Elizabeth Holmes, one time billionaire and CEO, goes on trial

Former Theranos CEO Elizabeth Holmes leaves after a listening to at a federal court docket in San Jose, California, July 17, 2019.

Stephen Lam | Reuters

Almost a decade in the past, Elizabeth Holmes was proclaimed the golden lady of Silicon Valley, and briefly topped America’s youngest feminine self-made billionaire.

This week, she’ll stroll right into a San Jose federal courthouse with a really completely different picture: a defendant charged with fraud. 

Federal prosecutors within the Northern District of California have accused Holmes and Ramesh “Sunny” Balwani, former Theranos president and for a time her romantic accomplice, of defrauding traders and sufferers. They every face two counts of conspiracy to commit wire fraud and 10 counts of wire fraud. Holmes, 37, and Balwani, 56, who might be tried individually, pleaded not responsible.

Jury choice in Holmes’ trial will start Tuesday and is predicted to take at the least two days, a course of that sometimes takes lower than a day in lower-profile circumstances. Opening statements are scheduled for Sept. 8 and the trial is predicted to final 13 weeks.

If convicted, Holmes may face 20 years in jail. Prosecutors say Holmes not solely swindled traders of a whole bunch of tens of millions of {dollars}, however she additionally put hundreds of lives in danger.

The rise and fall of Theranos

The investors

Holmes once had some of the most powerful and wealthiest venture capitalists in America behind her healthcare start-up Theranos.

Investors such as media mogul Rupert Murdoch, former Education Secretary Betsy DeVos, the Walton family of Walmart fame, the Cox family, Patriots owner Robert Kraft and Mexican investor Carlos Slim became so enchanted with her they poured millions into Theranos.

Some of those investors are expected to testify in Holmes’ trial. All of the major investors, who doled out $700 million over the course of a decade, did not respond to CNBC’s request for a comment. Prosecutors allege the investors were swayed by exaggerations and misrepresentations of the blood-testing technology.

“When a deal turns into this, you don’t want to be on that list of investors anymore,” said Kevin O’Leary, chairman of O’Shares ETFs and a judge on CNBC’s “Money Court.”

O’Leary, who said about 20% of his investments have failed, didn’t mince words when asked about the fallout from Theranos investors.

“You can understand how embarrassing it is to get a zero like that,” O’Leary said. “Clearly means you didn’t do your due diligence which all investors know is a mistake. When there’s a really hot deal, what suffers immediately is the diligence process. You’re just questioning if you can get into the deal.”

According to the indictment, prosecutors say there were six wire transfers from unnamed investors that they allege were the result of fraudulent claims about what they were getting in return.

“It’s going to be highly scrutinized and the investors will be dragged back into the press again and shamed for it,” O’Leary said. “I can guarantee you this, it will change nothing. When this is over whatever happens, it will happen again. I guarantee nothing changes in regards to investment in Silicon Valley.”

A Silicon Valley tale

Instead of being an example of Silicon Valley’s best, Theranos turned into a black eye for start-ups.

One of Holmes’ defense strategies may be to blame the so-called “fake it ’til you make it” motto of Silicon Valley. Earlier this year, the judge ruled her defense team can lean on the hype and exaggeration of start-up founders to explain Holmes’ own actions. 

“It’s going to be a wake-up call for venture capitalists and young entrepreneurs in Silicon Valley,” Carreyrou said. “If you go too far, if you push the envelope and hype and exaggerate to the point of lying, it becomes securities fraud.”

However, if she’s found not guilty, some say it could encourage risk taking.

“It’s going to a take guilty verdict to course correct and even a guilty verdict in this case might not be enough,” Carreyrou said.

Mental health defense

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