No. 2 Theranos executives found guilty of 12 counts of fraud

SAN JOSE, California. – Ramesh BalwaniThe former Theranos executive was found guilty Thursday on 12 counts of fraud, with a more severe sentence than his accomplice’s. Elizabeth Holmesand anchor a failed blood testing startup as Silicon Valley’s final caveat.

mr. Balwani and Mr. Holmes, who together pushed Theranos to sky-high heights with the promise of revolutionizing healthcare, are the most notorious tech executives to have been accused and convicted of fraud in a generation. It took a jury of five men and seven women 32 hours to reach a verdict, finding Ms. Balwani, aka Sunny, guilty of all 10 counts of wire fraud and two counts of conspiracy to commit wire fraud. funds.

RS. Holmes was convicted in January on four counts of fraud and acquitted of four; three other charges were dropped after jurors failed to reach a consensus. She appealed the verdict and M. Balwani is expected to do the same.

Both of their cases depended on exaggerating the ability of Theranos blood testing machines to attract investors and customers when the products didn’t really work.

Each count carries a maximum penalty of 20 years in prison. mr. Balwani and Mr. Holmes are expected to be sentenced together in September.

As G’s convictions progressed, Balwani, 57, who appeared in court in a black suit and blue medical mask, glanced at the jury before looking straight ahead.

The double culpability verdicts are a rare example of the Silicon Valley hype machine leading to possible jail time. After Theranos collapsed in 2018, the company became a shorthand for scammers, and the world developed an insatiable appetite for sordid stories of startup ups and downssuch as WeWork’s failed first attempt to go public and cunning Ozy Media. But Theranos was the only one that was prosecuted. Its implications are likely to send a signal to entrepreneurs who exaggerate in the name of innovation.

The verdict showed that the jury was influenced by prosecutors’ testimony that Mr. Balwani was aware of problems in Theranos’ technology and business, defrauding investors and patients. mr. Balwani tried to absolve himself of guilt argue that Ms. Holmes – as CEO and founder of Theranos – was in charge, and by stating that he believed in Theranos’ mission and technology.

mr. Balwani “put his heart and soul into Theranos,” said Jeffrey Coopersmith, Mr. Wilson’s lawyer. Balwani in his final argument. “He worked tirelessly, year after year, to make the company a success.”

Forensic evidence, including text messages, emails and testimonies from 24 witnesses, showed that Mr. Balwani was deeply involved in nearly every aspect of Theranos’ business and was aware of its problems. He ran her lab, made her financial projections, oversaw personnel matters, and attended many of her investor meetings.

“Mr. Balwani wants you to think he’s a victim,” said Jeffrey Schenck, Assistant US Attorney and lead prosecutor on the case, in his closing remarks. Balwani is not a victim – he is the perpetrator of the fraud.”

The verdict arrived on time abrupt awakening for the tech industry as stock prices tumbled amid rising interest rates, soaring inflation and economic uncertainty. Investors, burned by the sell-off, stopped chasing high-risk, loss-making startups, prompting many Silicon Valley companies to lay off staff and slow down their aggressive expansion plans. Humiliating moment many predict the end of a decade-long tech start-up boom.

mr. Balwani and Mr. Holmes capitalized on that era of optimism for Theranos. The couple met when M. Holmes was 18 years old, and they began dating secretly shortly after she created a startup. mr. Balwani joined the company in 2009 and has invested in it.

As chief operating officer of Theranos, he played a behind-the-scenes role in the company’s growth. He helped Mrs. Holmes cultivated the image of Steve Jobs, ran a lab, and helped fundraise, bringing the company’s valuation to $9 billion.

A 2015 exposé in The Wall Street Journal that revealed Theranos had lied about its blood tests sent the company reeling. mr. Soon Balwani left, and in 2018 the startup went bankrupt. Holmes was accused of fraud.

Each defendant was often discussed at the trial of the other, but neither testified against the other. RS. Holmes accused G. Balvani emotional and sexual abuse, but these allegations were not admitted as evidence in court.

“The Theranos story is a tragedy,” Mr. Prosecutor Schenk said in his closing remarks.

Kelly Huang made a report.