Blood Money: Number Two Is Found Guilty In Billion Dollar Fraud Case

Theranos $1 Billion Dollar Fraud

Former Theranos COO Found Guilt Of Federal Fraud Charges

A jury found Ramesh “Sunny” Balwani guilty of wire fraud and conspiracy to commit wire fraud after deliberating for four days.

Balwani, the former president and COO at the failed blood testing startup, was indicted four years ago for defrauding investors and patients. His verdict marks the end of a rare criminal fraud case against two Silicon Valley startup executives.

Elizabeth Holmes founded Theranos when she was 19 years old to create a cheaper, more efficient alternative to traditional blood testing. The startup raised $945 million from investors and struck up partnerships with prominent retailers.

The government called two dozen witnesses to prove Balwani’s guilt in the Theranos fraud, including concealing third-party manufactured machines, overstating financials, and misrepresenting work with pharmaceutical companies and the military.

The defense argued Balwani acted in good faith and believed in the company’s technology, and prosecutors cherry-picked information to prove their case.

Balwani became COO and president of Theranos in 2009. He was in a relationship with the companies founder, Elizabeth Holmes, their relationship was kept private from investors, employees and business partners.

Elizabeth Holmes was hailed as the rare female founder of a billion-dollar business, but in 2015 it was revealed that it had only performed roughly a dozen of the hundreds of tests it offered using its “proprietary” blood-testing device.

After nearly two years of turmoil, Holmes and Theranos settled “massive fraud” charges with the US Securities and Exchange Commission, but Balwani is still fighting the charges.

Balwani was a confidante to Holmes throughout her time running Theranos, and oversaw its patient lab, retail partnership with Walgreens, and financial projections.

Holmes claimed Balwani controlled her lifestyle and image, and forced her to have sex with him. He denied the allegations, and Holmes stopped short of saying he directed her to mislead anyone.

Mark MacDougall, a white-collar defense lawyer, said the prosecution and defense likely made adjustments based on the outcome of the Holmes case.

While Balwani did not take the stand, his defense team pointed the finger back at Holmes, highlighting how many other notable investors, business partners and employees had believed in Holmes and Theranos.

Theranos’ backers included several prominent investors and public figures. Holmes had the charisma, drive, vision, and goal to change diagnostic testing, and her backers bought into that vision. The only problem was the product was never really ‘theirs’ and it didn’t actually work.

Balwani’s attorneys emphasized that the prosecution’s case was flawed because the prosecution was unable to retrieve the company’s testing records before they were destroyed and those records would of shown that the testing did work.

The jury didn’t buy it and Balwani could face up to 20 years in prison, a $250.000 fine, plus have to play restitution to a number of investors he help persuade.

For more on this story, please consider these sources:

  1. No. 2 Theranos Executive Found Guilty of 12 Counts of Fraud  The New York Times
  2. Former Theranos COO is guilty of federal fraud  CNN
  3. Theranos ex-COO Sunny Balwani found guilty in all 12 fraud charges 6 months after founder Holmes’ conviction  CNBC
  4. Former Theranos executive Sunny Balwani found guilty on all 12 charges  Fox Business
  5. Former Theranos executive Sunny Balwani is convicted of fraud  NBC News
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