Criminal charges filed against Theranos's Elizabeth Holmes, Ramesh Balwani

Theranos CEO Elizabeth Holmes charged with fraud by SEC

Theranos founder and CEO Elizabeth Holmes is being charged with “massive fraud” by the SEC.

Federal prosecutors filed criminal charges against Theranos Inc. founder Elizabeth Holmes and the blood-testing company’s former No. 2 executive, alleging that they defrauded investors out of hundreds of millions of dollars and also defrauded doctors and patients.

The indictments of Holmes and Ramesh “Sunny” Balwani, Theranos’s former president and chief operating officer who was also Holmes’s boyfriend, are the culmination of a 2½-year investigation by the U.S. attorney’s office in San Francisco, sparked by articles in The Wall Street Journal that raised questions about the company’s technology and practices.

Holmes, 34 years old, and Balwani, 53, were each charged with two counts of conspiracy to commit wire fraud and nine counts of wire fraud in an indictment handed up Thursday and unsealed Friday. If convicted, they each face a maximum sentence of 20 years in prison and a fine of $250,000, plus restitution to those found to have been defrauded, on each count.

“This indictment alleges a corporate conspiracy to defraud financial investors,” said John F. Bennett, special agent in charge of the Federal Bureau of Investigation in San Francisco. “More egregiously, this conspiracy misled doctors and patients about the reliability of medical tests that endangered health and lives.”

A lawyer for Balwani, Jeffrey B. Coopersmith, said in a statement, “Mr. Balwani is innocent and looks forward to clearing his name.” A lawyer for Holmes didn’t respond to a request for comment.

Before the charges were filed, Theranos announced that Holmes had stepped down as chief executive and that David Taylor, the company’s general counsel, has been appointed CEO and general counsel. Holmes will remain as founder and board chair, the company said.