Former Theranos director of operations and ex-boyfriend of disgraced founder Elizabeth Holmes, Sunny Balwani has been found guilty of the 12 criminal charges after a three-month trial.
In her own high-profile trial this winter, Holmes was found guilty of defrauding investors and conspiring to defraud investors in four of the 11 charges, though she was not found guilty of defrauding patients. This jury, however, found Sunny Balwani guilty of defrauding both investors and patients, as well as conspiring to defraud them.
As anyone who has seen the Hulu fiction series “The Dropout” knows, Theranos aspired to perform dozens of tests with a single drop of blood, which could have revolutionized the healthcare industry. But despite reaching a valuation of $ 10 billion and spending more than a decade developing, Theranos technology never worked, and in the most egregious cases, patients received dangerously false medical results.
Balwani is more to blame than Holmes
Holmes and Balwani were supposed to be tried together for fraud, but the former CEO filed a separate lawsuit, claiming that Balwani, who is 20 years older than her, had abused him emotionally and sexually. Although the court did not rule on these allegations, the judge accepted the request. This strategy seems to have borne fruit, as Holmes was charged with four counts, compared to Balwani’s twelve.
Throughout the trial, Balwani’s lawyers tried to argue that while he was an investor and executive at Theranos, he was not involved in key decision-making. The defense noted that it invested $ 15 million in the company, which ended up valuing more than $ 500 million at one point, but never charged. The defense did not defend his innocence, but in a trial, the jury presented a text by Balwani to Holmes that said, “I am responsible for everything in Theranos.”
In his own judgment, Holmes’ defense tried to fix the company’s colossal failure in Balwani. She herself took the charge, a rarity in the trial itself for criminal fraud, to detail their relationship. Holmes described Balwani having so much control over both herself and her company that she micromanaged her daily schedule, including how she dressed and what she ate.
“He told me that I didn’t know what I was doing in business, that my convictions were wrong, that I was surprised by my mediocrity, and that if I followed my instincts I would fail,” Holmes said in the stands. .
Balwani’s trial included the same evidence that Holmes was accused of. The prosecution focused on a key piece of evidence related to Theranos’ relationship with Walgreens. The defective technology of the biotech startup reached 41 Walgreens stores, but without the pharmacy giant knowing, most of the testing was done on third-party computers. Theranos’ own machines could not produce accurate test results, so many patients had blood drawn not with a puncture in the finger but intravenously. So Walgreens basically spent hundreds of millions of dollars redesigning stores for Theranos’ “wellness centers,” just so the startup could use the same old technology.
Although Balwani’s lawyers say otherwise, a Walgreens executive said he worked closely with Balwani on the deal. The prosecution also showed evidence from a Balwani text to Holmes saying it deliberately did not tell Walgreens that they were using different machines.
Holmes’ verdict was complicated. The jury failed to reach a verdict on three charges of electronic fraud between Black Diamond executive Chris Lucas, Hall Group executive Bryan Tolbert and money manager Alan Eisenman, who testified at trial. Judge Edward Davila found a trial set aside for these three charges. Meanwhile, Balwani was found guilty of these charges.
In particular, Holmes was not responsible for the struggles that Theranos caused to patients who received inaccurate medical results.
In one case, a mother with a history of miscarriages was misinformed that she would have another unsuccessful pregnancy. Another patient, Erin Tompkins, used Theranos for its low costs, was marked as HIV-positive, and then lived in limbo for three months until a second blood test could be allowed. As it turned out, I didn’t actually have HIV. Meanwhile, a patient named Mehrl Ellsworth was diagnosed with a false cancer. Both Ellsworth and Tompkins recounted their experiences in court, but only Balwani was convicted of defrauding patients. Holmes was only held liable for the infringements against investors.
The legacy of Theranos
It’s been almost seven years since The Wall Street Journal published the damning exposition that started Theranos ’downfall. Now, the story of the fall of the youngest self-taught billionaire has led to multiple Hollywood adaptations, such as an HBO documentary, a Hulu series, and an upcoming Apple film directed by Adam McKay.
The conclusion of Balwani’s fraud trial offers some closure to the most notorious history of startups that have gone wrong, but Theranos ’lasting impact has lingered in the collective consciousness. Theranos is a tale that warns against investing in technology without significant due diligence, but it’s not as if overly inflated home valuations have disappeared. As the Theranos and Holmes profile itself took center stage, Facebook’s haunting mantra for “move fast and break things” remained firmly in the zeitgeist, but this approach to building a business doesn’t work when the medical treatment of people.
Theranos barely reflects the rest of the home ecosystem, but the founders of biotechnology have said it is even harder for them to raise funds after the fall of Holmes. Holmes aside, however, women in technology have always faced more hurdles in securing risky funding than male founders. In 2021, less than 2% of venture capital funding went to all-female founding teams.
The Holmes jury took seven days to deliberate, but the Balwani jury made a decision on the fifth day of deliberation. The two former Theranos executives are awaiting sentencing. Holmes’ sentence is scheduled for September 26, while Balwani will have to wait until November 15. For now, former Theranos senior executives are free on charges.