A criminal probe has been launched to investigate whether blood-testing technology firm Theranos misled investors while seeking funding. According to The Wall Street Journal, the company is also being probed for allegedly misleading government officials, which could place it under federal investigation. In light of the article, which was published on April 18, Theranos responded swiftly via a memo to its partners, stating that it is working closely with regulators and assisting with all investigations.
Walgreens and the New York State Department of Health, both of which had partnerships in place with the Californian start-up, have received subpoenas requesting that they supply documents and testimonies relating to representations made to them by Theranos.
During a round of funding in 2014, Theranos received $400m, thereby valuing the company at $9bn. With a majority stake in the company, the shares belonging to founder and CEO Elizabeth Holmes are more than half of that valuation
Theranos was launched in 2003 with a self-proclaimed mission to revolutionise the industry for blood testing. Despite the firm’s claims that the Edison system is the pillar of its model, it has been revealed that the machine is used only for a fraction of over 240 tests offered by Theranos, due to issues with accuracy. According to the damning WSJ piece, one Theranos’ employees has complained to regulators about the company’s failure to report questionable results from the Edison, which could be a violation of federal legislation. In fact, it has now come to light that most tests are carried out by Theranos using traditional equipment, thereby making its claims of innovation and revolution all the more misrepresentative.
Until recently, the website claimed that “breakthrough advancements have made it possible to quickly process the full range of laboratory tests from a few drops of blood”. However, the company profile now reads that “Theranos is working to revolutionise diagnostic testing through technological innovations that have made it possible to quickly process a range of laboratory tests from smaller samples at prices that are at least 50 percent below Medicare reimbursement rates”, in what appears to be a last-ditch attempt at rolling back its bold claims.
During a round of funding in 2014, Theranos received $400m, thereby valuing the company at $9bn. With a majority stake in the company, the shares belonging to founder and CEO Elizabeth Holmes are more than half of that valuation. Given the level of investment in question, together with the incriminatory claims made against the company, it would be surprising if both Theranos and its reputation survive the current mess that it has put itself in.