Elizabeth Holmes, the disgraced founder of failed blood-testing start-up Theranos, has been sentenced to more than 11 years in prison for what prosecutors called one of the “most substantial” white-collar crimes ever seen never in the United States.
The 135-month sentence handed down on Friday marks the culmination of a saga that has ignited a debate over the US tech sector’s “until you make it” ethos and the investment community’s willingness to embrace the charismatic founders of companies
Holmes, 38, who is pregnant with her second child, wept as she addressed the court on Friday. “I loved Theranos. It was my life’s work,” he said. “I am devastated by my failures.”
After the sentence was handed down, Holmes, who was dressed in black, hugged her husband Billy Evans. He left through a side door of the court, dodging the throngs of press awaiting his exit. He is scheduled to begin serving his sentence in April.
“His sentence reflects the audacity of his massive fraud and the staggering damage it caused,” U.S. Attorney Stephanie Hinds said in a statement.
Holmes was found guilty in January of four counts of defrauding investors, after a trial that lasted nearly four months.
Jurors explained how Theranos’ centerpiece, the Edison machine, was incapable of performing the groundbreaking blood tests that Holmes and his company had promised. Prosecutors showed evidence they said showed she falsified endorsements to get approval from investors and partners, a deception that led Theranos to raise $900 million in funding at a $9 billion private valuation .
Prosecutors said investors deserve full restitution for their expenses, comparing Theranos to a “plane flying with a broken engine.”
“The writing was on the wall, it was going to fail,” prosecutor John Bostic said during Friday’s sentencing hearing. “The investors were locked in that plane. There was no way to escape. When the company went out of business, none of them took anything from their investment.”
Holmes had faced a maximum of 20 years in prison. The Justice Department, calling her “blinded” by ambition, had asked Judge Edward Davila to impose a 15-year prison sentence and millions of dollars in restitution to her defrauded investors.
“Holmes’ crimes were not failing, they were lying, lying in the most serious context, where everyone needed him to tell the truth,” prosecutors wrote.
A hearing will be held to determine final restitution for 10 defrauded investors, including Rupert Murdoch. Judge Davila estimated the amount of money lost to be about $121 million, although that could change.
Holmes’ lawyers said in a sentencing memo that 18 months of house arrest, plus community service, was appropriate.
She was billed as a well-intentioned businesswoman with honorable goals and a determined woman with an unwavering belief that she could accomplish what Theranos had set out to do: create a game-changing device that could perform a series of sophisticated diagnostic tests only in one small drop of blood
“We recognize that this may seem like a difficult task, given the public perception of this case, especially when Ms. Holmes is seen as the caricature, not the person; when the company is seen as a house of cards, not the ambitious, inventive and undeniably valuable enterprise that it was; and when you consider the media vitriol of Ms. Holmes,” her defense lawyers wrote.
At Friday’s hearing, defense attorney Kevin Downey noted that Holmes had not tried to sell his shares in the company, unlike other high-profile individuals convicted of major fraud.
“These are the cases of yachts, airplanes, parties and big mansions,” Downey said. “What did this woman do? She built technology.”
After securing lucrative contracts with Walgreens and others, the promise of Holmes’ Edison machine quickly unraveled. The company began using off-the-shelf technology made by Siemens to run tests, and it sometimes delivered incorrect results.
It wasn’t until Theranos employee-turned-whistleblower Tyler Shultz, the nephew of former US Secretary of State and Theranos director George Shultz, reported to The Wall Street Journal that the matter came to light. light
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Journalist John Carreyrou’s book about Holmes and Theranos, Bad Blood, became a New York Times bestseller and inspired a series of dramatic television reimaginings, spurred by Holmes’ signature look and mannerisms inspired by Steve Jobs.
Shultz’s father, Alex, addressed the court Friday, saying that Holmes had hired a private investigator to follow Tyler and that Tyler had slept with a knife under his pillow out of fear. “It was an exhausting experience,” Alex Shultz said. “My family home was desecrated by Elizabeth.”
Holmes’ defense said the public’s interest should not be used against her, noting that more than 130 people “who really know Ms Holmes” had written to the court in support.
Among them was Democratic Sen. Cory Booker, who bonded with her vegan Holmes over a dinner where the two shared a packet of almonds. She “has within her a sincere desire to help others, to be of meaningful service, and has the ability to redeem herself,” he wrote.
In a separate trial, Holmes’ former boyfriend and Theranos chief operating officer, Ramesh “Sunny” Balwani, was also found guilty on 12 counts of fraud. He will be sentenced in early December.