Theranos & Its CEO Settle Stock Fraud Charges with SEC

Seven years ago, Theranos was a $9 billion dynamo seemingly on the precipice of blowing the blood testing market wide open. Today, the company and its CEO and founder, Elizabeth Holmes, are a beleaguered group surrounded by legal adversaries and struggling to survive. Recent months have seen the firm retrench and seek to settle its many legal fights. On March 14, Holmes and her company took a big step in that direction by settling with perhaps the most potent of its legal foes, the US Securities Exchange Commission.

The Settlement Deal
The SEC charged Theranos, Holmes and other corporate principals with securities fraud for allegedly making false claims about its prickless blood analyzing technology to raise over $700 million in investment capital. As it did with CMS and the Arizona State Attorney General, Theranos decided that settlement was the better part of valor and cut a deal with the SEC. Under the settlement, Holmes will pay a $500,000 penalty, disgorge the 18.9 million shares in Theranos stock allegedly acquired via the fraud and give up her voting control over the company. Holmes has also been barred for serving as an officer or director of a publicly traded company for 10 years.

According to the SEC, the defendants knowingly made false claims including predicting that the analyzer would generate over $100 million in 2014 revenues. Actual revenues came in just $99.9 million short of those projections. The SEC also charged the defendants with claiming that the product was used on the battlefield in Afghanistan and in medevac helicopters, neither of which was true.

Not included in the settlement is Theranos's former President Ramesh Balwani who will get the chance to prove his innocence in a US California District Court.