Back when Elizabeth Holmes was featured on the cover of Time magazine, her company Theranos was valued at around $9 billion. This week, Holmes was found guilty in four of eleven federal criminal fraud charges.

What led to the downfall of Holmes and her company? Was she a founder who made mistakes, or did she intentionally deceive investors and patients? And now that she has been found guilty, will she face any meaningful consequences?

The Theranos Scandal

In March 2004, when Holmes was just 19 years old, she launched her company, Theranos. Like a few other famous Silicon Valley entrepreneurs, she dropped out of prestigious school, leaving Sandford to build her business.

Theranos was promised to be a company that could offer a variety of medical testing through a small amount of blood work. The promise of the company had investors and partners interested. Holmes raised over $945 million. After a 2013 retail partnership announcement with Walgreens, the company was valued at around $9 billion.

On paper, Holmes was one of the richest women in the world. Then, reality hit.

In 2015, a Wall Street Journal investigation found that Theranos had not actually conducted the hundreds of blood tests it claimed to offer. Some of the tests were less accurate than presented, and other tests were conducted on devices from third-party blood testing companies.

This story started a series of issues that eventually led to civil charges in March 2018.

The First Round of Legal Trouble: Civil SEC Charges

In March 2018, the Securities and Exchange Commission (SEC) announced fraud charges against Holmes, the company Theranos, and Theranos COO and president, Ramesh “Sunny” Balwani.

According to an SEC press release, Holmes and Balwani raised, “more than $700 million from investors through an elaborate, years-long fraud in which they exaggerated or made false statements about the company’s technology, business, and financial performance.”

Holmes and Theranos did not admit to or deny the charges, but they settled with the SEC. Holmes was required to return millions of shares to the privately held company, pay a $500,000 fine, and not serve as an officer or director of a public company for 10 years, as reported by Reuters.

The civil charges were a blow to Holmes, but they weren’t as serious as the fraud charges that came just a few months later.

Related: What Does It Take to Be an Attorney for a High-Profile Case? 

The Second Round of Legal Trouble: Criminal Fraud Charges

In June 2018, Holmes and Balwani were indicted on federal wire fraud charges by the United States Attorney for the Northern District of California.

The charges alleged that Holmes and Balwani both knew the Theranos proprietary blood analyzer could only perform 12 of the 200 tests it said it could, yet they continued to make misleading claims to both investors and customers.

The criminal charges meant Holmes was now facing jail time.

Related: What’s the Difference Between a Civil and Criminal Case? 

Facing the Charges

It took almost three years for Holmes’s case to make it to trial. It began in August 2021, included 30 witness testimonies, and lasted 11 weeks. Holmes testified over seven days of the trial trying to show that she never intentionally defrauded investors or patients.

The jury was slow to decide Holmes’s fate. As we recently discussed in a blog relating to the trial of Ghislaine Maxwell, jury deliberations can take time.

After 50 hours, the jury eventually found Holmes guilty on four of the eleven charges.

  • 4 Charges — Not Guilty: There were four not guilty verdicts related to three charges concerning defrauding patients and one charge of conspiracy to defraud patients.
  • 3 Charges — No Verdicts: There was no verdict on three charges related to defrauding patients. The judge expects to declare a mistrial on those charges, according to reports from CNN. The jury could not come to a unanimous decision on these charges.
  • 4 Charges — Guilty: Holmes was found guilty on three counts of wire fraud relating to investors and one count of conspiracy to defraud investors. Holmes faces up to 20 years in prison and a fine of $250,000 plus restitution for each count.

Facing the (Minimal) Consequences

Many people were hurt by the unscrupulous acts of Holmes and Balwani. Investors lost millions of dollars, but Holmes’s conviction does not resolve their loss. She was only found guilty on four of the eleven charges.

Even after losing billions of dollars for investors, Holmes may only spend a few years in prison.

According to estimates by prison consultants and legal experts, even though Holmes faces decades in prison, she may only serve as little as three years at a low-security prison facility.

Facing Criminal or Civil Charges? Talk to an Attorney Right Away.

Facing criminal or civil charges is a serious matter. Civil charges can lead to financial judgments and fines, and criminal charges can lead to probation, fines, and jail time. Both can uproot your life. If you find yourself facing either civil or criminal charges, it’s important to talk to an experienced attorney right away.

TJ Grimaldi is both a criminal defense attorney and civil attorney. If you are facing a legal case, he can help you create a plan to get the best possible outcome for your situation. Talk to him today by requesting your consultation or calling 813-226-1023 to schedule a time to talk directly with TJ.

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