The SEC has charged fallen entrepreneurial star Elizabeth Holmes, founder of flameout Theranos (Private:THERA), and former President Ramesh Balwani with fraud. She also has to return millions of shares to Theranos and won't be able to serve as an executive at a public company for 10 years.
Holmes and Balwani have agreed to a number of measures to settle the charges against them.
In the event that Theranos is liquidated or acquired, Holmes can not profit from her remaining shareholding unless $750 million is handed back to investors that were defrauded.
"They deceived investors by, among other things, making false and misleading statements to the media, hosting misleading technology demonstrations, and overstating the extent of Theranos' relationships with commercial partners and government entities, to whom they had also made misrepresentations", the SEC charged. In truth, Theranos' technology was never deployed by the U.S. Department of Defense and generated a little more than $100,000 in revenue from operations in 2014.
In 2014, the Silicon Valley upstart reached a valuation of $9 billion, the most of any venture-backed company working in health care.
The US Securities and Exchange Commission said Wednesday that Theranos and Holmes have agreed to resolve the charges against them.
In a statement, Theranos' independent board of directors said the company was "pleased to be bringing this matter to a close and looks forward to advancing its technology". Holmes agreed to give up majority voting control over the company and reduce her equity in the privately-held company.
Theranos and Holmes neither admitted nor denied the allegations in the SEC's complaint and the settlements are subject to court approval.
Theranos and Holmes have settled with the SEC as a result. The SEC intends to litigate its claims again Balwani in federal court.
The SEC's investigation was conducted by Jessica Chan, Rahul Kolhatkar, and Michael Foley and supervised by Monique Winkler and Erin Schneider in the San Francisco Regional Office.