Theranos Founder Elizabeth Holmes Convicted of Defrauding Investors

After fifty hours of deliberation that stretched over seven days, a San Jose jury convicted Theranos Founder Elizabeth Holmes of four counts of defrauding investors with her claims about her company’s blood-testing technology. The case has received widespread media attention, spawning best-selling books, in-depth podcasts and TV movies.

The case features a who’s-who of the American establishment, including former Secretaries of State and Defense who served on Theranos’s board, lending an air of credibility to a Silicon Valley “success story” that was eventually exposed as a house of cards. Another board member, famed attorney David Boies, worked to muzzle whistleblowers, but their information proved crucial in unraveling the scheme and bringing Holmes to justice.

While the jury acquitted Holmes on several fraud counts concerning its communications to patients, and deadlocked on three counts of defrauding investors, it agreed that her claims to investors crossed the line from puffery to criminal fraud. While the personal costs to Holmes remain to be seen (sentencing will occur later this year), the message prosecutors and this jury sent to CEOs is unmistakable: if you lie to investors to raise money for your company, you’ll pay a steep price.

We have arrived at a watershed moment. The work of whistleblowers, the attitudes of juries and the priorities of federal prosecutors and securities regulators have all aligned. The U.S. Department of Justice has refocused its efforts on white-collar crime, with Deputy Attorney General Lisa Monaco urging prosecutors to “be bold.” Jessica Roth, a law professor at Cardozo School of Law and former federal prosecutor in the Southern District of New York, observed that the verdict “shines a light on the importance of drawing a distinction between truth and optimistic projections — and keeping that clear in one’s mind.”

Our firm represents individuals and businesses who have been harmed by fraudulent statements made to entice them to invest. We also represent SEC whistleblowers who raise the curtain on false claims made by issuers raising hundreds of millions from U.S. capital markets.

If you have suffered investment losses due to fraudulent claims that induced you to invest, or if you have evidence that an institution or individual has violated U.S. securities laws, please contact our firm to discuss how we can assist. If you are a whistleblower, you can earn a financial award in the event your evidence leads to a successful SEC enforcement action with a recovery of $1 million or more. You can contact us by calling 212.203.1249 or emailing kevin@galbraithlawfirm.com for a free, confidential consultation.