The hits keep coming for former Theranos founder and CEO Elizabeth Holmes.
On Friday, a federal grand jury indicted Holmes alongside the company’s former president and chief operating officer Ramesh “Sunny” Balwani on two counts of conspiracy to commit wire fraud and nine counts of wire fraud.
In an unsealed indictment (PDF), federal prosecutors alleged Holmes and Balwani not only defrauded investors but encouraged patients and doctors to use the Theranos blood testing device despite no evidence that it could produce accurate results.
Specifically, prosecutors allege the executives purchased ads in California and Arizona to convince consumers to buy Theranos blood tests at Walgreens stores, indicating the tests were cheaper than conventional labs. Patients, and sometimes insurers, purchased the device and then brought the “inaccurate, unreliable and improperly validated” results to their doctor.
“This indictment alleges a corporate conspiracy to defraud financial investors,” FBI Special Agent in Charge John F.Bennett said in a statement. “This conspiracy misled doctors and patients about the reliability of medical tests that endangered health and lives.”
Both Holmes and Balwani pleaded not guilty to the charges. On Friday, the company announced Holmes resigned as CEO and was replaced by David Taylor, the company’s general counsel.
The criminal charges come just three months after a settlement with the Securities and Exchange Commission (SEC) which stripped Holmes control over the company and barred her from serving as an officer or director for any public company for 10 years based on her elaborate scheme to defraud investors.
It’s a stunning fall from grace for the Silicon Valley CEO who was once heralded as the next Steve Jobs in her quest to overhaul the medical industry with her revolutionary blood testing device.
Earlier this month, Wall Street Journal reporter and author of a new tell-all book about the fall of Theranos, John Carreyrou, told Vanity Fair that Holmes was still meeting with investors in Silicon Valley to raise money for a new start-up.
Ultimately, the new charges could land Holmes behind bars.
“At the end of my book, I say that a sociopath is described as someone with no conscience,” Carreyrou told Vanity Fair. “I think she absolutely has sociopathic tendencies. One of those tendencies is pathological lying. I believe this is a woman who started telling small lies soon after she dropped out of Stanford, when she founded her company, and the lies became bigger and bigger.”