Former Theranos CEO Elizabeth Holmes was sentenced to more than 11 years in prison Friday for misleading investors regarding her blood-testing start-up.
She was convicted of four counts of wire fraud and conspiracy to commit wire fraud after a four-month-long trial that featured testimony and tales of billionaire investors, former U.S. officials’ endorsement and patients who had used the company’s technology. Holmes also took the stand over the course of seven days in emotional testimony defending her actions as being in good faith and denying that she was aware of the fraud.
On Friday, Federal District Judge Edward J. Davila sentenced her to prison beginning on April 27.
“The tragedy of the case is that Ms. Holmes is brilliant,” the judge said in a lengthy statement. She fought herself into a male-dominated world and people gravitated toward her vision and drive, he said.
“She made it, she got into that world.” But the venture capital world also doesn’t condone fraud, he said.
The sentencing is the conclusion of the years-long saga of Holmes, during which she was once hailed as a hero for female entrepreneurs before a dramatic fall to become the notorious founder of a crumpled company. Now the subject of an HBO documentary, a Hulu TV series, a best-selling book and multiple podcasts, Holmes has become one of the most famous tech start-up CEOs, as well as a cautionary tale for how badly an ambitious start-up can spin out of control.
“The message to Silicon Valley and other entrepreneurs is have a dream, invest in it, but be honest with investors about where you are, and don’t commit fraud,” said Jason Linder, a former federal prosecutor, who is now a partner at corporate law firm Mayer Brown and has been following the case.
Holmes spoke before the judge handed down her sentence. She cried as she read from notes, breaking the staid composure she had held throughout the day and through most previous court appearances.
“I take responsibility for Theranos,” she said. “I regret my failings with every cell in my body.”
After her sentence was read, she stood up and was embraced by her family, burying her face in their shoulders. She then quickly left the courtroom as journalists and her supporters stood quietly before filing out.
Later, she and her partner left the court building through a side entrance, dodging a large group of photographers and TV camera people who had assembled outside the main door. She jumped in a black SUV, which quickly drove off.
Since Theranos crumbled, Holmes has kept a low profile. She lives in Silicon Valley with her partner and son, and has been volunteering at a crisis line for sexual assault survivors. She is pregnant with their second child.
Holmes started the company in 2003 when she was just 19 years old with the promise to develop technology that would eliminate the need for drawing tubes and tubes of blood to run diagnostic tests. She quickly drew in investors, attracting hundreds of millions of dollars in investment from prominent businesspeople and political figures including Larry Ellison, Rupert Murdoch and others. Holmes also attracted big-name statesmen such as Henry Kissinger and Jim Mattis to her board of directors.
Federal prosecutors were asking the judge to sentence her to 15 years in prison, as well as require restitution of about $800 million to pay back investors and business partners.
She leased space in a famed Silicon Valley office park and hired hundreds of employees. After her start-up went public with its ambitions roughly a decade ago, Holmes soared to fame. She was one of the few young female founders in a competitive tech world that still often features White, male CEOs.
The media took notice, putting her on the covers of magazines including, Forbes, Fortune and Inc. as well as speaking at conferences and giving a TEDMED Talk. She inked deals with Walgreens and Safeway to put her technology — a small blood-testing machine, known as the Edison, that purported to use “nanotainers” that needed just a finger prick’s worth of blood to test for everything from cholesterol to herpes.
But internally, it was a different story, according to testimony at her trial last year. Theranos’s proprietary technology could in reality run only about a dozen tests, and witnesses said it didn’t always do those reliably.
During the trial, former employees testified about growing concern within the company about how quickly Theranos was pushing to use the technology on patients. Former Walgreens and Safeway executives said they didn’t realize Theranos was using other companies’ traditional machines to process blood tests. And former defense secretary Jim Mattis, who served on the company’s board, said he would have had a different view of the company if he had known the limitations of the Theranos blood-testing device.
“It would have tempered my enthusiasm significantly,” he said in court.
A Wall Street Journal investigation in 2015 revealed that Theranos was relying on traditional lab testing machines and typical blood draws to run many of its tests.
Regulators started investigating the company, and Theranos went on the defensive. Holmes’s empire and public image began to crumble.
A federal regulator of laboratories found deficiencies at the company’s lab that “pose immediate jeopardy to patient health and safety.” Holmes was eventually barred from owning or operating a medical lab for at least two years. And in 2018, she was charged with massive fraud by the Securities and Exchange Commission, which she paid a hefty fine to settle. She left Theranos that year and the company shuttered soon after.
Holmes was originally charged with her former business and romantic partner Sunny Balwani. He was convicted on 12 counts in a separate trial this summer, and is scheduled to be sentenced in December.
Prosecutor Jeff Schenk told the court during the hearing Friday that a 15-year sentence was in line with guidelines for Holmes’s crimes.
“When faced with the choice of allowing Theranos to fail, Ms. Holmes made the choice to defraud her investors,” he said.
Schenk argued that because Holmes had not apologized for the fraud or admitted wrongdoing, the court should give her a serious sentence that would act as a strong deterrent to committing new crimes.
The judge asked if any victims wanted to speak. Alex Shultz, father of Theranos whistleblower Tyler Shultz, stood up and said that Holmes hired a private investigator to follow his son when Theranos suspected Tyler Shultz had spoken to media about the company.
“It was a grueling experience to go through, I feel like my family home was desecrated by Elizabeth and the lawyers,” he said.
Holmes’s defense lawyers asked the judge to sentence her to 18 months in prison, or home confinement plus community service hours.
Holmes’s defense lawyer, Kevin Downey, said in court she never cashed out when she had the chance and was deprived of her support network during much of the time she was running Theranos.
Holmes testified on the stand for more than 20 hours during the trial last year, speaking publicly for one of the first times in years and drawing a crowd of reporters and members of the public to see her in person. She told the jury that she was always acting in good faith — trying to create and sustain a technology that would help people.
Holmes admitted on the stand during her trial that Theranos was running blood tests on modified third-party machines without telling its business partners and that she added the logos of two pharmaceutical companies to studies that the company sent to investors. She said she did not intentionally mean to deceive them.
“They weren’t interested in today or tomorrow or next month,” she said. “They were interested in what kind of change we could make.”
Former defense secretary Jim Mattis testifies about his time on Theranos board during Elizabeth Holmes trial
Balwani, Holmes’s former partner, was charged together with Holmes before his case was later severed when Holmes alleged he had abused her for years. Balwani has denied the allegations.
More than 100 people wrote letters in support of Holmes for her sentencing memo, including former employees, investors and even New Jersey Sen. Cory Booker, who said he met Holmes years before she was charged.
“In the years since, I’ve always been struck by the way our conversations focused on her desires to make a positive impact on the world,” he wrote.
Holmes’s partner Billy Evans also wrote to the judge, seeking to describe a different Holmes than had been portrayed in the media. He said her “willingness to sacrifice herself for the greater good is something I greatly admire in her.”
He also wrote that “earlier this year, while pregnant, she decided she wanted to swim the Golden Gate Bridge,” something that concerned Evans.
“Rain or shine she practiced, and her determination was overpowering the odds against her,” he wrote. “Two weeks before the event she made the cut off time, swimming the breaststroke. I was wrong, you would think by now I would learn to not discount her perseverance.”