Elizabeth Holmes was sentenced to more than 11 years in prison for Theranos fraud

Elizabeth Holmes was sentenced to more than 11 years in prison for Theranos fraud

Elizabeth Holmes, the disgraced founder of the failed blood-testing start-up Theranos, has been sentenced to more than 11 years in prison for what prosecutors called one of the “most extensive” white-collar crimes ever seen in the United States.

The 135-month sentence handed down Friday marks the culmination of a saga that has fueled debate about the US tech sector’s “fake it ’til you make it” ethos and the investment community’s willingness to embrace charismatic founders.

Holmes, 38, who is pregnant with her second child, wept as she addressed the court on Friday. “I loved Theranos. It was my life’s work,” she said. “I’m devastated by my failures.”

After the verdict, Holmes, who was wearing black, embraced her husband Billy Evans. She left through a side door at the court, avoiding the crowds of press awaiting her exit. She will begin serving her sentence in April.

“Her sentence reflects the brazenness of her massive fraud and the staggering harm she caused,” U.S. Attorney Stephanie Hinds said in a statement.

Holmes was found guilty in January of four counts of defrauding investors, following a trial that lasted nearly four months.

Jurors were told how Theranos, the centerpiece of the Edison machine, was unable to perform the groundbreaking blood tests promised by Holmes and her company. Prosecutors presented evidence they said proved she falsified endorsements to win the approval of investors and partners, a fraud that led Theranos to raise $900 million in funding at a private valuation of $9 billion.

Prosecutors said investors deserved full compensation for their outlays, likening Theranos to an “airplane flying with a broken engine.”

“The writing was on the wall, it was going to fail,” prosecutor John Bostic said during Friday’s sentencing hearing. “Investors were locked in that airplane. There was no way to escape. When the company went bankrupt, none of them took anything from their investment.”

Holmes had faced a maximum of 20 years in prison. The Justice Department, calling her “blinded” by ambition, had asked Judge Edward Davila to impose a 15-year prison sentence as well as millions of dollars in restitution to her defrauded investors.

“Holmes’ crimes did not fail, they lied — lies in the most serious context, where everyone needed her to tell the truth,” prosecutors wrote.

A hearing will be held to determine the final repayment to 10 defrauded investors, including Rupert Murdoch. Judge Davila estimated the amount of money lost at about $121 million, although that could change.

Holmes’ lawyers said in a sentencing statement that 18 months of house arrest, plus community service, was appropriate.

They billed her as a well-intentioned entrepreneur with honorable goals, and a determined woman with an unwavering belief that she could achieve what Theranos had set out to do: create a game-changing device that could perform a number of sophisticated diagnostic tests on just a tiny drop of blood.

“We recognize that this may seem like a tall order, given the public’s perception of this case – particularly when Ms Holmes is seen as the caricature, not the person; when the company is seen as a house of cards, not as the ambitious, inventive and undeniably valuable company it is where; and when the media vitriol for Ms. Holmes is considered,” her defense attorneys wrote.

In Friday’s hearing, defense attorney Kevin Downey noted that Holmes had not tried to sell her shares in the company, unlike other high-profile people convicted of felony fraud.

“It’s the cases of yachts, airplanes, parties and the big mansions,” Downey said. “What did this woman do? She built technology.”

After securing lucrative contracts with Walgreens and others, the promise of the Holmes Edison machine quickly unraveled. The company began using off-the-shelf technology made by the likes of Siemens to perform tests instead, sometimes delivering inaccurate results.

It wasn’t until Theranos employee-turned-whistleblower Tyler Shultz, nephew of former US Secretary of State and Theranos CEO George Shultz, tipped off The Wall Street Journal that the matter came to light.

Reporter John Carreyrou’s book about Holmes and Theranos, bad blood, became a New York Times bestseller and inspired a slew of dramatic TV reimaginings, spurred by Holmes’ distinct Steve Jobs-inspired look and mannerisms.

Shultz’s father Alex spoke to the court on Friday and said that Holmes had hired a private investigator to follow Tyler, and that Tyler had slept with a knife under his pillow out of fear. “It was a grueling experience to go through,” Alex Shultz said. “My family home was desecrated by Elizabeth.”

Holmes’ defense said the public interest should not be used against her, noting that more than 130 people “who actually know Ms Holmes” had written to the court in support.

Among them was Democratic Sen. Cory Booker, who bonded with fellow vegan Holmes over a dinner where they both shared a packet of almonds. She “has within her a sincere desire to help others, to be of meaningful service and has the ability to redeem herself,” he wrote.

In a separate trial, Holmes’ ex-boyfriend and Therano chief operating officer Ramesh “Sunny” Balwani was found guilty for his part, convicted of 12 counts of fraud. He will be sentenced in early December.

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