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Wednesday, May 31, 2023

    Has Theranos Founder Elizabeth Holmes Lost Final Battle to Avoid Prison? Judge Orders Restitution to Investors

    Shutterstock Debby Wong

    Theranos Founder Elizabeth Holmes, facing the final battle to avoid prison, suffered a significant blow as a federal judge ordered her to pay $452 million in restitution to investors she deceived with her fraudulent blood-testing business. In addition to the restitution order, Holmes was also directed to commence her prison sentence. Notably, among the investors she allegedly cheated was media mogul Rupert Murdoch, who had purchased 7.3 million shares of Theranos at $17 per share.

    Holmes had previously sought a pause in her sentence from the ninth US circuit court of appeals, but her bail application was denied on Tuesday at a separate hearing. Consequently, the judge overseeing her case will schedule a new prison date in light of the recent ruling. Convicted in 2022 in San Jose, California, Holmes was sentenced to 11 years and three months in prison. The court also held her former business partner, Sunny Balwani, equally responsible for repaying the substantial sum.

    While Holmes recently disclosed her inability to afford the $30 million legal defense bill, it remains uncertain whether she can fulfill the now nine-figure amounts owed. She was found guilty of conspiracy and wire fraud related to Theranos, a company that had been valued at $9 billion based on Holmes’s misleading representations to investors about its financial state and technology. Balwani, her former business partner, has already begun serving his 13-year prison sentence, while Holmes continues her efforts to delay her own 11-year sentence.

    Murdoch’s investments in Theranos between 2014 and 2015 took place before the Wall Street Journal exposed the company’s shortcomings, leading federal investigations and subsequent investor losses. The $125 million payment he is owed represents a mere 1.59% of his $7.88 billion net worth. In addition to Murdoch, other prominent investors such as Tim Draper, Larry Ellison, and the Walton family, among others, also supported Theranos financially.

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    Holmes admitted to making numerous mistakes during her tenure at Theranos, attributing them to her lack of knowledge and understanding at the time. At her trial, she offered profuse apologies, claiming naivety but denying any intention to defraud. Her legal team has contested her conviction, alleging errors and misconduct during the trial, as well as biased jury decisions. However, both the appeals court and Judge Davila found these arguments unconvincing.

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