Elizabeth Holmes sentenced to more than 11 years in prison for fraud

A California judge sentenced Theranos founder Elizabeth Holmes to 11 years and three months in prison for defrauding investors in her now-defunct blood testing start-up that was once valued at US$9 billion (S$12.4 billion).

US District Judge Edward Davila in San Jose, California, sentenced Holmes on three counts of investor fraud and one count of conspiracy. A jury convicted Holmes, 38, in January following a trial that spanned three months.

The judgment on Friday following her conviction in January for defrauding investors while running the failed blood testing startup Theranos.

Judge Edward Davila imposed a sentence of 11 years and three months in prison, with another three years of supervision after Holmes is released.

The sentence also includes a fine of $400, or $100 for each count of fraud. Restitution will be set at a later date. Holmes was ordered to turn herself into custody on April 27, 2023. She is expected to appeal her conviction.

Holmes, who was found guilty in January on four charges of defrauding investors, faced up to 20 years in prison as well as a fine of $250,000 plus restitution for each count.

Lawyers for the government asked for a 15-year prison term, as well as probation and restitution, while Holmes’ probation officer pushed for a nine-year term. Holmes’ defense team asked Davila, who presided over her case, to sentence her to up to 18 months of incarceration followed by probation and community service.

Before the sentencing was announced, a tearful Holmes spoke to the court in San Jose, California. “I loved Theranos. It was my life’s work,” she said. “The people I tried to get involved with Theranos were the people I loved and respected the most. I am devastated by my failings.”

Elizabeth Holmes, the founder of failed blood testing startup Theranos who was convicted of fraud earlier this year, was sentenced today by a judge in court in San Jose, California.

She is shown here making a statement to the judge before the sentencing.
Elizabeth Holmes, the founder of failed blood testing startup Theranos who was convicted of fraud earlier this year, was sentenced today by a judge in court in San Jose, California. She is shown here making a statement to the judge before the sentencing.

She also apologized to the employees, investors and patients of Theranos. “I’m so, so sorry. I gave everything I had to build our company and to save our company,” she said. “I regret my failings with every cell in my body.”

“The judge imposed a powerful sentence that confirms that fraud cannot masquerade as innovation in Silicon Valley,” said George Demos, a former SEC enforcement attorney and adjunct law professor at UC Davis.

“When given the opportunity to speak, Elizabeth Holmes made a statement that she takes responsibility for Theranos but did not say she takes responsibility for the fraud.”

In arguments before the judge on Friday over her sentence, Kevin Downey, one of Holmes’ lawyers, said that unlike other defendants in corporate fraud cases, the Theranos founder did not express greed by cashing out shares or spending money on “yachts and planes.”

Instead, the money was “used to build medical technology.”

Elizabeth Holmes, founder of Theranos Inc., arrives at federal court in San Jose, California, U.S., on Tuesday, Dec. 7, 2021. Confronted with tough questions on the witness stand last week, as she defends herself against criminal fraud charges, Holmes admitted to errors on several occasions.

Federal prosecutor Jeffrey Schenk pointed out that Holmes did gain fame, admiration, and a lifestyle from the fraud, even if she did not make financial gains. “These still are benefits she’s receiving,” he said.

Friday’s sentencing hearing caps off Holmes’ stunning downfall. Once hailed as a tech industry icon for her company’s promises to test for a range of conditions with just a few drops of blood, she is now the rare tech founder to be convicted and face prison time for her company’s missteps.

Holmes, now 38, started Theranos in 2003 at the age of 19 and soon thereafter dropped out of Stanford University to pursue the company full-time. After a decade under the radar, Holmes began courting the press with claims that Theranos had invented technology that could accurately and reliably test for a range of conditions using just a few drops of blood taken from a finger prick.

Theranos raised $945 million from an impressive list of investors, including media mogul Rupert Murdoch, Oracle founder Larry Ellison, Walmart’s Walton family and the billionaire family of former Secretary of Education Betsy DeVos.

At its peak, Theranos was valued at $9 billion, making Holmes a billionaire on paper. She was lauded on magazine covers, frequently wearing a signature black turtleneck that invited comparisons to late Apple CEO Steve Jobs. (She has not worn that look in the courtroom.)

The company began to unravel after a Wall Street Journal investigation in 2015 found the company had only ever performed roughly a dozen of the hundreds of tests it offered using its proprietary blood testing device, and with questionable accuracy. Instead, Theranos was relying on third-party manufactured devices from traditional blood testing companies.

In 2016, Theranos voided two years of blood test results. In 2018, Holmes and Theranos settled “massive fraud” charges with the Securities and Exchange Commission, but did not admit to or deny any of the allegations as part of the deal. Theranos dissolved soon after.