Theranos COO Sunny Balwani Sentenced to 13 Years in Federal Prison for His Part in Its Fraudulent Decade-Long Practices

The explosive 2018 book Bad Blood: Secrets and Lies in a Silicon Valley Startup by Wall Street journalist John Carreyrou recounted the failed venture known as Theranos. Theranos is a real-crime story of arrogance, unbridled greed, and hubris. It is now coming to an end. Elizabeth Holmes, the founder of Theranos, was sentenced to eleven years of federal imprisonment. Her lover and partner in crime, Sunny Balwani, was sentenced on Wednesday to 13 years in federal prison and fined $250,000 for each of the twelve counts. He was found guilty on all counts, including fraud against patients who believed Theranos's system worked as advertised. It never did. Holmes is the Stanford University student who dropped out and then founded Theranos. Holmes was adored by capital investors in start-ups who nearly jumped over themselves to lend the Silicon Valley-based business massive sums of cash. In all, Theranos raised almost one billion dollars. That's all gone with the wind now.

A number of the founders left the business after seeing the evidence on the table. Many researchers and techs noticed obvious and fundamental flaws in the information presented to partners, investors, clients, and regulators, finding that the data with which they were presented was not consistent with the information they were seeing.

Carreyrou's book outlined the compelling “How did anyone fall for this?” tale because it was evident to any uninitiated observer of the story that Holmes and Balwani sold snake oil. What Theranos was offering was simply impossible. The experts in this field were saying so. Holmes and her accomplice in crime, Balwani, claimed that their machine could recognize hundreds of diseases from a single prick of blood. This was the same as claiming you could understand a book by reading just the first two pages. It was simply not possible.

It was revealed that the Holmes/Balwani card house collapsed at the time Carreyrou published an article in the Wall Street Journal based on a tip received from an insider at Theranos.

Holmes was an unassuming and almost robotic manipulator who pictured herself as the Steve Jobs of the future. As with Jobs, Holmes dressed all in black and sported turtlenecks. Holmes was called “scary” because she wouldn't blink for what seemed to be hours at a time. She would simply stare at the employees.

Balwani was appointed the COO (chief operating officer). Despite the fact that Balwani was 20 years older than Holmes, he was her lover, too. Balwani was, according to all reports, an egomaniac as well as an angry tyrant at Theranos. He was impossible with employees, requiring absurdly long working days.

They were both found guilty and sentenced as felons.

According to CNN Business: “Holmes and Balwani were first indicted together four years ago on the same 12 criminal charges pertaining to defrauding investors and patients about Theranos’ capabilities and business dealings in order to get money. Their trials were severed after Holmes indicated she intended to accuse Balwani of sexually, emotionally, and psychologically abusing her throughout their decade-long relationship, which coincided with her time running the company. (Balwani’s attorneys have denied her claims.)

“In July, Balwani was found guilty on all 12 charges he faced, which included ten counts of federal wire fraud and two counts of conspiracy to commit wire fraud. Holmes was found guilty in January on four charges relating to defrauding investors and found not guilty on three additional charges concerning defrauding patients and one charge of conspiracy to defraud patients.”

Balwani had pleaded with the court to grant him probation based on the fact that he had not been previously found guilty of a crime. The prosecution sought 15 years in prison and $850 million in restitution. The court agreed to 13 years of imprisonment and a $3 million fine.

US Attorney of the Northern District of California, Stephanie Hinds, explained, “Significantly, today the court also made clear that Sunny Balwani’s decision to deceive doctors and patients also put the health of patients at risk. Ms. Holmes and Mr. Balwani now will be justly punished for their illegal conduct. Let this story be a cautionary tale for entrepreneurs in this district: Those who use lies to cover up the shortfalls of their promised accomplishments risk substantial jail time.”

It's a cautionary tale that anyone who invests money in a “too good to be true” scheme may be investing in something that's actually too good to be true.

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