More than two years after a Wall Street Journal investigation exposed potential fraud at blood-testing startup Theranos, many of us have forgotten about the company. The Securities and Exchange Commission has not.
Wednesday, the regulatory agency charged CEO Elizabeth Holmes and former President Ramesh Balwani with an “elaborate, years-long fraud in which they exaggerated or made false statements about the company’s technology, business, and financial performance.” As a result of the SEC’s charges, Holmes has agreed to reduce her equity stake and voting control in the company. She’s also agreed to a 10-year ban on working at public companies.
More significant than the news is the message it’s meant to send to all Silicon Valley startups—not just those whose photogenic CEOs land on magazine covers.
“The Theranos story is an important lesson for Silicon Valley,” said Jina Choi, director of the SEC’s San Francisco Regional Office, in a statement. “Innovators who seek to revolutionize and disrupt an industry must tell investors the truth about what their technology can do today, not just what they hope it might do someday.”