Elizabeth Holmes to seek mental disease/insanity

[wilfred]

That is interesting. I'd be curious to see the details. "Conspiring to defraud investors" usually requires making use of one's particular influence, network, credibility, etc, to persuade others to invest (in other words, having some position of power and authority), and as I already mentioned (I know many did not agree), I'm wondering how and where her influence could come from, because to me, she had neither power (at the beginning at least) nor authority, so I'm still very curious how this was determined that she was able to defraud seasoned investors on her own.

Not saying she didn't deserve it, eh. Just still really curious about this particular point. I don't doubt she's a bit nuts and maybe "evil" too, but being nuts is usually not enough to gain power, authority and credibility.

She's not nuts. Or evil. She didn't set out to do harm to anyone but she became obsessed and delusional in believing it was possible to run a complete spectrum of hundreds of tests with tiny finger prick samples. The dilutions were introducing errors in test accuracy and the tiny machines were always going to present insurmountable problems with miniaturisation.

Maybe she was a bit evil but I don't think she set out to be evil. I think she slid into it and just kept digging.  But listening to the podcasts on the trial and reading the book you have to wonder at the secrecy inside Theranos and the unusually tight need-to-know silos where some teams were not allowed to see what others were doing. That is where I start to think the slide into fantasy wasn't accidental and she knew it was a pipe-dream early on.

Her authority came from being CEO of a Silicon Valley startup and her influence was bought in the form of very high profile board members who carried substantial gravitas.

There's sure to be more to come on appeal.

[SiliconWizard]

I dunno if she is nuts or evil. But whatever, this is sort of irrelevant. Just a thought - because many have called her evil. And as time was passing by, I admit she was starting to look a bit spooky.

Her authority came from being CEO of a Silicon Valley startup and her influence was bought in the form of very high profile board members who carried substantial gravitas.

Well, anyone can be CEO of a Silicon Valley startup these days. Almost everyone also knows that a good 80% of them are bullshit.
As to how she was able to "buy" those high-profile board members - and keep them on board, while definitely some things were starting to be questioned along the way - is also a bit of a mystery. But that in itself is not enough, IMO, to give power and credibility. That again is very common. That's almost how all startups are built these days - using a a few PHDs as staff members and a couple professors as board members. This is cool but isn't enough to give a project credibility. At least, it certainly should not.

There's sure to be more to come on appeal.

Yep, I'm pretty curious. Because whatever is going to happen, it's going to set a precedent. And if it could drill some sense into some people and future investors, maybe then, something will be gained from it all. If not, it will happen again, and investors will keep injecting loads of cash into pure bullshit startups. Of course this is particularly bad here because it dealt with health, but the point is still a general problem.

Then again, for as long as it happens, we'll have stuff to write about in this forum section. =)

[coppice]

I'm more bothered about the mental state of all the people suckered by such a transparent charlatan. This seems like a classic Emperor's new clothes event.

[bdunham7]

Maybe she was a bit evil but I don't think she set out to be evil. I think she slid into it and just kept digging.  But listening to the podcasts on the trial and reading the book you have to wonder at the secrecy inside Theranos and the unusually tight need-to-know silos where some teams were not allowed to see what others were doing. That is where I start to think the slide into fantasy wasn't accidental and she knew it was a pipe-dream early on.

Her authority came from being CEO of a Silicon Valley startup and her influence was bought in the form of very high profile board members who carried substantial gravitas.

The expression is "Fake it until you make it".  She didn't make it.  It works for certain obstacles, like the financial and practical hurdles Tesla faced, but it doesn't work out when your underlying technology simply can't work, like U-Beam.  With Theranos, I'm not sure if the claimed technology can ever be made, but I suspect it can.  Essentially her downfall was that she claimed that they already had it working--and sold it to the public--when they didn't.  Sort of like 'Full Self Driving'. 

Frankly I'm a bit dismayed that we prosecute these things as investor fraud.  I say screw the investors if they aren't diligent.  She should have been prosecuted for fraud against medical patients and for that every person in the company who was fully aware of what was going on deserves hanging.  IMO.

[SiliconWizard]

I'm more bothered about the mental state of all the people suckered by such a transparent charlatan. This seems like a classic Emperor's new clothes event.

That's my point all along, yes. Glad at least one person here sees it the same way.

As to this happening again, unfortunately, I'm almost certain it's going to. And possibly in health-related startups too, especially since those are booming these days.

[magic]

They all wanted to believe

[coppice]

I'm more bothered about the mental state of all the people suckered by such a transparent charlatan. This seems like a classic Emperor's new clothes event.

That's my point all along, yes. Glad at least one person here sees it the same way.

As to this happening again, unfortunately, I'm almost certain it's going to. And possibly in health-related startups too, especially since those are booming these days.

Of course it will happen again. All the bad stuff from history will eventually see a re-run. It looks like millions of youngsters have been convinced our current way of life is so messed up, we'll soon be back under feudalism.

[Bud]

As to how she was able to "buy" those high-profile board members - and keep them on board, while definitely some things were starting to be questioned along the way - is also a bit of a mystery.

Not as much if you look who her parents are.

[MK14]

Frankly I'm a bit dismayed that we prosecute these things as investor fraud.  I say screw the investors if they aren't diligent.  She should have been prosecuted for fraud against medical patients and for that every person in the company who was fully aware of what was going on deserves hanging.  IMO.

Because there are two types of leaders in those situations. Those who genuinely believe their invention(s), will succeed and work well, in the future, as long as it received enough monetary investment. Such as detecting Gold from a very long range, using only rf for the detection. A leader really could believe in that (or many other things, such as free energy machines). In which case they probably shouldn't be prosecuted, if the investments, eventually fail.
Alternatively, there are leaders who know full well, that the 'invention', such as a crystal which 'magically' cures badly ill people, or an audio cable which 'amazingly' improves the over all sound quality, well beyond what an electronic engineer would consider, even vaguely reasonable. Who in real terms are con artists, and are basically defrauding investors and the buying general public.

[Gyro]

It's funny, but over the past few days I've been seeing TV ads in the UK from nu*an.com offering disease diagnosis (not just erectile dysfunction) based on mail in finger prick blood samples.

I don't know whether it's just coincidental timing with the Holmes trial verdict, whether I've developed heightened sensitivity to them, or whether they figure that any publicity is good publicity.

I'm not suggesting that they're doing anything more dodgy than charging people for sending them a few drops of blood. Not something I would have any confidence in though!.

[John B]

Well, another twist in the saga.

Elizabeth Holmes, the founder and former CEO of the disgraced blood diagnostics company Theranos, might accuse her ex-boyfriend of mentally and sexually abusing her, thereby clouding her judgement during the time she allegedly committed fraud, according to court documents that were unsealed ahead of her criminal trial.

https://www.buzzfeednews.com/article/skbaer/elizabeth-holmes-theranos-defense-plans

"Don't stick your soldering iron in crazy."
    - Sun Tzu

[coppice]

It's funny, but over the past few days I've been seeing TV ads in the UK from nu*an.com offering disease diagnosis (not just erectile dysfunction) based on mail in finger prick blood samples.

I don't know whether it's just coincidental timing with the Holmes trial verdict, whether I've developed heightened sensitivity to them, or whether they figure that any publicity is good publicity.

I'm not suggesting that they're doing anything more dodgy than charging people for sending them a few drops of blood. Not something I would have any confidence in though!.

Are they saying you can buy this service now, or are they being vague. I've seen lots of ads recently for things like this and amazing "molecular diagnostics", which describe futuristic things as if they can be bought today, when they can't. I think they are trying to create a buzz to get investor money to develop these things.

[SiliconWizard]

Those things are going to boom in the next few months/years. That's a guarantee. That's the new goldmine. And if one thinks that there won't be maybe half of them not similar to the Holmes' venture... well... =)

[Gyro]

Are they saying you can buy this service now, or are they being vague.

Nope they're offering it now... https://www.numan.com/fear-nothing/fear-nothing-blood-test. It's even free if they don't find anything - what are the odds! 

Edit: To be fair, the disease bit is only implied in the Ads.

There's nothing better for stirring up peoples' fears than calling it a 'fear-nothing' test!

[Just_another_Dave]

I'm more bothered about the mental state of all the people suckered by such a transparent charlatan. This seems like a classic Emperor's new clothes event.

That's my point all along, yes. Glad at least one person here sees it the same way.

As to this happening again, unfortunately, I'm almost certain it's going to. And possibly in health-related startups too, especially since those are booming these days.

Unluckily, many startups nowadays are just scams made by people unable to judge if their product would be implementable, yet it is quite common that they offer a lot of promising results obtained with dubious tests. As most of them usually fail pretty quickly, the harm made is small enough to avoid ending up in the news. I’m quite sure that is only a matter of time to have a similar event

Some years ago a startup promising real time tracking nano-tags without batteries that could send their locations through the 4g network. In order to achieve it, they hired a group of computer scientists to “program” that feature in a SIM card. After several years without results, they decided to hire an electronics engineer to add an antenna to the card (by “programming” it without modifying the hardware), as they realized that they couldn’t send data without it. Obviously I declined the offer, but I laughed really hard while reading their specifications

[tom66]

Frankly I'm a bit dismayed that we prosecute these things as investor fraud.  I say screw the investors if they aren't diligent.  She should have been prosecuted for fraud against medical patients and for that every person in the company who was fully aware of what was going on deserves hanging.  IMO.

Yep, fraud against investors, utter bollocks ... do your due diligence, losing money should be enough.
As it stands we have a system of socialised losses and privatised profits.

[Bud]

It was a clown show top to bottom. Just look what general Mattis, the former US Secretary of Defence, who was the Board member at Theranos, did:

Mattis eventually agreed to join, testifying that he went to a bookstore “and picked up two books and two pamphlets to educate myself on being a board member.”

Really? Buying two pamphlets  was all that was needed?  .
Dear generals, please stick to what you know and do best.

[fourfathom]

Yep, fraud against investors, utter bollocks ... do your due diligence, losing money should be enough.
As it stands we have a system of socialised losses and privatised profits.

While I agree that the Theranos investors should have had better sense, I assume that at least some of them were relying on the lead investor's good judgement and didn't want to upset their business relationships by being too difficult.  A bad call this time, but maintaining relationships is a real factor in the VC world.

And how are private VC losses socialized?  There's no equivalent to FDIC (Federal Deposit Insurance) or other bailout.  The best you can do is to write off your losses against other gains.  Even after taxes it's still a loss, just not as big.

[DrG]

Those things are going to boom in the next few months/years. That's a guarantee. That's the new goldmine. And if one thinks that there won't be maybe half of them not similar to the Holmes' venture... well... =)

While I agree with you, it is definitely not new. Biomarkers are the object of a huge amount of research. We have had some hits, e.g., cancer detection from tumor markers and various proteins but it is never as easy as that https://www.mayoclinic.org/diseases-conditions/cancer/in-depth/cancer-diagnosis/art-20046459 but the claims are always out there https://www.healthline.com/health-news/this-new-test-can-detect-50-types-of-cancer-from-a-single-blood-draw

Because of the need to identify and treat and because of the difficulty of coming up with easy detection and therapeutics, PTSD and mTBI have been huge targets and I do know something about that. Certainly there is a huge amount of high risk / high reward research being funded and it is genuine - but not as close as the proposals often make it appear.

As for the instant case, I remember asking biochemists and microbiologists at the time what they thought - their responses, as I recall, were always, I'd like to see how they do that.

[tom66]

Yep, fraud against investors, utter bollocks ... do your due diligence, losing money should be enough.
As it stands we have a system of socialised losses and privatised profits.

While I agree that the Theranos investors should have had better sense, I assume that at least some of them were relying on the lead investor's good judgement and didn't want to upset their business relationships by being too difficult.  A bad call this time, but maintaining relationships is a real factor in the VC world.

And how are private VC losses socialized?  There's no equivalent to FDIC (Federal Deposit Insurance) or other bailout.  The best you can do is to write off your losses against other gains.  Even after taxes it's still a loss, just not as big.

They're not truly socialised but they expect the courts to prosecute someone for their lack of due diligence.

It's not enough to just go on reputation when you're spending millions!

[MK14]

They're not truly socialised but they expect the courts to prosecute someone for their lack of due diligence.

It's not enough to just go on reputation when you're spending millions!

But you're doing victim blaming here. I don't think things are as Black and White (clear-cut) as you are implying here. There are a number of factors. On the one hand, there should be decent due diligence on the part of the investors, but there is also requirements for the people you are investing with, to be honest and not scam merchants.
Hiding real, large medical test equipment (not even made by them), used behind the scenes, to secretly create medical test results. Which were not produced by Elizabeth Holmes's new small medical test device(s), was a scam. So I agree with prosecuting such people.

[tom66]

But you're doing victim blaming here. I don't think things are as Black and White (clear-cut) as you are implying here. There are a number of factors. On the one hand, there should be decent due diligence on the part of the investors, but there is also requirements for the people you are investing with, to be honest and not scam merchants.
Hiding real, large medical test equipment (not even made by them), used behind the scenes, to secretly create medical test results. Which were not produced by Elizabeth Holmes's new small medical test device(s), was a scam. So I agree with prosecuting such people.

Maybe I'm just tired of VC's throwing millions at moronic projects that go nowhere, because they expect 90% of their investments to fail, and then expecting the courts to clean up their mess.  No doubt the investors will sue Holmes personally.  And, I suppose they will probably win pennies on the dollar.  All while completely tying up the court system to the tune of millions of hours of wasted time for lawyers, judges and possibly juries.

It leads to inefficient allocation of resources putting out fires like this.   Due diligence on Theranos would have consisted of asking Theranos for published, peer reviewed research that describes their process, which could be protected by patents if Theranos was worried about proprietary technology being leaked.  Or, they could have interviewed some of the staff involved in the process or research.  Or watched carefully over a demonstration of a test performed.  Yet it seems investors pretended as if the technology worked fine.

The fact is Theranos only had a concept - not an implementation - and yet investors were still convinced it was a feasible product / technology.  No doubt Holmes committed fraud, and she'll face the consequences for it.  But why did it take this long?
 
We see a similar issue with Nikola, who have defrauded investors to the tune of billions, with a truck rolling down a hill.  For some reason, no one actually ever investigated whether they had feasible hydrogen fuel cell technology, despite the likes of GM pouring money into the company?  It's really bloody weird.  I probably spent a day's research on buying a £300 phone, yet a $500 million investment is agreed on the basis of napkin maths and a body-in-white.

[MK14]

It's sad that they are tying up the courts valuable time. I've heard these cases are also ridiculously complicated, and mean the unfortunate jury members, have to endure such a trial, for a rather long time and they are sometimes or often, bewildered by the complexities of such trials. But, assuming we agree to keep the laws as they are, as regards fraud, I don't know what the solution is. But it could be to have three (quantity can be changed), expert fraud judges, who make the judgement, without a jury.

The Due diligence situation, reminds me of some of the Kickstarters, that are mentioned on these forums. In some cases, it is obvious to most of the people who are members of this forum, that it is a complete scam and technically/scientifically almost impossible, to achieve the stated goals.
For example, a free energy machine, which charges up batteries using spinning magnets and fills an empty water bottle, with pure/fresh water, anywhere, within minutes.
But in this case, I don't think it is that obvious, that a rather small medical blood test system, can't be developed, especially if billions of dollars are invested in it.

But it is a pity, they weren't identified as scammers, much earlier. The Medical Test Experts and Technical Experts, should have spoken up and/or been consulted more. As you say, it should have had professional feasibility reports, or whatever is needed. Before investing in it big time.

[fourfathom]

And how are private VC losses socialized?  There's no equivalent to FDIC (Federal Deposit Insurance) or other bailout.  The best you can do is to write off your losses against other gains.  Even after taxes it's still a loss, just not as big.

They're not truly socialised but they expect the courts to prosecute someone for their lack of due diligence.

It's not enough to just go on reputation when you're spending millions!

The investors money is *gone*, and no court is going to get more than a tiny fraction of it back.  The prosecution is to punish fraudulent behavior, and we hope discourage others from pulling this type of scam in the future.

And in the VC world, there is a huge dependence on reputation.  Due diligence can warn you if something is truly impossible, or perhaps impractical, but part of the VC spectrum is finding people that can figure out how to do the previously impractical and make it profitable.  This is where reputation comes in big-time, and VCs expect that a large percentage of these will fail to deliver to their supposed potential.

I would put U-Beam in the category of "truly impossible" -- not that some sort of sonic charging itself is impossible, but that what was being pursued was impossible.  Those investors should have known better.  I don't know if there was an actual scam though, or at least not in the early days.

Theranos was more of an "impractical" development, one that could possibly be made practical by achievable breakthroughs.  In hindsight, I suppose it should have been obvious that Holmes herself didn't have the skills to advance the technology sufficiently, but perhaps she would have been able to hire people who could.  Early due diligence might have legitimately rated Theranos as a high-risk but potential big winner.  Most of the investors were not technically savvy enough to do their own due diligence, but were relying on the reputation of the lead investor.  This all turned into a scam as soon as Theranos started lying to the investors and clients about the status and capability of their product.  I am surprised that the investors let this go on as long as they did, but they may have hoped that there would at least be some useful technology being created, which could be sold to reduce their losses.  This is best done by acquisition, rather than after a company is shuttered -- when you have a "fire sale" situation.  Honestly, if the investors were aware of the scam being perpetrated on the customers/victims then the investors themselves should also be prosecuted.

(Most of my knowledge re. Theranos comes from reading "Bad Blood: Secrets and Lies in a Silicon Valley Startup".  And I've been in a few startups.  I also used to do a bit of "due diligence" work for my company and for VCs. )

[SiliconWizard]

As with many other projects, the idea was all nice, and potentially very useful. No doubt about that. But that can be said for almost any other startup project that promises wonders. The ideas, *if* they can be realized, are almost always great - in terms of outcome. Problem is, they are very rarely practical, and the determining if the project is achievable or not IS the responsibility of investors AND board members. Anyone getting trapped while not having done their homework is a moron.

Sure, sometimes things are very interesting, but very challenging, and even if you do your homework and the plans are clear, things can fail. Shit happens. But that's not the case here, not with many other startups. Doing proper diligence would have shown, almost from the start, that it was bound to failure. And, if not right from the start, because hey, hope is always nice, then along the way - before eventually injecting what? Billions of dollars? Who are they kidding?

Punishing fraudulent behavior is all nice, but making it a purely individual problem, it's just a recipe for the same thing happening again and again, and ecouraging investors  - and typically old retired chaps getting bored with their life - to do it all over again without ever taking any responsability, while THEY are the ones who can make all of this possible. Without money, you do nothing. So you have the utmost responsibility as an investor.