Tuesday, May 21, 2024

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Elizabeth Holmes found guilty of fraud and conspiracy in blockbuster Silicon Valley trial

Holmes’s story reflects the excesses of a venture capital industry that will plug any charismatic founder with a cash bazooka despite their ideas being untested.

It took more than 50 hours of deliberations over seven days, but yesterday a jury found Theranos founder Elizabeth Holmes guilty on four charges of criminal fraud. Basically, they concluded that Holmes intentionally lied to investors to raise gobs of money for her company, a blood testing startup that promised to revolutionize health care.

Spoiler alert: It didn’t. And according to the jury, Holmes knew that it wouldn’t work out even as she touted the company’s tech capabilities to raise nearly $1 billion from the likes of Rupert Murdoch, the DeVos family, and the Waltons of Walmart fame.

The details: Holmes was convicted of three counts of wire fraud and one count of conspiracy to commit wire fraud. She was found not guilty on four other charges and the jury couldn’t agree on a verdict for three charges. So Holmes went 4/11.

How long will Holmes be behind bars? Each of those guilty counts could carry a sentence of 20 years in prison, but legal experts say she’ll probably serve less time than that, given typical sentences in white-collar fraud cases like hers.

How we got here

When she was 19, Holmes dropped out of Stanford to build a device that could perform hundreds of diagnostic tests more cheaply and more accurately than anything on the market. She was labeled the youngest female self-made billionaire by Forbes and drew comparisons to Steve Jobs.

But things unraveled when WSJ investigations in 2015 and 2016 exposed Theranos’s vaunted technology for not actually working. Then came a slew of lawsuits and an indictment, and in 2018 the company dissolved in a thundercloud of disgrace.

Big picture: To many, Holmes’s story reflects the excesses of a venture capital industry that will plug any charismatic founder with a geyser of cash despite their ideas being untested. But Silicon Valley insiders told Bloomberg that, despite Holmes’s conviction, that faucet won’t be turned off anytime soon. The lure of exponential returns is that powerful.

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