Healthcare

United States: we explain the Theranos trial, a case of scientific fraud that shook Silicon Valley

Elizabeth Holmes, founder of the start-up Theranos, which promised to revolutionize blood tests, is on trial for fraud and criminal association.

Its meteoric rise came to an abrupt end. The trial of Elizabeth Holmes, founder of Theranos , opens Tuesday, September 7 in court in San José (California), a week after the selection of jurors. Become a billionaire at the age of 30, thanks to her company which promised to transform the blood tests market, often compared to Steve Jobs, the American is now judged for fraud and criminal conspiracy ( Ramesh “Sunny” Balwani, her former head of operations and ex-companion, will be judged separately) . Eleven counts are brought against Elizabeth Holmes, who faces up to twenty years in prison and severe fines. Explanations.

A company supposed to revolutionize blood tests

Elizabeth Holmes created Theranos in 2003, based on a portmanteau word born from the contraction of the English words therapy and diagnosis . She was 19 at the time and still a student at Stanford University. With Theranos, the young woman plans to simplify blood tests in the laboratory. The company intends to produce diagnostic tools on a large scale that are faster and cheaper than traditional laboratories, using new technologies.

The entrepreneur promises that a very small amount of blood will allow up to 200 analyzes to be carried out at the same time and interests investors very quickly. In 2014, the Theranos company is valued at $ 9 billion. Elizabeth Holmes then becomes the youngest billionaire who has not inherited her fortune, valued at $ 3.6 billion by Forbes magazine . In 2015, Time magazine ranked her among the 100 most influential people in the world.

A scam unveiled in 2015

In October 2015, journalist John Carreyrou published several articles on the start-up in the  Wall Street Journal  and cast doubt on the reliability of the company. Elizabeth Holmes is suspected of having lied about the performance of the machine supposed to revolutionize blood tests, deceiving her investors. The US Department of Health is seizing the case. Nothing to worry about Elizabeth Holmes, who then explains to the American television station CNBC that “this is what happens when you work to make a difference. First they think you are crazy, then they fight you up. that you change the world “ .

In March 2018, the gendarme of the American Stock Exchange, the SEC, accused him of fraud. He is accused of raising $ 700 million on lies, such as the use of false drug reports and false financial statements. Her company’s results have been inflated: Estimated at $ 100 million, Theranos ‘revenue actually amounted to $ 100,000 in 2014. After an out-of-court settlement with the SEC, Elizabeth Holmes s’ undertakes to pay a fine of $ 500,000 as well as to cede control of his business. The SEC banned him from running any other publicly traded company for ten years. This agreement clears the financial side of the case, but not the criminal proceedings.

Hundreds of patients paid for blood tests to Theranos, which “delivered test results which were inaccurate” , explains the American justice, which adds that a large part of the tests was carried out thanks to other systems available in the trade. Thus, victims of defective analyzes could be called to the bar to tell how they experienced bad diagnoses of cancer, AIDS or pregnancies.

Famous names can be found among potential witnesses, such as former Secretary of State Henry Kissinger and former Defense Minister James Mattis, who served on Theranos’ board of directors. Rupert Murdoch, media mogul and owner of the Wall Street Journal who exposed the case, could also be called, having invested in Theranos.

A warning for Silicon Valley

The Theranos affair gradually turned into a lawsuit in Silicon Valley , accused of betting on companies that all present themselves as revolutionaries. In 2018, SEC San Francisco office manager Jina Choi said the case “is an important lesson for Silicon Valley . ” She also calls on “innovators who seek to revolutionize and disrupt an industry” to tell “investors the truth about what their technologies are capable of today, not what they hope they will one day be able to do . 

At the same time, Northern California District Attorney Alex Tse promises to prosecute all “those who break the rules that make Silicon Valley work . 

After multiple postponements due to the Covid-19 pandemic and the pregnancy of the accused, the first hearings of the Theranos trial will begin on Tuesday, September 7 and will last four months. This Hollywood-style story will be brought to the screen in 2022 with the feature film  Bad Blood , in which Jennifer Lawrence will take on the role of Elizabeth Holmes.

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