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Elizabeth Holmes found guilty of defrauding investors as founder and CEO of Theranos

Elizabeth Holmes has been found guilty of defrauding investors as founder and CEO of Theranos, the jury has reached a verdict that will have lasting implications in Silicon Valley and beyond.

Holmes was found guilty of conspiring to defraud investors, as well as defrauding investors from the DeVos family, hedge fund manager Brian Grossman and former estate and trust attorney Dan Mosely. She was not found guilty of charges related to defrauding patients.

Prosecutor Jeffrey Schenk said he will confer with the Department of Justice, then tell the court next week how the government wishes to proceed.

Holmes founded Theranos in 2003 after dropping out of Stanford. She pitched investors and partners on technology that would revolutionize the healthcare system — instead of drawing blood intravenously and waiting days for test results, her technology would prick a tiny bit of blood and instantly conduct dozens of tests on it. Soon she was the CEO of a company with a $10 billion valuation, but there was one problem: the technology didn’t work.

Even though Theranos’ technology didn’t actually accomplish what the company claimed it did, Holmes said that she thought she was telling the truth — she even alleged that the slideshows she presented to investors were made by scientists and engineers. But the prosecution managed on some counts to convince the jury that Holmes knowingly misled investors and partners — one piece of evidence showed that Theranos used Pfizer’s logo in an unauthorized manner while negotiating a partnership with Walgreens. A former senior product manager at Theranos, Daniel Edlin testified that Theranos sometimes faked demonstrations of their technology in front of investors. When billionaire investor Rupert Murdoch had his blood tested, Theranos removed abnormal results before sending out the reports, Edlin said.

In a big twist for the high-profile trial, Holmes took the stand herself to argue that her failure as a startup founder doesn’t mean she committed fraud.

The jury deliberated for seven days, even asking if they were allowed to take jury instructions home to review. They also asked to re-listen to some audio clips of Holmes’ calls with investors, which had been presented as evidence, yet deliberations continued into the new year.

The trial’s verdict sends a message to tech founders that it’s not okay to lie about your technology — especially not when it affects the health of real people. But it sends a mixed message that she was found not guilty of the counts related to defrauding patients. Beyond that, the case showed how important due diligence is for investors and partners collaborating with startups. Notably, Theranos’ investors weren’t the usual-suspect venture capital firms. Rather, her funding came from individuals like former Secretary of Education Betsy DeVos, billionaire media mogul Rupert Murdoch, former Secretary of State Henry Kissinger and the Walton family, among other wealthy elites. Some evidence showed that these investors were willing to give Theranos money even when Holmes evaded their more probing questions.

But the investors’ misplaced belief in Holmes wasn’t the only thing propelling the faulty Theranos tech forward. Theranos and other diagnostics companies have exploited regulatory loopholes that allow devices that are not yet FDA approved to reach the market.

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