The story now known as Silicon Valley's biggest scam began in 2003 when Elizabeth Holmes, a 19-year-old student, dropped out of Stanford University, California, to found a technology company in Palo Alto that promised to revolutionize the world. US healthcare sector and save hundreds of thousands of lives. The company was called Theranos, from the fusion of the two English terms therapy and diagnosis, therapy and diagnosis. In the following years Theranos managed to raise more than 700 million dollars from private investors and at its peak, between 2013 and 2014, reached a market value of 9 billion dollars.
Theranos' technology had been peddled by Holmes as revolutionary: the company had built a machine the size of an old desktop computer that made it possible to do blood tests by taking a blood sample from a fingertip from patients. What it promised to do was actually revolutionary: the fact that it needed so little blood and that it was so small made it possible to imagine a future in which to do blood tests with great ease and therefore also with great frequency, allowing to monitor effectively. and big savings in the blood values of sick people but also of healthy ones.
The machine had been renamed Edison, after the inventor of the light bulb: according to the company it was able to give reliable results in a short time and at a fraction of the cost of the tests done in normal laboratories (every year the blood tests done in the United States , where healthcare costs a lot, generate a 70 billion dollar market). Theranos' technology, Holmes said, could carry out up to two hundred different tests with a drop of blood, including those for HIV, blood type, and for viruses of any kind. His dream was to see Edison in the home of every US citizen.
Thanks to this revolutionary idea, Holmes had convinced several funds and very wealthy people – including Rupert Murdoch – to invest in his company, raising 700 million dollars in ten years. Holmes had also managed to persuade several high-profile US politicians and personalities to join the Theranos board of directors, to give her company prestige: the two former secretaries of state Henry Kissinger and George Shultz, the former secretary of defense. William Perry, close Democratic attorney David Boies, former Senators Sam Nunn and Bill Frist. However, there were no doctors, engineers or scientists.
In 2013, Theranos struck a deal with Walgreens, the largest drugstore chain in the United States, to install Edison in their stores, starting with those in Arizona. Holmes and her company were portrayed as a true entrepreneurial phenomenon: Forbes valued his company $ 9 billion and Holmes, who owns half of the shares in Theranos, thus became the 12th richest woman in the United States, with an estimated capital of approximately 4.5 billion dollars.
Holmes also became Silicon Valley's first female billionaire, and many called her the new Steve Jobs: perhaps also due to the fact that she always wore a black turtleneck, like the one the Apple founder used to wear. In September 2015 she appeared on the cover of Forbes in the issue dedicated to the 400 richest people in the United States – she was the only female billionaire not to have inherited her wealth – and in November 2015 she was awarded the “Women of the Year Award” of Glamor magazine, which annually awards women who have distinguished themselves in the world of entertainment, fashion, politics and business.
Things began to change in October 2015, when a Wall Street Journal investigative reporter, John Carreyrou, wrote his first article on Theranos, in which he revealed all the lies that Holmes and former chief operating officer, Ramesh ” Sunny ”Balwani, had told up to that moment: first of all the absolute ineffectiveness of the Edison machine and the unreliability of the analyzes and demonstrations made up to that moment. The technology invented by Theranos, in fact, was used by the group only for a tiny fraction of the tests it performed: of the 215 tests in the Theranos catalog, only 15 were performed with the Edison machine; for the remaining 200 traditional Siemens machines were used. Furthermore, the samples taken to be analyzed by Edison were not sufficient to be subjected to the analysis of traditional machines and therefore the blood vials were diluted, compromising the final result.
After the article in the Wall Street Journal, lawsuits began to arrive. The Centers for Medicare and Medicaid Services (CMS) inspected Theranos laboratories and found that the facilities “did not meet certificate requirements and performance standards”, causing “immediate danger to patient health and safety.” Companies that had started partnering with Theranos suspended the sale of blood tests done in Theranos labs, and Walgreens suspended the close deal in 2013.
Theranos was also investigated by the Securities and Exchange Commission (SEC), the US federal body similar to the Italian Consob. Holmes and Balwani, who retired in 2016 after seven years at the helm of the company and who was romantically linked to Holmes, were accused of systematically lying to their investors in order to receive more and more funds. Among other lies, Holmes and Balwani also alleged that their technology was used by the Defense Department in Afghanistan and the helicopter rescue services. They also distorted their balance sheets, saying that in 2014 the company had generated over $ 100 million in revenue, when in reality the revenue was just over $ 100,000.
What no one can now explain is how Holmes managed to run a company for years, deceiving some of the most powerful men in the United States with a technology that has never actually been verified and that more than one doctor had called impossible. For this reason too, thousands of articles on the case have come out in the last two years. Carreyrou, the Wall Street Journal reporter who first raised the case, wrote a book about the Theranos scam, Bad Blood, in 2018, which among others was also recommended by Bill Gates, from whom a film will soon be made. with Jennifer Lawrence as the protagonist. HBO produced a documentary on the affair, released on March 18, and ABC dedicated a series of podcasts to Theranos, but according to New Yorker reporter Rachel Syme, no one has yet really managed to understand Holmes' behavior, which after four years still professes innocent.
Even in 2017, when it had been proven that Edison was not working, Holmes continued to maintain his lifestyle and his optimistic spirit convinced that the company would make it, said Nick Bilton in an article on Hive. Former Theranos employees describe that period as surreal, as if Holmes truly believed the company would make it, and viewed the scandal as a plot hatched by journalists and pharmaceutical companies. Many have called it the perfect embodiment of the Silicon Valley saying “fake it, until you make it”. In 2017 she also bought a dog, a husky puppy, which she said was supposed to represent the journey the company should have taken to re-establish its name after the scandal raised by the Wall Street Journal. He had named him Balto, after the famous sled dog who led a team of huskies 600 miles across Alaska in 1925 to deliver a medicine to treat a severe diphtheria epidemic. In the last days of the company, when the headquarters had been moved from the huge building along Page Mill Road in Palo Alto – called by its employees simply the “1701”, as the house number – to an old solar panel warehouse, Balto he went around the offices leaving his needs around, in the total indifference of Holmes who kept looking for new investors willing to bet on Theranos.
Another of the things that the documentaries on Theranos tell is the climate of absolute secrecy and paranoia that Holmes had brought into the company. The nearly 700 employees had been forced to sign very strict secrecy clauses that forbade talking about anything that happened within the company, justifying it with patent reasons, and no department knew exactly what the other was doing. In this way, few knew that Theranos' technology was not working. Ana Arriola, a former employee of Theranos who in 2007 had been “tipped off” by Apple along with other executives, compared the working environment at Holmes' company to a South American dictatorship, which was held together only by charm and manipulative skills of its founder.
Following the SEC investigation, Holmes was ordered to pay a half-million dollar fine and barred from holding any executive positions in publicly traded companies for the next ten years and from running medical laboratories for two. Holmes and Balwani are still on trial and a criminal investigation by the San Francisco federal prosecutor is also pending: they face up to 20 years in prison for financial fraud. Theranos ceased operations in August 2018. Holmes' personal fortune is now estimated at zero.
