Risk register · entry
Q-F · FraudTheranos
A blood analyser that never worked, sold as validated to investors.
The fifth quadrant, where the thing was never real. The tell is that the story is too clean.
Why this quadrant
An unproven machine that might work is ordinary venture risk. Theranos told investors the machine was validated and running patient samples when it was neither, which turns a probabilistic bet into a certain loss the investor cannot see coming. About 945 million dollars went in, and roughly one in ten patient results was wrong.
The record
- Investors put roughly $945 million into Theranos over its lifetimelikely
- Peak valuation of approximately $9 billion in 2014certain
- Elizabeth Holmes convicted January 2022 on 4 counts of wire fraud and 1 count of conspiracycertain
- Holmes sentenced November 18, 2022 to 11 years 3 months (135 months) in prisoncertain
- Sunny Balwani convicted on all 12 counts in July 2022, sentenced to 12 years 11 months in December 2022certain
- Approximately 1.5 million patient blood tests run through the Arizona Walgreens partnership, 2013-2016uncertain
- Roughly one in ten Theranos test results inaccurateuncertain
- Safeway invested $350 million in 2012 to retrofit 800 store locations; deal terminated 2015likely
- SEC civil settlement March 2018: Holmes paid $500,000, forfeited 19 million shares, accepted 10-year officer/director bancertain
- John Carreyrou's Wall Street Journal exposé published October 2015, triggering Walgreens to suspend expansioncertain
Sources
The newsletter
One risk story a week, taken apart the way this one was: what was known, what was ignored, and which quadrant it really belonged to.
No spam, one email a week.