Theranos’ Elizabeth Holmes reportedly pleads guilty to fraud

On Sunday, news broke that Theranos founder Elizabeth Holmes, who dropped out of Stanford University at 19 to found her company, had reportedly turned herself in to federal authorities in San Jose, California, where the company is headquartered.

The investigation has been under way for months, prompted by concerns over the effectiveness of Theranos’ blood tests.

Theranos’ story started out positive enough. In a 2015 feature in Vanity Fair, Holmes described the Theranos machine, the Edison, as “a little digital nuke engine in the cloud, sitting in a garage” capable of analyzing one test from 10 vials of blood in 15 minutes.

After years of carefully cultivating her image — passing a stringent background check, riding a Segway, and looking smart in plaid suits — Holmes, 29, was not afraid to ride shotgun with Oprah.

And her company’s early success got media attention and major support from institutions like Johnson & Johnson, where Holmes became a part-time board member. Silicon Valley firms and venture capitalists piled in, helping to build Theranos a $9 billion behemoth.

But Holmes had trouble keeping her promises. In 2015, Bloomberg reported that Theranos had pulled an audit of its lab in Phoenix and was self-reporting to the US Centers for Medicare and Medicaid Services. Soon after, investors began to bail on the company, which canceled its IPO.

As CNN reported, a few months later, the company issued a statement admitting that its test results were inaccurate. A spokesman for Theranos told CNN that the results could not be verified because the CDC never followed up on the company’s claims.

“They were able to stay in business by flimflamming everybody for so long,” CNN legal analyst Danny Cevallos said, “and it seems that they were knowingly able to let the public be hoodwinked.”

This has led to tough questions for Holmes and the tech companies and institutions that backed her, including the Mayo Clinic, which Theranos said was one of its launch partners.

Theranos was able to get away with its shenanigans because Holmes amassed some of the strongest fan bases among Silicon Valley investors.

Experts say there’s no law against branding a company as an underdog. “If you saw [past] 20, 30 years of history,” said Rodney Hackett, the president of Hackett Branding, “the people who were known as the underdog were either saving the world or saving lives.”

But it’s a dangerous line, Hackett said, “if you can’t meet your financial projections, the public begins to lose faith in the company, if the investors have lost faith in the company.”

As for what’s next for Theranos, the company says it will continue to fight on.

“Theranos continues to be committed to the growth of our businesses, and we look forward to fighting the allegations against us and defending our reputation,” a company spokesperson said in a statement.

CNN reached out to Theranos for further comment but did not hear back.

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