What was the outcome?
As a result of market suspicions, regulators investigated the company. They concluded that Theranos' claims on its breakthrough device were false and its product's design had not been validated under actual or simulated use cases.
A letter released by the Center for Medicare & Medicaid Services (CMS) at the beginning of 2016 stated that a California-based lab used by Theranos posed "immediate jeopardy to patient health and safety."1 It gave the company 10 days to correct the deficiencies or face daily fines and/or loss of CMS approval for Medicare payments.
In July 2016, Holmes was banned by US regulators from owning and running a medical laboratory for two years. By October, the company closed its labs and testing centers, shuttering operations altogether.
In March 2018, the US Securities and Exchange Commission (SEC) charged Holmes and Balwani with “an elaborate, years-long fraud”2 that involved exaggerated or false statements about the company's technology and performance. Holmes and Theranos agreed to resolve the SEC complaints, with Holmes giving up financial and voting control of the company, paying a $500,000 fine, and returning 18.9 million shares of company stock. She also agreed to restrictions against holding a leadership position in any publicly traded company for 10 years.
As reported by several media, Balwani decided to fight the SEC's charges, claiming that he "accurately represented Theranos to investors to the best of his ability."
In addition to the SEC's charges, the office of the United States Attorney for the Northern District of California also announced in July 2018 that Holmes and Balwani were indicted on federal wire fraud charges. They were charged with two counts of conspiracy to commit wire fraud and nine counts of wire fraud.
Following trials held in 2022, Holmes was sentenced to 11 years and three months, while Balwani was sentenced to 12 years and 11 months in prison and three years on probation.