Theranos founder Elizabeth Holmes and her co-accused and former lover Sunny Balwani were ordered late Tuesday to pay more than $450 million in restitution for defrauding investors.
Holmes, the founder and former CEO of the now-defunct Palo Alto, California, blood testing startup, has said in court filings that she “continues to work on ideas for patents” but “has essentially no assets of meaningful value” and “has incurred substantial debt from which she is unlikely to recover.”
Former Theranos CEO Elizabeth Holmes
In his restitution order, Judge Edward Davila, who presided over the trials and convictions of Holmes and Balwani, held the two “jointly and severally liable” for the nearly half-billion-dollar repayment to individuals and entities, because they were both found guilty of conspiring with each other to defraud investors. That means Holmes and Balwani – the former Theranos president who has denied Holmes’ claims he sexually abused and coerced her – are each on the hook for the full amount, but if one pays, they can seek a contribution from the other.
How much Balwani may be able to pay is unclear. In a February court filing, a lawyer for Balwani attacked prosecutors’ suggested restitution of more than $878 million as “beyond anyone’s ability to pay,” and asked Davila to order that any restitution payment be delayed until Balwani gets out of prison.
Holmes was convicted by a jury in January 2022 in U.S. District Court in San Jose of four counts of defrauding investors, but not patients. Balwani tried separately, and was convicted six months later of defrauding both patients and investors. Balwani’s jury found him guilty of conspiring with Holmes to defraud patients. Davila sentenced him to almost 13 years in prison.
Holmes, 39, this week lost her final bid to delay the start of her prison sentence of more than 11 years. On Wednesday, her legal team asked in a court filing that she go to prison on May 30, and said federal prosecutors had no objection to that date. Davila, who oversaw her four-month trial in U.S. District Court and sentenced her in November, did not immediately rule on the prison-date request.
Holmes’ jury convicted her on charges related to about $144 million in losses. Federal prosecutors in a March court filing asked Davila to order Holmes to repay the full amount of investor losses, which the prosecution tallied at more than $878 million. Davila in his restitution order said he had held Holmes liable for $452,047,268 based on the overall fraud scheme.
Davila said that for restitution, he found Holmes and Balwani victimized 12 individuals and entities. “For each of these investors, the Court identified specific reliable evidence indicating that they were induced to invest in Theranos by Defendants’ misrepresentations as part of the fraud conspiracy,” Davila said.
The investor with the largest restitution amount is media magnate Rupert Murdoch, with Holmes and Balwani ordered to pay him $125 million.
Holmes and Balwani were also ordered to pay a total of nearly $55 million in restitution to Walgreens, which housed Theranos blood-testing machines, and Safeway, which dissolved a partnership with Theranos.
In November, Davila sentenced a pregnant Holmes but allowed her to defer incarceration until April 27 in a decision legal experts said was likely to allow her to give birth to her second child.
Davila has recommended that Holmes serve her time at a minimum-security prison camp 100 miles from Houston, but the U.S. Bureau of Prisons has the final say on the location of her incarceration. Under federal law, Holmes must serve at least 9.5 years of her sentence.
A Stanford University dropout who founded Theranos in 2003 at age 19, Holmes has been free on bail since she was charged by federal authorities with fraud in 2018. Jurors in her trial heard she made false statements about her company and its purported ability to conduct a full range of tests using just a few drops of blood from a finger-stick. The trial generated worldwide media coverage, with evidence revealing Theranos’ technology fell far short of Holmes’ claims, and that she engaged in substantial deceptions about its capabilities and uses, and about her company’s financial state.
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