Being a successful entrepreneur often means imagining what the future could be like and convincing others of your vision. It takes big ideas and bold action to change status quo. However, there is a fine line between enthusiasm and fraud, a topic being explored in the trial of Elizabeth Holmes, the charismatic founder and CEO of failed medical device company, Theranos.
According to charges laid by the US Government, it is alleged that Holmes, along with her former partner and company CFO, Ramash Balwani, engaged in a multi-million dollar scheme to defraud the company’s investors, as well as doctors and patients. Prosecutors claim that the two promised to revolutionize health care, but profited from misleading and deceptive conduct.
The complaint, being tried in the US District Court, addresses two primary areas of concern. The first is that Holmes and Balwani used advertisements and solicitations to encourage and induce doctors and patients to use Theranos blood testing technology, even though they knew that the devices were not capable of consistently producing accurate and reliable results.
The second is that Holmes and Balwani made numerous misreprestations to potential investors about the financial condition of the company and its future prospects. For example, it is alleged that patient tests were represented as having being completed with proprietary technology, when in fact, these tests were conducted from other commercially-available sources.
It is well known that Holmes tried to established a reputation as a hard-charging entrepreneur, and in many ways she succeed. Theranos peaked at a valuation of $9 billion in 2014 before media and regulatory scrutiny drove it to ruin less that four years later. Balwani, who will be tried separately next year, has pleaded not guilty to the charges, and also denies manipulating Holmes.