Ramesh Balwani, an adviser to the biotech firm’s founder, has been charged with wire fraud and conspiracy to commit it
Balwani, a trusted adviser to Theranos’s founder Elizabeth A Holmes, is part of the team accused of “massive fraud” after making false claims about offering a cheap blood test that provided fast and accurate reports, according to the United States Attorney for the Northern District of California.
Holmes, who founded Theranos in 2003, was ranked number 110 on the Forbes 400 in 2014. The Stanford University chemical engineering dropout also topped the list of America’s Self-Made Women in 2015 with a net worth of $4.7 billion.
Theranos is a private healthcare and life sciences company with the stated mission to revolutionize medical laboratory testing through allegedly innovative methods for drawing blood, testing blood, and interpreting the resulting patient data. But it didn’t go as planned.
According to the press release from the US Attorney’s office, Balwani, 53, of Atherton, California, joined Theranos in 2009 and worked there till 2016. He worked in several capacities, including as a member of the company’s board of directors, as its president, and as its chief operating officer.
According to the release, both Balwani and Holmes defrauded investors, doctors and patients, knowing that Theranos was not capable of consistently producing accurate and reliable results for certain blood tests, including the tests for calcium chloride, potassium, bicarbonate, HIV, the diabetes-linked hemoglobin a1C, the pregnancy-associated Human Chorionic Gonadotropinm hormone, and sodium.
Instead, the release said, the company allegedly created hype to raise funds and purchased advertisements intended to induce individuals to purchase Theranos blood tests at Walgreens stores in California and Arizona.
The indictment alleges they both represented to investors that Theranos had a profitable and revenue-generating business relationship with the United States Department of Defense and that Theranos’s technology had deployed to the battlefield when, in truth, Theranos had limited revenue from military contracts and its technology was not deployed in the battlefield. In addition, the defendants represented to investors that Theranos would soon dramatically increase the number of Wellness Centers within Walgreens stores. In fact, Holmes and Balwani knew by late 2014 that Theranos’s retail Walgreens rollout had stalled because of several issues, including that Walgreens’s executives had concerns about Theranos’s performance.