SAN JOSE, Calif. — Ramesh Balwani, a former chief executive at Theranos, was found guilty on Thursday of 12 counts of fraud, in a sentence harsher than that of his co-conspirator, Elizabeth Holmes, and the failed blood-clotting-testing start-up like the ultimate Silicon Valley warning story.
Mr. Balwani and Ms. Holmes, who together pushed Theranos to great heights with the promise to revolutionize healthcare, are the most prominent tech executives to be charged and convicted of fraud in a generation. A jury of five men and seven women took 32 hours to reach a verdict, with Mr Balwani, known as Sunny, being convicted of all 10 counts of wire fraud and two counts of conspiracy to commit wire fraud.
Ms. Holmes was convicted of four counts of fraud in January and acquitted of four; three other charges were dismissed after the jury was unable to reach a consensus. She has appealed the verdict and Mr Balwani is expected to do the same.
Both cases depended on whether they exaggerated the capabilities of Theranos’ blood testing machines to appeal to investors and customers when the products didn’t really work.
Each count carries a maximum prison sentence of 20 years. Mr Balwani and Ms Holmes are expected to be sentenced together in September.
As the pleas rolled in, Mr Balwani, 57, who appeared in court in a black suit and blue medical mask, glanced briefly at the jury before taking his gaze straight ahead.
The double convictions are a rare example of Silicon Valley’s hype machine leading to possible jail time. Since Theranos collapsed in 2018, the company has evolved into shorthand for corporate scammers, and the world has developed a voracious appetite for messy startup rise-and-fall stories, like WeWork’s disastrous first attempt at IPO. and the Ozy Media deception. But Theranos was the only one who led to criminal charges. Its consequences are likely to send a message to entrepreneurs who exaggerate in the name of innovation.
The verdict showed that the jurors were influenced by the prosecutors’ evidence that Mr Balwani was aware of the problems in Theranos’ technology and business while misleading investors and patients. Mr. Balwani had tried to shift blame by stating that Ms. Holmes – as chief executive and founder of Theranos – was in charge, and by claiming that he believed in Theranos’ mission and technology.
Mr Balwani “put his heart and soul into Theranos,” Jeffrey Coopersmith, a lawyer for Mr Balwani, said in his closing statement. “He worked tirelessly, year after year, to make the company a success.”
Evidence from the trial, including text messages, emails and testimony from 24 witnesses, showed that Mr Balwani had been deeply involved in almost every aspect of Theranos’s affairs and was aware of the problems. He ran the lab, made the financial projections, led personnel issues and attended many pitch meetings with investors.
“Mr. Balwani wants you to think he’s a victim,” Jeffrey Schenk, an assistant US attorney and chief prosecutor on the case, said in his closing statement. Balwani is not the victim – he is the perpetrator of the fraud.”
The verdict came amid a hard awakening for the tech industry as stock prices plunged amid rising interest rates, rising inflation and economic uncertainty. Burned by the sell-off, investors have stopped chasing risky, money-losing start-ups, prompting many Silicon Valley companies to cut staff and delay their aggressive expansion plans. The humbling moment has many predicting the end of a decade-long boom for tech start-ups.
Mr Balwani and Mrs Holmes took advantage of that era of go-go optimism for Theranos. The pair met when Ms. Holmes was 18, and they started dating secretly shortly after she founded the start-up. Mr Balwani joined the company in 2009 and invested in it.
As Chief Operating Officer of Theranos, he played a behind-the-scenes role in the company’s emergence. He helped Ms. Holmes build her Steve Jobs-esque image, ran the lab, and helped raise funds, propelling the company to a valuation of $9 billion.
A 2015 revelation in The Wall Street Journal revealing that Theranos had lied about his blood tests shook the company. Mr Balwani soon left and the start-up went under in 2018. That year, he and Ms Holmes were charged with fraud.
Each defendant was often discussed in the other’s trial, but neither testified against the other. Ms. Holmes accused Mr Balwani of emotional and sexual abuse, but those charges were not allowed as evidence in his trial.
“The story of Theranos is a tragedy,” prosecutor Schenk said in his closing statement.
Kalley Huang reporting contributed.
