Elizabeth Holmes Is Getting Off Lightly Over The Theranos Fraud


Aficionados of business scams and frauds will be savouring this from Elizabeth Holmes at Theranos for decades yet. The point being that she was, for a time at least, listed as a multi-billionaire, raised vast sums of venture capital and managed to do both while lying entirely about a product that simply didn’t work – or even exist.

Pretty good going if you remember to cash in and Louis Vuitton yourself out of there to somewhere without an extradition treaty:

The Silicon Valley startup Theranos and its chief executive Elizabeth Holmes were charged by the Securities and Exchange Commission (SEC) on Wednesday with “massive fraud” for raising $700m from investors by allegedly deceiving them about their supposedly groundbreaking blood-testing technology.

Theranos and Holmes agreed to settle the charges without admitting or denying wrongdoing. Holmes, a Stanford dropout who was once hailed as the next Steve Jobs, will pay a $500,000 penalty, return millions of shares to the company, and relinquish her company voting power under the terms of the settlement. She will also be barred for 10 years from serving as an officer or director of a public company.

That’s a pretty light punishment there.

Its rise had seemed unstoppable. Theranos attracted backing from some of America’s biggest political and business heavyweights, with Henry Kissinger joining the board.

The way their raised money is what allowed them to do so. They didn’t go to any of the usual venture capital firms in this space. Instead, they went to wannabe investors in VC. People who rather needed the VC filter – sure, they were pension funds and all that but still needed the VCs – and who thought they were being clever by avoiding them and their fees.


The SEC’s document on it all shows that it was a fraud from start to finish:

Plaintiff Securities and Exchange Commission (the “Commission”) alleges:
1. This case involves the fraudulent offer and sale of securities by Theranos, Inc.
(“Theranos”), a California company that aimed to revolutionize the diagnostics industry, its
Chairman and Chief Executive Officer Elizabeth Holmes, and its former President and Chief
Operating Officer, Ramesh “Sunny” Balwani. The Commission has filed a separate action
against Balwani.

That is pretty clear, isn’t it?

Pretty much all of this has been known for some time now but there’s still an interesting question to ask:

Jeff Skilling was convicted of fraud and fined $50 million dollars and given 20+ years in jail. Elizabeth Holmes — for fraud that is way more obvious and for which she is clearly directly accountable — will get no jail time, a fine of a half million dollars, loss of some voting shares in the company, and a ten year moratorium on being a director or officer of a public company.


Well, Jeff Skilling wasn’t fashionable, a young woman making it in Silicon Valley was. But there is something more, something more reasonable.

Skilling’s work was at a listed – public in that sense of public – company. Holmes was at a public but still private company in those other senses of public and private. And rooking people in a private company is a different thing than rooking them in a public and listed one. The second brings all public markets into disrepute. Thus the penalties are different.

Yes, not as different as they are here but there is still good cause for the two cases, the two crimes, to be treated differently and punished differently.