Elizabeth Holmes and Theranos Scandal

Some people find it uncomfortable to get their blood drawn. As a result, when Theranos was established in 2003, it claimed a nearly painless and straight forward method for collecting and analysing blood samples. The healthcare and tech industries, as well as media outlets, praised Elizabeth Holmes, the founder and former CEO for this purportedly novel idea.

A promising firm called Theranos had big plans to transform medical diagnosis and blood testing. Because of her company’s potential to disrupt and modernise the healthcare sector in the same way that Apple revolutionised the computer and consumer electronics industries, she was even dubbed the “Next Steve Jobs.”

However, the business ceased to exist in 2018. In 2022, Holmes was later found guilty of fraud and given a sentence. Following the alleged promises made by Theranos and Elizabeth Holmes, one of the most dramatic scandals rocked the American business and financial world to its core. Stories of corporate greed, Media frenzy, and a lack of due scrutiny were uprooted by their downfall.

A HIGH PROFILE TECH SCANDAL STORY: ELIZABETH HOLMES’ AND THERANOS ASCENT AND DECLINE

THE ASCENT OF THERANOS AND ELIZABETH HOLMES

The Future of Blood Testing

Elizabeth Holmes enrolled in the Stanford University School of Engineering in 2002 with the intention of obtaining a bachelor’s degree in chemical engineering.

She was a lab assistant and a student researcher at the same university.

During her time at Stanford, the concept to rethink blood extraction and blood sample processing was born. She started developing a lab-on-a-chip system that would enable more affordable and practical blood testing for people.

A single drop of blood would be used for quick, in-the-moment testing that would provide information to help with medical diagnosis and treatment plans.

Holmes left Stanford because he was unable to withstand the allure of entrepreneurship.

Her tenacity paid off. She received support for her plan from Channing Robertson, a well-known professor and dean at Stanford School of Engineering at that time.

Robertson was elected as Theranos’ first board member. He guided the early decision-making processes of the corporation and introduces Holmes to his influential connections, placing her in the midst of a network of powerful people.

Theranos’ Corporate Strategy

“Theranos” a combination of the words “therapy” and “diagnosis” presented itself as a provider of health technologies. Its aim and objective were focused on utilising technology to create and market new medical diagnostic equipment.

The Edison portable blood testing device was at the centre of the unique product strategy. It was planned to run hundreds of tests with a single blood drop to search for biomarkers.

In December 2004, Holmes was able to raise $6 million effectively for her business. During its early years, she managed her start-up without the attention of the larger business and investment world and away from the prying eyes of the mainstream media.

The president and Chief operational officer of Theranos, Sunny Balwani joined the company in 2009, whom she met in Beijing in 2002 while participating in a Mandarin immersion programme.

Additional investments were obtained by the business from various sources. By the end of 2010, it had more than $92 million in venture money.

In 2011, former secretary of state George Schultz joined Theranos. Richard Kovacevich and other more eminent people joined the group. Holmes won praise for creating the most distinguished board of directors in American business history.

A growing number of organisations began to respect Theranos and its potential.

Potential for Stardom

Theranos gained public attention and investment interest as a result of its agreement with Walgreens. Taking advantage of this momentum, it raised an astounding $400 million in venture capital and reached a $9 billion valuation in 2014.

Holmes rose to prominence as a scientist and a successful businesswoman.

In 2014, Forbes listed her as one of the 30, Under 30, and in2015, Time listed her as one of the 100 Most Influential People. In 2015, she was selected Woman of the Year by Glamour, and she was also listed as one of the 50 Most Influential People by Bloomberg.

She was lauded as the youngest woman to become a self-made billionaire with net worth of $4.5 billion by the media, who even compared her to Steve Jobs.

At her peak, Holmes was revered as a visionary businesswoman and a representation of female emancipation. She was revered as a role model and an inspiration by many. She was respected for her tenacity and desire.

As Holmes rose in stature, Theranos gained more traction. Based on its potential to revolutionise the healthcare sector with its cutting-edge blood testing technology, it was valued at $1 billion.

THE DECLINE OF THERANOS AND ELIZABETH HOLMES

Concerns and Eventual Exposure

A paper by Stanford professor and physician-scientist John Ioannidis appeared in the Journal of the American Medical Association in February 2015. He contended that Theranos had not published any peer-reviewed study in the domain of medical research.

Eleftherios Diamandis, a scientist from Canada and professor at the University of Toronto, examined Theranos’ blood testing technique as well. In May 2015, Clinical Chemistry and Laboratory Medicine published its findings.

Fundamentally, Diamandis came to the conclusion that the majority of the claims were false.

Following, Pulitzer Prize-winning writer John Carreyrou began investigating Holmes and her Edison gadgets.

The Carreyrou article was published in The Wall Street Journal in October 2015. It revealed how Theranos was conducting tests, managing testing volumes, and resolving errors using conventional blood testing equipment rather than its Edison device.

Holmes and Balwani were also discovered having covert romance while operating Theranos. For both of them, Carreyrou ignited the beginning of the end.

The Edison Devices Problem

Antibodies are used in immunoassays, which are biochemical tests, to identify and gauge the quantity of a certain molecule or substance in a sample.

A portable device with a variety of immunoassays that could test for hormone and medication levels, illness and their risk factors, specific cancer indicators and other biomarkers may be created, according to Holmes.

Notably, Holmes reportedly chose Thomas Edison as the model for the device. She clarified that this was an illusion to the famous Edison remark that there are millions of ways an invention could go wrong.

Theranos’ blood testing technology was discussed by experts. A 2016 research by 13 academics that was published in the Journal of Clinical Investigation revealed significant errors in the company’s blood test results.

Carreyrou also disclosed that Theranos performed the majority of their tests using conventional blood testing equipment rather that its exclusive Edison device. According to his article, the corporation used falsified data to claim that their technology was accurate and capable.

Government Actions and Legal Actions

While the Cleveland Clinic said that it will concentrate on validating the technology behind the Edison devices in the wake of the release of The Wall Street Journal piece, Walgreens postponed its plans to add blood testing facilities in its shops.

After conducting an examination of Theranos’ laboratory in New York, California, in January 2016, the Centre for Medicare and Medicaid Services, or CMS, issued a warning letter for abnormalities with equipment, methods and proficiencies.

Further announcements from CMS regulators in March 2016 included a two year ban on Holmes and Balwani owning and operating clinical labs.

Major let-down occurred in the 2016-2017 time frame. Theranos lay off 340 workers in October 2016 and another 155 in January 2017, closing its lab operations and wellness centres while doing so.

In April 2016, federal prosecutors and representatives of the Securities and Exchange Commission opened a criminal investigation. Understanding how Theranos misled its investors and government authorities about its technology was the main goal.

Theranos, Holmes and Balwani were each charged with civil fraud by the U.S. Securities and Exchange Commission or SEC in March 2018. In June 2018, a federal grand jury indicted Holmes and Balwani as a result of an investigation by the Office of the Attorney for the Northern District of California.

Nine counts of wire fraud and two counts of conspiracy to commit wire fraud were brought against Holmes and Balwani. Two entered a not guilty plea.

Consequences of a massive billion-dollar fraud include Theranos’ demise and Holmes’ conviction

What actually transpired at Theranos and the driving forces behind Holmes and her executive’s decision are still unknown. The scandal was mostly attributed to simple corporate greed. Some saw it as yet another story of irrational people and their selfish goals. Some people were a bit tolerant. They thought Holmes had excellent intention, but her optimism was unwarranted. She bit off more than she could chew.

Numerous witnesses, including former co-workers and patients, contributed to the development of the case against Holmes and Balwani. Theranos experienced significant difficulties. It was forced to scale up its operations after settling a number of cases. In September 2018, the company eventually declared that it was in the process of closing the entire operation. The company divided its remaining cash and assets to its creditors.

On January 3, 2022, Holmes was found guilty by the U.S. District Court for the Northern District of California on four charges of deceiving investors, three counts of wire fraud, and one count of conspiring to commit fraud. On November 18, 2022, she received her final sentence of 11 years and 3 months in jail. On June 7, 2022, Balwani was found guilty on all 12 charges of fraud and on December 7, 2022, he was given a sentence of 12 years and 11 months in jail.

Holmes arrived in the Federal Prison Camp in Bryan, Texas, a facility for women with little security, on May 30. Due to the birth of her second child and other appeals, she postponed the jail report.

According to a prison entrance and orientation manual, the former healthcare executive must comply with a daily 6 A.M. wake-up call, wear khaki clothing, and give up any jewelry that is worth more than $100. Additionally, she will be employed in a jail job that involves packaging food on a manufacturing line and may only be paid 12 cents per hour.

The rise and fall of Theranos and Elizabeth Holmes serve as a lesson in hubris, dishonesty and the perils of hype. Holmes ascended to the top of the business world from her modest beginnings. Her failure serves as a token of the value of answerability and principles in business.

Frequently Asked Questions

Why couldn’t Theranos work?

There was a serious technical issue in the testing device and the CEO Elizabeth Holmes tried to hide the sore with false promises and skilled presentation.

Did Theranos machine ever work?

The Edison machine of Theranos could perform very few tests instead of as promised to do nearly 200 tests with an ounce of blood. Its accuracy was always under question mark.

What is the relationship between Elizabeth Holmes and Sunny Balwani?

Sunny was Holmes’ long-time boyfriend and the COO of her start-up.

What’s Theranos case update?

CEO Elizabeth Holmes has started her prison in Texas for a period of 11 years and 6 months.

What did Theranos do that was so bad?

They cheated investors, patients and employees by stating false promises under the shadow of media and publicity.

Why was Theranos unethical?

When Holmes gave investors misleading information and fraudulent demonstrations of the medical testing gadget to entice them to invest in her business, she violated the moral principles of truthfulness and integrity.

Thanks for reading our article. Hope, it was a good experience.

Plaban Nayak

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