Elizabeth Holmes sentenced to 11-plus years in prison for defrauding Theranos investors

Elizabeth Holmes, founder of the once high-flying blood-testing startup Theranos, was sentenced Friday to 11.25 years in prison and three years of supervised release after being convicted on four counts of fraud.

Edward Davila, the San Jose federal judge who oversaw Holmes’ trial in California’s Northern District, passed down the judgment to a “visibly pregnant” Holmes, reported NBC’s Scott Budman, who was tweeting from inside the courtroom. According to Budman, prior to announcing the sentence Davila said, “Failure is normal. But failure by fraud is not OK.”

Toward the end of the hearing, Holmes tearfully addressed the court.

“I stand before you taking responsibility for Theranos. It was my life’s work,” she said, per Budman. “I am devastated by my failings. I have felt deep pain for what people went through, because I failed them. … To investors, patients, I am sorry.”

Davila set Holmes' surrender date for April 27, according to Law360’s Dorothy Atkins, who was also present at the proceedings.

Davila didn’t make a decision on financial penalties Friday but said another hearing on the matter will follow in the future, Atkins reported.

However, the judge noted that his sentencing decision was based on a calculation of $384 million in investor losses, a figure that Davila came up with by tallying losses from just 10 Theranos investors, including Rupert Murdoch and Betsy DeVos, per Budman, as well as a “reasonable total loss to investors” of $121 million.

In his decision, Davila had to consider Holmes’ questionable behavior at the helm of Theranos, its impact on patients and investors, the question of whether she has shown sufficient remorse for the crimes and the possibility that her sentence could help rein in the potentially dangerous “fake it 'til you make it” attitude rampant in Silicon Valley.

That was all weighed against the letters that dozens of family members and friends submitted to the court in her defense and her lack of prior criminal history, as well as the fact that she is the mother of a young child and pregnant with her second.

The punishment falls around the midpoint of Holmes’ maximum possible sentence, which could’ve reached as high as 20 years in prison and fines of $250,000 plus restitution for each of her three convicted counts of wire fraud and one count of conspiracy to commit wire fraud.

In a trial that stretched from August 2021 to the first week of January this year, Holmes was tried on 12 fraud charges, though one was thrown out during the proceedings. Her four guilty counts were all related to defrauding investors; the jury was deadlocked on another three counts of investor fraud and found her not guilty on the remaining four counts, which were linked to defrauding patients.

Last week, Holmes’ legal team and federal prosecutors submitted separate documents requesting vastly different punishments for the founder.

Holmes’ attorneys suggested that no prison sentence was needed at all, writing that “home confinement with a requirement that Ms. Holmes continue her current service work is sufficient.” They also noted in the document that she has put in more than 500 hours as a certified rape crisis counselor and advocate since her January conviction. If jail time is absolutely necessary, they added, a maximum of 18 months would do, followed by a supervised release period.

The memo detailed Holmes’ post-Theranos life as a “supportive partner and coparent” with her partner, Billy Evans, for their 16-month-old son. It also included more than 130 letters in support of her character; Evans’ letter revealed that they are currently expecting their second child.

The U.S. Department of Justice, meanwhile, asked for 10 times the punishment: a 180-month sentence, or 15 years, plus three years of supervised release and an $804 million payment for restitution. Elsewhere in that memo, the prosecutors disclosed that the federal probation officer in Holmes’ case had proposed only a nine-year sentence.

“Holmes speaks eloquently about her desire to innovate and improve healthcare. She has demonstrated a strong work ethic, charisma and ambition. But she is blinded by that ambition. Her reality distortion field put, and will continue to put, people in harm’s way,” the prosecutors wrote.

Holmes’ trial and subsequent sentencing are positioned to send a harsh message to a tech industry characterized by its “move fast and break things” ethos and godlike founders whose knack for overpromising and, all too often, underdelivering has long gone unchecked.

Theranos aimed to deliver a bench-top device that could run hundreds of diagnostic tests on just a few drops of blood. It raised more than $900 million, soaring to a $10 billion valuation at its peak, and racked up partnerships with Walgreens and Safeway to put its Edison devices in the retail giants’ clinics.

The only problem? The devices didn’t work.

Doubts about the promise of Theranos began to trickle out as then-Wall Street Journal­ reporter John Carreyrou first published evidence that the company’s machines couldn’t do what Holmes had told investors they could. The dam had completely broken by 2016, as a flood of further evidence of the technology’s shortcomings came to light. Walgreens cut off its partnership with Theranos and investigations by federal and state agencies halted lab operations, ultimately leading to the company’s 2018 shutdown.

During her trial, Holmes admitted in a week’s worth of testimony to having knowingly used modified Siemens analyzers to run the tests that Walgreens believed Theranos was doing itself. She also confessed to adding pharma companies’ logos to Theranos reports without their signoff. Throughout the trial, however, she and her attorneys maintained that Holmes had believed wholeheartedly in her company’s ability to achieve its mission, despite willfully engaging in those shady practices.

The defense also claimed that many of Holmes’ questionable actions and behavior were due to the emotional and physical abuse she reported experiencing at the hands of Ramesh “Sunny” Balwani, her ex-boyfriend and the former president and chief operating officer of Theranos. Balwani has denied all claims of abuse.

With Holmes’ sentence set, Balwani will face his own judgment next month. He was tried on the same 12 charges as Holmes but was found guilty of the full dozen. He faces the same maximum punishment as her, and his sentencing is set for Dec. 7.