Former Theranos CEO Elizabeth Holmes set to be sentenced

Former Theranos CEO Elizabeth Holmes awaits sentencing Friday, 10 months after a Jury found her guilty of defrauding investors in the failed blood-testing company.

The sentencing hearing in San Jose, California, began shortly after 10:00 a.m. Pacific time and deliberations continued from 1 p.m.—an unusually long time for what is typically a procedural hearing.

The amount of money Holmes must repay will be determined at a later date, Judge Edward Davila of the Northern District of California ruled. Prosecutors argued that Holmes must pay back $804 million to defrauded investors, but Davila ruled that true losses were likely closer to $121 million.

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Holmes, 38, founded Theranos in 2003, and it quickly grew to become one of the most prominent startups in the world, with a peak valuation of $10 billion. But a series of exposés by The Wall Street Journal raised questions about the effectiveness of the company’s technology and business practices, triggering multiple investigations by federal and state officials.

The sentence will be seen as a signal for how seriously wrongdoers in the high-flying world of tech startups can expect to be punished when they misrepresent a company’s capabilities.

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“Especially in a very highly publicized case, you want the public to know that if you defraud investors or anyone else, you’re looking at serious prison time,” said Carrie Cohen, Global Co-Chair of the Investigations and White Collar. Defense practice group at law firm Morrison Foerster.

“Given the facts that all came out at trial, I would suspect that she’s looking at a significant amount of prison time, probably closer to what the government asked for,” Cohen said.

In January, Holmes was convicted of four counts of Investor fraud and conspiracy. A jury acquitted her of four other claims of harming patients who used Theranos’ blood-testing device, and could not agree on other claims. Investors in Theranos, a group that included media magnate Rupert Murdoch and software billionaire Larry Ellison, lost $144 million when the startup faltered.

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Federal prosecutors asked for a 15-year sentence and $800 million in fines, describing Holmes’ crimes as “among the most substantial white-collar crimes Silicon Valley or any other district has seen,” according to court filings this week.

Theranos founder Elizabeth Holmes attends court hearing
Elizabeth Holmes, founder of Theranos, right, leaves federal court in San Jose, Calif., Thursday, Sept. 1, 2022.

Bloomberg


Holmes’ attorneys asked that she receive no prison time, arguing that she poses no danger to society, has debts she may not be able to repay and has already suffered from the “dehumanizingly cruel” media coverage of Theranos’ case. They presented testimonials from 130 people, including friends, family and even Senator Cory Booker, attesting to Holmes’ good intentions.

Holmes has a 1-year-old son and was pregnant at her last court hearing. Both are factors that can lead the judge to be lenient in sentencing, Cohen said.

Holmes testified that she was psychologically traumatized after being raped in college, and that she suffered sexual and emotional abuse at the hands of former Theranos Chief Operating Officer Sonny Balwani, who is 19 years her senior. While the duo was running Theranos, Holmes maintained that Balwani controlled her schedule, diet and presentation to others, and often calculated and castigated her.

Balwani’s lawyers denied the charges. He was found guilty of 12 counts of fraud in July and is scheduled to be sentenced on December 7.

Holmes said she plans to appeal her conviction. If she is sentenced to prison time, one point of contention could be when she begins the sentence. The judge could delay the start of her term until after Holmes’ birth. Cohen said she may also post bail to stay out of jail while she appeals her sentence.

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