Theranos founder Elizabeth Holmes and Ramesh “Sunny” Balwani, the start-up’s former president, have been indicted on two counts of conspiracy to commit wire fraud and nine counts of wire fraud, the Justice Department announced Friday.
DOJ announces wire fraud charges against Theranos founder Elizabeth Holmes and Ramesh “Sunny” Balwani pic.twitter.com/MN77BOmw4w
— Zeke Miller (@ZekeJMiller) June 15, 2018
The indicment accuses Holmes and Balwani of engaging in a multi-million-dollar scheme to defraud investors, and a separate scheme to defraud doctors and patients. Both schemes involved efforts to promote Theranos, according to federal proscutors. The charges come three months after she was slapped with a civil lawsuit in March by the Securities and Exchange Commission that alleged “massive fraud” by her and California-based Theranos.
The SEC had alleged that Theranos has raised more than $700 million from investors between late 2013 and 2015, while at the same time “deceiving investors” by overselling the ability of the company’s diagnostic devices.
“The conduct alleged in these charges erodes public trust in the safety and effectiveness of medical products, including diagnostics,” said Catherine A. Hermsen, an Acting Director of the FDA Office of Criminal Investigations.
“The FDA would like to extend our thanks to our federal law enforcement partners for sending a strong message to Theranos executives and others that these types of actions will not be tolerated.”
On Friday, Holmes stepped down as CEO from the blood testing start-up and will be succeeded by David Taylor, the company’s general counsel.