The Theranos Saga Ends, Company Closes Its Doors for Good
Elizabeth Holmes, Theranos founder and former CEO. Credit: Krista Kennell / Shutterstock.com
Hours after it was reported that Elizabeth Holmes is shutting down Theranos for good, the company’s website has gone dark.
The company, which has become associated with massive fraud, ran out of money and has dissolved. Citing an email from company Chief Executive Officer David Taylor, The Wall Street Journal first reported the final acts of the company that has been in death throes for the past year. The company once had a valuation of about $9 billion, but now is attempting to pay off its creditors as it sweeps up its failed technology and places it in the dustbin of biotech history. The Journal noted that the few remaining employees at Theranos had their last day on Aug. 31. Taylor and a few others remain to close up shop.
Theranos had been bleeding cash for a long time, particularly as its reputation had been battered due to its failed blood-testing technologies and the civil fraud charges brought against Holmes, the company founder and former CEO, and former company president Sunny Balwani. Holmes and Balwani also face criminal fraud charges that allege the two engaged in a multi-million dollar scheme to defraud investors, and a separate scheme to defraud doctors and patients. Both Balwani and Holmes have entered not guilty pleas to the criminal charges. Holmes agreed to pay a $500,000 fine for fraud to the U.S. Securities and Exchange Commission for earlier charges brought against the two. Balwani is fighting the charges brought against him.
According to the indictment, Holmes and Balwani used advertisements and solicitations to encourage and induce doctors and patients to use Theranos’ blood testing laboratory services, despite the fact that Holmes and Balwani knew the company’s proprietary device was “not capable of consistently producing accurate and reliable results for certain blood tests,” the government said.
Taylor, who took over as CEO in June, outlined the final days of the company in a letter sent to remaining shareholders. In the letter, which was posted online by the Journal, Taylor said the company had about $5 million left in its accounts and was working to negotiate a settlement transaction with Fortress Investment Group, a company that provided $100 million last December, as well as other creditors. The company owes Fortress for that loan, as well as about $60 million to other creditors, according to the letter.
“Fortress has the legal right to foreclose upon, and to sell or take ownership of, all of the company’s assets, including the company’s intellectual property,” Taylor said. That intellectual property is currently owned by a “special subsidiary of Theranos," he added in the letter.
Taylor noted that Fortress will take over the company’s assets and intellectual property, but will leave the $5 million for Theranos to distribute to its other creditors. Once the creditors are paid off with the remaining funds, Taylor said there will be no remaining funds to pay anything to shareholders. Taylor said that shareholders will instead receive a copy of the certificate of dissolution, for use for tax loss purposes. The Journal reported that investors in the company have lost about $1 billion.
Taylor noted in the letter that Theranos continued to approach stakeholders for infusions of cash, but not too surprisingly, there were no takers. Taylor said that investment bank Jefferies Group LLC acted on behalf of the company in those attempts.
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