We’re only a few months into the year, but 2019 already seems rife with scam stories. More than 50 people, including actresses Felicity Huffman and Lori Loughlin, were charged last week in a college admissions bribery scheme. In January, two documentaries about the failed Fyre Festival made their way to our screens. And another con story is in the works: Shonda Rhimes is adapting the New York Magazine article about alleged scammer Anna Delvey, who is accused of posing as an heiress to insinuate herself into elite social circles and is now awaiting trial on Rikers Island.
Enter Elizabeth Holmes and her company, Theranos. Both are back in the news.
In 2003, at age 19, Holmes founded the blood-testing company. Its claim to fame? Theranos technology could purportedly perform more than 240 tests with just a drop or two of blood. The process was supposedly faster, more affordable and less painful than your standard blood test.
Holmes said Theranos would revolutionize health care. That never happened. What came next includes twists, turns, revelations and denials.
In 2015, the Wall Street Journal published a stunning investigation into the company. In 2018, the Securities and Exchange Commission charged Holmes and her ex-boyfriend, Ramesh “Sunny” Balwani, Theranos’s former president and chief operating officer, with massive fraud. Both Holmes and Balwani deny wrongdoing.
Here’s what you need to know about Theranos.
Holmes enrolled in Stanford University’s school of engineering as an undergraduate in 2002. Gardner said that a colleague told her, “I have the most intelligent student I’ve ever met, and I would love for you to meet her.”
That student was Elizabeth Holmes.
When Holmes told Gardner about an idea for a medical device — similar to, but not the same as, the idea behind Theranos — Gardner explained that the approach was not scientifically possible. She said Holmes was resistant to that feedback.
“There was something about her inability to listen when she was so young and inexperienced,” Gardner told The Lily.
Soon after, Holmes shifted her energy to Theranos. She formally founded the company in 2003, and dropped out of Stanford as a sophomore to build the business — and, some say, to craft a persona.
Ana Arriola, an early Theranos employee who previously worked for Apple, told ABC News that colleagues had caught Holmes “falling out” of her voice.
“I think it was at one of the company parties and maybe she had a little bit too much to drink or what not. But she fell out of character and exposed that it wasn’t her real voice. Maybe she needed it to be more convincing to project a persona within a room amongst male [venture capitalists],” Arriola said on “The Dropout” podcast. “I’m not really quite sure.”
As for the turtleneck, some believe Holmes was attempting to emulate Steve Jobs, whom she admired. It was not atypical for publications to draw comparisons between the two college dropouts-turned-entrepreneurs.
“Elizabeth was very obsessed with Apple,” Arriola said on the podcast. Holmes, who Arriola said would initially wear “these frumpy Christmas sweaters,” grew curious about Jobs’s attire. Arriola mentioned that Jobs’s infamous black turtlenecks were designed by Issey Miyake.
“I think she went off and tracked down who Issey Miyake was and the rest is couture history ... she did change her aesthetic and I think it was for the best,” Arriola added.
Holmes, on the other hand, claims she’d been dressing that way since she was a kid.
“My mom had me in black turtlenecks when I was, like, eight," Holmes told Glamour in 2015. “It makes it easy, because every day you put on the same thing and don't have to think about it — one less thing in your life. All my focus is on the work. I take it so seriously; I'm sure that translates into how I dress.”
Gibney, the HBO documentary director, isn’t convinced.
“It’s as if she has to go through hair and makeup every day to present herself in this drama that she is writing, producing and directing,” he told The Lily. “And at times it seems very alluring, and at times it just seems bizarre, as if she’s become a kind of caricature of an executive.”
Holmes’s lawyers did not reply to multiple requests for comment.
At the very beginning, Holmes’s company was named Real-Time Cures, but she quickly changed the name to Theranos, a combination between “therapy” and “diagnosis.”
The company’s aim was to create low-cost blood tests, performed with just a few drops of blood derived from a pinprick to your finger, that could detect illnesses sooner than traditional blood tests and potentially save lives. Blood samples would be processed in a device Theranos called the Edison. Named after the famous inventor, the proprietary technology was about the size of a desktop printer.
In discussing her company, Holmes sometimes spoke of her uncle as an inspiration behind its creation. In a 2014 TEDMED talk, Holmes said “he was diagnosed one day with skin cancer, which all of a sudden was brain cancer, and in his bones. He didn’t live to see his son grow up, and I never got to say goodbye.”
A segment of the HBO documentary shows Holmes telling the same story on multiple occasions.
In many ways, Holmes’s pitch worked.
Theranos raised more than $700 million from investors over the course of its existence, including high-profile individuals such as Betsy DeVos — who is now education secretary but at that time was chairwoman of an investment management firm — and her family, who invested $100 million. Media mogul Rupert Murdoch invested $125 million.
Theranos’s board included heavy hitters such as Henry Kissinger and George Shultz, both former secretaries of state, and James Mattis, who went on to serve as secretary of defense in the Trump administration. Like Holmes, none of the board members were medical professionals.
Along with investors and board members, Holmes also convinced employees of the company’s mission, recruiting several individuals from Apple. Arriola even left behind 15,000 Apple shares to join Theranos, she told ABC News.
For many years, Holmes, who served as Theranos’s chief executive, and her recruits were tinkering away with the technology. They produced 23 patents, with Holmes listed as a co-inventor on 19 of them, according to the U.S. Patent and Trademark Office.
Arriola was tasked with designing the Edison, according to ABC News, which was the key to Theranos’s blood tests. But a lot of what was going on inside the company, including how exactly the Edison functioned, wasn’t publicly known. Holmes offered little explanation, claiming that much of Theranos’s work involved “trade secrets.”
In October 2015, when the Wall Street Journal’s John Carreyrou released a front-page investigation on Theranos, this much became clear: much of the technology wasn’t working as advertised.
In 2013, Tyler Shultz, grandson of Theranos board member George Shultz and a recent Stanford University graduate, and Erika Cheung, a recent graduate from the University of California at Berkeley, both began working for Theranos.
Cheung, who started as a research and development associate, told The Lily she was eager to work for a “strong, leading female entrepreneur.”
And that’s exactly what Holmes appeared to be. In 2014, Forbes named her the youngest self-made billionaire at age 30, with Theranos valued at $9 billion. She received overwhelmingly positive media coverage.
The company was also making big strides, at least by outward appearances. In 2013, Theranos began offering its services to the public, eventually opening 45 blood-testing wellness centers, mostly in Walgreens in the Phoenix area.
In initial conversations regarding their partnership, Walgreens understood that Theranos would test patients’ blood using a finger prick, and process the tests on-site with their proprietary medical devices. According to Carreyrou’s 2018 book, “Bad Blood: Secrets and Lies in a Silicon Valley Startup,” some Walgreens executives were thrilled about the potential.
That’s not what ultimately happened. Theranos devices were not approved by the Food and Drug Administration (FDA). To steer clear of issues with the FDA, Theranos did not put their devices in Walgreens stores. Instead, patient blood samples were sent to a Theranos lab and processed there. In addition, some patients at Walgreens wellness centers were undergoing traditional intravenous blood draws, rather than the finger prick Theranos had touted in its marketing.
Some doctors and nurses receiving patient test results from Theranos began complaining, Carreyrou reported in “Bad Blood.” Some doctors sent their patients’ blood work to other labs, such as LabCorp, to cross-check the results. In many cases, those results would come back normal, indicating inaccuracies in Theranos’s testing.
One Phoenix nurse raised concerns with Walgreens and Theranos, “asking for data to show that the company’s finger-prick testing produced results as accurate as blood drawn from a vein,” but she said Theranos wasn’t able to provide the data, Carreyrou reported.
In fact, in 2016, Theranos voided all blood tests that were conducted on the Edison device during 2014 and 2015 and issued several thousand corrected blood-test reports.
Multiple Theranos employees, including Cheung and Tyler Shultz, had raised flags, noting the technology didn’t work.
Cheung, who was working at Theranos’s headquarters in the clinical lab where patient blood samples were processed, said that not only was Theranos using the Edison to run just 14 to 15 tests, far fewer than advertised, but those 14 to 15 tests — including ones that check for prostate cancer and syphilis — were failing repeatedly.
Cheung entered the failures into reports, she said, but the data points would be deleted, shrugged off as “outliers.” She said she and Shultz raised concerns with colleagues, but management wasn’t receptive.
She quit her job at Theranos in 2014, seven months after her start date, but her relationship with the company grew more acrimonious.
Cheung and Shultz both broke their nondisclosure agreements with Theranos to speak with Carreyrou while he was investigating the company for the Wall Street Journal.
“I knew the consequences,” Cheung said. “They scared me all the time. I just value the truth so much more.”
The FDA conducted a surprise inspection of Theranos’s California headquarters in 2015, the Wall Street Journal reported, and declared the company’s blood vials “uncleared medical devices.” Pressured by the FDA, Theranos almost entirely stopped using the vials.
In 2016, Walgreens terminated its partnership with Theranos and filed a lawsuit against the company for breach of contract, seeking $140 million in damages.
That same year, Cheung filed a complaint with federal regulators, citing her experience in the lab. Ultimately, Cheung said, her complaint was part of what led to Theranos’s shutdown.
Last March, the SEC filed civil fraud charges against Holmes, Balwani, and the company, accusing them of having repeatedly misled investors about Theranos’s true financial state and the effectiveness of its technology. According to ABC News, Holmes said a variation of “I don’t know” to questions about Theranos’s processes more than 600 times in her deposition. She settled the SEC case, agreeing to pay a fine of $500,000 and accepting a 10-year ban from serving as an officer or director of a public company. (The SEC case against Balwani is still proceeding.)
In September 2018, Theranos announced that it was dissolving.
Last summer, shortly after Holmes settled the SEC’s enforcement action, federal prosecutors charged Holmes and Balwani with wire fraud and conspiracy to commit wire fraud. The two face a coming criminal trial; if convicted, they could receive up to 20 years in prison.
Gardner, the Stanford professor who was skeptical of Holmes from the start, is now steadfast.