheaper, and more accurate than existing methods and at a speed faster than ever before possible. 

Trial evidence demonstrated that Holmes knew the analyzer was not producing accurate and reliable results. Holmes understood that at best it could only perform a few basic tests and was slower than existing devices. She knew that it could not successfully compete with the established conventional machines. Evidence showed that Holmes repeatedly had to resort to using conventional machines to obtain the blood test results that the Theranos analyzer was supposed to perform, though she led investors and the public to believe that Theranos was conducting most or all of its tests using its own analyzer.

Evidence showed that Holmes, despite being aware of the Theranos analyzer’s failure to perform, was able to induce dozens of investors, many of whom were prominent public figures, to invest hundreds of millions of dollars in Theranos. She used direct communications, marketing materials, statements to the media, financial statements, models, and other information to reach potential investors and induce investments. Holmes consistently provided glowing but false representations to investors and potential investors about the analyzer’s progress and capabilities. She falsely represented to investors that multiple major pharmaceutical companies had comprehensively evaluated Theranos and had validated its technology, and she provided investors with reports bearing logos from pharmaceutical companies, falsely suggesting the pharmaceutical companies endorsed Theranos. Holmes misrepresented to investors that Theranos had a profitable, revenue-generating business relationship with the U.S. Department of Defense and that the Theranos technology had been deployed to the battlefield to treat wounded soldiers. In truth, Holmes knew the technology was never deployed in the battlefield and that Theranos had acquired little revenue from military contracts for trial-runs of the analyzer. Holmes also falsely represented to investors that Theranos would dramatically increase its number of Wellness Centers within stores operated by its partner Walgreens from a few dozen to 900, despite knowing that the relationship with Walgreens was stagnating. 

Trial evidence demonstrated that Holmes also misrepresented the dire financial status of Theranos to investors and its prospects for future earnings. In examples at trial, Holmes represented to one investor in 2010 that the projected revenue for Theranos in 2011 was $223 million, when she knew that Theranos’ revenue was dropping precipitously, from $2.8 million in 2009 to less than $600,000 in 2011. Holmes misrepresented to other investors that Theranos, which had zero revenue in 2012 and 2013, was projected to generate over $100 million in revenue in 2014 and to reach nearly $1 billion in 2015. She knew when she made these representations that Theranos would at best generate only modest revenue in 2014 and 2015. 

In its memorandum filed for the sentencing hearing, the government pointed to evidence that Holmes’ fraud was immensely successful. Projecting altruistic motives, Holmes raised hundreds of millions of dollars by duping investors of all experience levels to invest in Theranos. She fooled investors new to the healthcare and bio-tech sector as well those with deep sophistication and experience in that arena. By the end of 2014, her stock in Theranos was valued at more than $4 billion. She enjoyed a lavish life while carrying out her fraudulent scheme, living in a $15 million mansion and traveling in a Theranos-paid private jet. She gained a national profile, adorning the cover of Fortune, Forbes, Inc., Glamour, and T: The New York Times Style Magazine. Holmes dined at the White House, joined the Board of Fellows of Harvard Medical School, and was named by Time as one of the 100 Most Influential People in the World. But as the government describes, her scheme not only deprived investors of vast sums of money, it also placed numerous others at risk of great physical harm. Wanting to paint Theranos as a legitimate enterprise, Holmes offered Theranos blood tests to the public, and Theranos’ flawed technology was used on patients with serious medical conditions. As a result, Theranos sent out inaccurate results to patients being screened for cancer, to women monitoring their pregnancies, and to one victim who was led to believe she had the precursor virus to AIDS, among many other examples. Theranos itself eventually concluded a patient impact existed for every test run on patients and voided all tests with its analyzer. The government points out that Holmes was undeterred and again choose deceit over candor by downplaying the extent of the patient impact to investor-victims and continuing forward with her elaborate fraud. 

Federal criminal charges were initially filed against Holmes on June 14, 2018. On July 28, 2020, a federal grand jury returned a superseding indictment charging her with two counts of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349, and ten counts of wire fraud, in violation of 18 U.S.C. § 1343. Of the two conspiracy counts, one alleged Holmes conspired to defraud investors and the second alleged Holmes conspired to defraud patients who used Theranos services. Some of the ten counts of wire fraud alleged Holmes committed fraud on individual investors while others alleged Holmes defrauded patients who were induced to purchase Theranos services. 

On January 3, 2022, after a nearly four-month trial, a federal jury convicted Holmes of one count of conspiracy to commit fraud on investors and three counts of committing fraud on individual investors which involved wire transfers totaling more than $140 million. The jury acquitted Holmes of the patient-related fraud conspiracy count and on three counts of fraud against individual patients. The jury could not reach a unanimous verdict with respect to three individual investor fraud counts. An additional count of wire fraud relating to a Theranos patient had been dismissed during trial.

In addition to the 135 month prison term, U.S. District Judge Davila sentenced Holmes to three years of supervision following release from prison. The parties were instructed to meet and agree on a future date for a hearing to determine the restitution amount to be paid by Holmes. No fine was assessed. Holmes was ordered to surrender on April 27, 2023, to begin serving her prison sentence. 

Assistant U.S. Attorneys Robert S. Leach, Jeff Schenk, John C. Bostic, and Kelly Volkar are prosecuting the case with the assistance of Madeline Wachs, Lakisha Holliman, Sara Slattery, Elise Etter, Susan Kreider, and Leeya Kekona. The prosecution is the result of an investigation by the FBI, USPIS, and the FDA Office of Criminal Investigations. 
USAO - California, Northern

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