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The Securities and Exchange Commission (SEC) on Wednesday charged consumer healthcare technology company Theranos, its CEO Elizabeth Holmes and the company’s former president Ramesh “Sunny” Balwani with fraud, alleging that they misled investors in a scheme that spanned years.
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Holmes, founder of Theranos, is being stripped of control of the company and is barred from serving as an officer or director at any public company for the next decade, according to the SEC.
Both Theranos and Holmes have agreed to settle the charges against them, according to the SEC. In addition to losing control of her company, Holmes will be forced to return 18.9 million shares, which the SEC says were obtained through fraud, to investors, and pay a $500,000 penalty.
Holmes and Balwani are charged with raising more than $700 million from investors through a fraudulent scheme that took place over the course of years. They allegedly made misleading statements about the company’s portable blood analyzer, which is a machine that can test and process small samples of blood, during investor presentations and product demonstrations.
The SEC concluded that while Theranos touted the technology as revolutionary, the blood analyzer had only been successfully tested a small number of times.
Holmes, Balwani and Theranos allegedly claimed that this product was used by the Defense Department on the battlefield in Afghanistan, generating $100 million in revenue for the company in 2014. The SEC found that the government did not use Theranos’ technology and that revenue in 2014 barely surpassed $100,000.