Articles Tagged with Theranos

The US Securities and Exchange Commission has filed fraud charges against Theranos Inc., its CEO and founder Elizabeth Holmes, and its ex-President Ramesh Balwani. The regulator contends that they engaged in a years-long fraud that raised over $700M from investors.

According to the SEC’s complaint, the three of them made statements that were false, exaggerated, and/or misleading regarding the company’s business, finances, and technology. They purportedly did this in presentations to investors, media articles, and product demos.

Because of these erroneous, deceptive, and inflated statements, investors thought that Theranos’s main product, which is a portable blood analyzer, could perform comprehensive blood tests with minute blood samples. Also, Theranos claimed that the company had the technologies needed to transport a finger stick sample of blood, place the sample in a specialized device that would go into an analyzer, and the analyzer could determine the results. The findings could then be sent to the care provider or patient. Theranos’ technology was supposedly able to offer cheaper, speedier, and more accurate results than any other blood testing labs—not to mention that it was portable.

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Ex-Merrill Lynch Broker Pleads Guilty to Bank Fraud

Jeffrey Kluge, a longtime Merrill Lynch broker, has pleaded guilty to defrauding two banks of more than $8.7M. His bank fraud ran from 2001 through November 2016.

Kluge’s plea agreement said that he committed bank fraud by fabricating account statements under Merrill Lynch’s name and pledging fake collateral to the banks so he could set up multi-million dollar credit lines. For instance, in 2001 he was able to get a $150K credit line with Alliance Bank in Minnesota by telling the financial institution that he had enough municipal bond funds as collateral. In fake account statements he sent the bank as evidence of these bond holdings, Kluge concealed from Alliance Bank that he had already promised the assets in the accounts for loans from the firm.

In 2007, Kluge was able to get a $1M credit line from Platinum Bank, which is also in Minnesota. His bank fraud scheme defrauded Platinum Bank in a similar fashion.

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The Wall Street Journal and other media are reporting that Theranos is now the defendant of a securities fraud lawsuit brought by one of its major investors. The plaintiff is San Francisco hedge fund Partner Fund Management, which is one of the blood testing company’s largest financial backers.  Partner, which brought its case in the Delaware Court of Chancery, is seeking damages beyond its investment and costs related to the lawsuit.
Although the complaint is under seal, Partner has confirmed that it has brought a legal case against the beleaguered blood testing company. According to a letter, which the hedge fund sent to investors, Theranos took part in “lies, material misstatements, and omissions” to persuade Partner to invest in the company. The letter notes that Theranos CEO/founder Elizabeth Holmes and ex-President Sunny Balwani are also defendants in the case.
Partner Fund believes that Holmes was deceptive when claiming that Theranos’s proprietary technologies were working and close to receiving regulatory approvals. Meantime, Theranos has stated that it would combat the securities fraud lawsuit. 

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