Theranos Settles Investor Lawsuit for Undisclosed Sum

Published: Jul 24, 2018 By

Elizabeth Holmes_Editorial_Krista Kennell

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Battered and beleaguered biotech Theranos, Inc. has settled another civil case. This time the financially strapped company settled a lawsuit filed by investors who claimed they were defrauded by the company.

First reported by The Wall Street Journal, the settlement ends a civil case brought against the medtech company by Robert Colman and other plaintiffs who “made indirect investments” in the company. The plaintiffs sued the company on allegations that it made “false and misleading statements about its technology,” the Journal reported. Terms of the settlement were not disclosed, the Journal added.

Theranos has been hemorrhaging money for some time. The embattled company has been forced to settle a number of lawsuits in recent months and that has helped to deplete the meager resources of the former high-flying Silicon Valley unicorn with a valuation of about $9 billion. The company has been living off of a $100 million loan it secured in late December from Fortress Investment Group. That money could be running out though as Theranos could fail to live up to its deal commitment to remain above a $3 million threshold established by the agreement.

Theranos, according to the Journal, also failed to live up to another agreement – one established by the settlement of a lawsuit with Walgreens. The Journal said Walgreens filed a new lawsuit against Theranos alleging that the medtech failed to “make good on a payment” related to a 2017 settlement the two companies reached. In addition to the Walgreens settlement, Theranos has settled other lawsuits, including a confidential settlement with Partner Fund Management LP, a hedge fund that invested $96.1 million into the company in 2014.

The newest settlement combined with the potential legal losses related to the second Walgreens lawsuit could be the proverbial straw that broke Theranos’ back. The company has been rumored to be close to shuttering its doors and has continued to be rocked by multiple allegations of fraud and wrongdoing. In March, the company agreed to pay a $500,000 fine for fraud to the U.S. Securities and Exchange Commission and founder and Chief Executive Officer Elizabeth Holmes stepped down from her top spot at the company. Former company president Ramesh “Sunny” Balwani is fighting those charges.

Earlier this spring BioSpace reported on an email Holmes sent to investors suggesting that the company could shut down and liquidated by June or July if she is unable to secure any additional funding. In early April, about nine days before Holmes sent the note to her investors, Theranos laid off an additional 100 employees as it sought to prevent bankruptcy.

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 has not launched much of a public defense against these charges but Balwani has, with his attorney engaging in a bit of a media blitz to decry the charges.  

While Theranos has settled the Colman lawsuit, the Journal noted that the case could have implications for the company. A documentary filmmaker, Alex Gibney, has requested that the judge overseeing the case allow video depositions to become a matter of public record. Some of those depositions would be from Theranos insiders, the Journal said. Gibney is in the middle of making a documentary about the company for HBO. Some of those tapes, or at least some of the portions, will be made public, the Journal said.  

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