The Wall Street Journal: Theranos, founder Elizabeth Holmes charged with fraud by SEC

Theranos Inc. founder and chief executive Elizabeth Holmes surrendered voting control of her blood-testing company, paid a $500,000 penalty and agreed to a 10-year ban from being an officer or director in a public company in settling civil-fraud charges Wednesday with the Securities and Exchange Commission.

The settlement follows a more than two-year investigation by the SEC prompted by revelations in The Wall Street Journal. In October 2015, the Journal published an article revealing that Theranos used its proprietary blood-testing technology for only a fraction of the blood tests it offered in Walgreens stores. The article also reported that former employees were leery of the technology’s accuracy.

Theranos has since voided nearly one million test results, and Holmes agreed to a two-year federal ban from owning or operating laboratories. The company also has settled lawsuits from a hedge-fund investor and Walgreens, its former retail partner, alleging that it made misleading representations to them.

In addition to reaching a settlement with Holmes, the SEC is pursuing civil securities fraud charges in California against Ramesh “Sunny” Balwani, Theranos’s former president and chief operating officer. Holmes and Balwani jointly ran the company for seven years before he retired in May 2016. They also were in a romantic relationship, according to multiple people familiar with the matter.

As part of her settlement with the agency, Holmes neither admitted nor denied wrongdoing.

An expanded version of this report appears on WSJ.com.

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