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Elizabeth Holmes Is Sentenced to More Than 11 Years for Theranos Fraud


SAN JOSE, Calif. — Elizabeth Holmes, the founding father of the failed blood-testing start-up Theranos, was sentenced to greater than 11 years in prison on Friday for defrauding investors about her company’s technology and business dealings.

The sentence capped a yearslong saga that has captivated the general public and ignited debates about Silicon Valley’s culture of hype and exaggeration. Ms. Holmes, who raised $945 million for Theranos and promised that the start-up would revolutionize health care with tests that required just just a few drops of blood, was convicted in January of 4 counts of fraud for deceiving investors with those claims, which turned out to not be true.

Judge Edward J. Davila of the U.S. District Court for the Northern District of California sentenced Ms. Holmes to 135 months in prison, which is barely greater than 11 years, followed by three years of supervised release. Ms. Holmes, 38, who plans to appeal, must give up to custody on April 27, 2023.

Within the courtroom on Friday, Ms. Holmes — who appeared with a big group of family and friends, including her parents and her partner, Billy Evans — cried when she read a press release to the judge.

“I’m devastated by my failings,” she said. “I even have felt deep pain for what people went through because I failed them.”

Ms. Holmes, who has a 1-year-old son and is pregnant together with her second child, apologized to the investors, patients and employees of Theranos. She said she had tried to appreciate her dream too quickly and do too many things directly. She ended with a quotation from the poet Rumi and a promise to do good on the planet in the longer term.

Though federal sentencing guidelines for wire fraud of the scale that Ms. Holmes was convicted of recommend a maximum of 20 years in prison, a probation officer assigned to the case proposed nine years. Her lawyers had asked for just 18 months of house arrest, while prosecutors sought 15 years and $804 million in restitution for 29 investors.

Prosecutors had urged Judge Davila to contemplate the message that her case would send to the world. In court filings, they wrote that a protracted sentence for Ms. Holmes was necessary to “deter future start-up fraud schemes” and “rebuild the trust investors will need to have when funding innovators.”

Jeffrey Cohen, an associate professor at Boston College Law School and a former federal prosecutor, said it was somewhat surprising for a sentence to transcend a probation report’s advice, however the high-profile nature of Ms. Holmes’s case had made it an emblem. The sentence also showed that courts take fraud seriously, he added.

“We rarely see these sorts of prosecutions,” he said.

Ms. Holmes’s case has taken on an almost mythic status amongst white-collar crimes. Few start-up founders reached the extent of prominence that she did, appearing on magazine covers, dining on the White House and hitting a paper net value of $4.5 billion. Since Theranos’s fraud was exposed in 2015, Ms. Holmes’s story has been told in podcasts, TV shows, books and documentaries.

Exaggeration and hype are common amongst tech start-ups, but only a few executives are indicted on fraud charges, let alone convicted and sent to prison. That trend could also be changing because the Justice Department has said it plans to be more aggressive in its pursuit of white-collar criminals.

In October, Trevor Milton, the founding father of the electrical vehicle company Nikola, was convicted of fraud. And Sam Bankman-Fried, the founding father of the cryptocurrency exchange FTX, which collapsed in bankruptcy last week, is under multiple state and federal investigations.

The Theranos founder’s story, from a $9 billion valuation to a fraud conviction, has come to symbolize the pitfalls of Silicon Valley’s culture.

In court on Friday, Judge Davila asked if any victims of Ms. Holmes were present. A person in a blue suit stood up and introduced himself as Alex Shultz, the son of George Shultz, the previous secretary of state who served on Theranos’s board and who died in 2021, and the daddy of Tyler Shultz, a Theranos worker who helped expose the fraud.

His voice shaking, Alex Shultz described how Ms. Holmes had nearly “desecrated” his family after she suspected Tyler Shultz of talking to the media about Theranos. She hired private investigators to stalk them, threatened legal damage and “took advantage of my dad,” Alex Shultz said.

Jeffrey Schenk, an assistant U.S. attorney and a lead prosecutor, criticized Ms. Holmes’s argument that Theranos’s failure was typical of a high-risk, ambitious Silicon Valley start-up. “It’s a logical fallacy to suggest that start-ups fail, Theranos was a start-up, and, due to this fact, Theranos failed since it was a start-up,” he said. “That will not be true.”

Kevin Downey, a lawyer for Ms. Holmes, said in court that because she had never cashed out her Theranos stock, there was no evidence of greed, like yachts, planes, large mansions and parties.

“We’ve a conviction for against the law where the defendant’s motive was to construct technology,” he said.

Asking for leniency, Ms. Holmes submitted greater than 100 letters of support from figures including Stanford professors, enterprise capital investors and Senator Cory Booker, Democrat of Recent Jersey, which painted her as a virtuous one that was a victim of circumstances.

“Much has been written within the media and addressed within the trial concerning the company and its failure,” Christian Holmes, her father, wrote in a single letter. “Little has been said concerning the innovation Elizabeth strived for, sacrificed and completed to be able to help the corporate proceed.”

Ms. Holmes will likely be assigned to a jail by the Federal Bureau of Prisons based on aspects corresponding to location, space, her lack of criminal history and the nonviolent nature of her crime. The minimum security prison nearest to Ms. Holmes’s residence in Woodside, Calif., is probably going the Federal Correctional Institution in Dublin.

Ms. Holmes’s dramatic rise and fall began greater than a decade after she dropped out of Stanford University to create Theranos in 2003, a start-up that aimed to revolutionize health care with higher diagnoses of illnesses. The corporate created a machine that it claimed could run greater than 1,000 tests on a drop of blood and struck partnerships with major grocery chains to construct test centers of their stores. Ms. Holmes also claimed the corporate’s technology was endorsed by pharmaceutical firms and used on battlefields in Afghanistan.

None of those claims turned out to be true.

Theranos’s deceptions were exposed by The Wall Street Journal in 2015, and a government inspection shut down the corporate’s lab soon after. Theranos dissolved in 2018, the yr Ms. Holmes and her business partner, Ramesh Balwani, were indicted on fraud charges.

In July, Mr. Balwani was found guilty of 12 counts of fraud in a separate trial. He is ready to be sentenced on Dec. 7. Ms. Holmes, who argued to separate the cases, didn’t cooperate with prosecutors on his case.

At her trial last yr, Ms. Holmes testified for seven days, the one time she had spoken publicly about what had happened at Theranos because the company collapsed. She expressed regret for her harsh treatment of whistle-blowers and journalists who investigated the corporate, in addition to for falsifying scientific research documents.

She blamed others at Theranos for lots of the company’s shortcomings and said her exaggerations were simply painting an image of the longer term that investors desired to hear. “They weren’t all for today or tomorrow or next month. They were all for what sort of change we could make,” she said.

She also accused Mr. Balwani, whom she dated for greater than a decade, and who’s greater than 20 years older than she is, of emotional and sexual abuse. Mr. Balwani has denied the accusations.

Ultimately, a jury concluded that Ms. Holmes was guilty of defrauding three of its largest investors and of conspiring to accomplish that. After the decision, Ms. Holmes made quite a few attempts to get a recent trial. She was denied.

Before he imposed his sentence, Judge Davila pondered Silicon Valley’s ethos and what had driven Ms. Holmes to commit fraud.

“Was there a loss of ethical compass here? Was it hubris? Was it intoxication with the celebrity that comes with being a young entrepreneur?” he asked. He drew a distinction between investors who take big risks backing ambitious founders and people who don’t know that they’re being lied to.

“The tragedy on this case,” he concluded, “is that Ms. Holmes is good.”

Kalley Huang contributed reporting.

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