Theranos CEO, Ex Indian-American President Charged With "Massive Fraud"
Theranos was founded in 2003 when Elizabeth Holmes was only 19.
The agency states that Holmes and Balwani engaged in "an elaborate, years-long fraud in which they exaggerated or made false statements about the company's technology, business, and financial performance", ultimately raising more than $700 million from investors.
Holmes agreed to pay a Dollars 500,000 penalty, be barred from serving as an officer or director of a public company for 10 years, return the remaining 18.9 million shares that she obtained during the fraud, and relinquish her voting control of Theranos. Theranos was under scrutiny by Justice Department prosecutors in San Francisco, but the status of any probe is unclear. The SEC's litigation will be led by Jason Habermeyer and Marc Katz of the San Francisco office.
Theranos said in a statement that it was "pleased to be bringing this matter to a close and looks forward to advancing its technology". None of that was true, the SEC said. John Dwyer, a lawyer for Ms Holmes with Cooley LLP, declined to comment.
"They must tell investors the truth about what their technology can do today, not just what they hope it might do someday", she said.
Theranos attracted extraordinary interest and loaded its board with huge names, mainly elder Washington statesmen, including two former U.S. secretaries of state: Henry Kissinger and George Schultz.
Behind the scenes, things were very different. The SEC refers to the pharmacy chain as "Pharmacy A".
The company got Walgreens Boots Alliance Inc to open store-within-a-store concepts where customers could get their blood tested by Theranos.
Elizabeth Holmes, the founder and CEO of the beleaguered blood-testing startup Theranos, has been charged with "massive [years-long] fraud" by the Securities and Exchange Commission.
In truth, Theranos' proprietary analyser could complete only a small number of tests, and the company used analysers manufactured by others to conduct majority of patient tests. The pharmacy gave Theranos a $100m "innovation fee" to help with the expansion. She attracted famous investors such as Rupert Murdoch and venture capitalist Tim Draper, according to The Wall Street Journal.
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But probes were launched after Wall Street Journal articles raised doubts about the technology. The Theranos technology was never deployed by the Department of Defense and the company only earned a little more than $100,000 from operations in 2014.
The binders also included purported endorsements from drug companies - but that weren't in fact written by those companies, according to the complaint.
The SEC said it did not settle with Balwani; it says it will litigate a case against him in the Northern District of California.
The charges were brought against Theranos and its former president Ramesh "Sunny" Balwani as well as Ms Holmes.
Mr Balwani joined the company and became its president and Chief Operating Officer that same year, the SEC said.
The company eventually had to retract or correct the results of tens of thousand of medical tests.
Theranos raised millions in start-up funding by promoting its tests as costing a "fraction" of what other labs charge.
The company claimed that they have developed such a machine that would do tests using a tiny finger-prick.
The SEC is not taking aim at the startup itself, which past year was near bankruptcy and recently obtained a loan to survive, according to Peikin. A corporate penalty would harm investors who had already been defrauded, he said.
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