CNN Business
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Ramesh “Sunny” Balwani, the former CEO of failed blood test startup Theranos, was sentenced Wednesday to nearly 13 years in prison for fraud. It marked the end of a startling fallout for a high-flying Silicon Valley company that led to the rare conviction of two tech executives.
“There is an unfortunate saying in Silicon Valley: ‘Be fake’ until you succeed.’ “Elizabeth Holmes and Sunny Balwani have extended this idea to a place much further than the law allows, and in doing so puts large amounts of investor money at risk,” said Stephanie Hinds, US Attorney at Northern County of California, said in a statement. “It is important that the court also made clear today that Sunny Balwani’s decision to deceive doctors and patients also put the patient’s health at risk. Mrs. Holmes and Mr. Balwani will now be properly punished for their crimes.”
Hinds added, “Let this story be a cautionary tale for entrepreneurs in this county: Those who use lies to cover up shortcomings in their promised performance risk going to jail. significantly.”
Jeffrey Coopersmith, Balwani’s attorney, said in a statement: “We are disappointed with the outcome. We respectfully disagree and plan to appeal.”
The verdict came weeks after Elizabeth Holmes, founder of Theranos and Balwani’s ex-girlfriend, sentenced to more than 11 years in the prison.
Theranos has raised $945 million from a group of Class A investors with the promise of testing multiple medical conditions with just a few drops of blood. At its peak, the company was valued at $9 billion.
The company began to disband after a The Wall Street Journal investigation in 2015 reported that Theranos had only performed about a dozen of the hundreds of tests it provided using its proprietary technology and with questionable accuracy. It is also known that Theranos is relying on third-party devices manufactured by traditional blood testing companies rather than its own technology. Theranos was finally dissolved in September 2018.
Holmes and Balwani were prosecuted together for the first time four years ago on the same 12 criminal charges related to defrauding investors and patients about Theranos’ capabilities and business dealings for money. Their trial was cut off after Holmes shown she intends to accuse Balwani of sexually, emotionally and psychologically abusing her during their decades-long relationship, which coincides with her time running the company. (Balwani’s attorney denied her claim.)
In July, Balwani was found guilty on all 12 counts he faces, including 10 counts of federal fraud and 2 counts of conspiracy to commit electronic fraud. Holmes was found guilty in January of four counts of defrauding investors, and not found guilty of three additional counts of patient fraud and one count of conspiracy to defraud patients. .
Like Holmes, Balwani faces up to 20 years in prison as well as a $250,000 fine plus restitution for each count.
In a recent court filing, prosecutors noted that Balwani was not only found guilty of defrauding investors but also defrauding patients. They recommended a 15-year prison sentence for him, as well as demanding that Balwani pay $804 million in restitution. In a separate filing, Balwani’s attorney requested a probationary sentence, noting that he had no criminal history.
Before joining Theranos, Balwani was a software executive. Balwani, almost 20 years older than Holmes, first met her in 2002 before she dropped out of Stanford. He served as an informal advisor to Holmes during the early days of Theranos, and the two were romantically involved. Balwani secured a “million-dollar loan” for the startup in 2009, court filings show, and took on the official roles as chairman and chief executive officer. Holmes and Balwani largely kept their romantic relationship a secret while working together.
During her trial, Holmes claimed Balwani tried to control nearly every aspect of her life – including her eating discipline, voice and image, while isolating her from others. . She testified that while he had no control over her interactions with investors, business partners and others, “he influenced everything about who I am and who I am.” I don’t quite understand that.”
Holmes was expected to appeal his sentence but was ordered to transform on April 27, 2023.
