Theranos Shutting Down Amid Fraud Allegations

In a letter to investors, the CEO of Theranos announced that the blood-testing company is preparing to shut down. Theranos has faced a U.S. Securities and Exchange Commission (SEC) investigation and has already laid off most of its staff.

The company, which was once valued at $9 billion, is expected to dissolve itself within six to 12 months, following payment of some of its outstanding debt.

Founded by former CEO Elizabeth Holmes, Theranos raised hundreds of millions of dollars in private capital on the promise that it could develop a revolutionary new blood-testing technology that could quickly and cheaply run dozens of blood tests with just a few drops of blood.

A 2016 investigation by The Wall Street Journal, however, raised concerns about the company’s technology, finding that Theranos was using routine blood-testing equipment for most of its tests. As questions about the technology emerged, investors and federal regulators increased their scrutiny of the company, leading to a civil settlement between Theranos and Ms. Holmes and the SEC in March 2018. The scandal is the subject of Bad Blood: Secrets and Lies in a Silicon Valley Startup, which ASH Clinical News Editor-in-Chief Mikkael A. Sekeres, MD, MS, reviewed in his latest Editor’s Corner.

Both Ms. Holmes and former Theranos president Ramesh Balwani are facing criminal charges that could lead to years in prison and millions of dollars in fines. Prosecutors allege that Ms. Holmes and Mr. Balwani deliberately misled investors, regulators, and the public about the accuracy of the company’s technology.

Sources: The New York Times, September 5, 2018; The Associated Press, September 5, 2018.