Blood-testing company Theranos will dissolve, pay creditors

Leslie Hanson
September 7, 2018

Theranos acting chief and general counsel David Taylor emailed investors to explain that the company has to shut its doors because of a deal with Fortress Investment Group.

The Securities and Exchange Commission brought civil fraud charges against Holmes and Balwani earlier this year.

Both brilliant and precocious, her idea to create a "laboratory on a chip" - a wearable patch that could detect and report changes in patients' blood chemistry, as well as moderate drug dosages to respond to those changes - eventually gave rise to the company that would revolutionize the $70 billion blood testing industry.

Taylor took over the CEO role from founder Elizabeth Holmes, a Clinton donor and presidential ambassador for global entrepreneurship under former President Barack Obama, after she was charged with "massive fraud".

Blood-testing company Theranos plans to go out of business in the wake of one of the tech community's biggest frauds, the Wall Street Journal reported Tuesday night. The company says it has about $5 million remaining in cash. Theranos operations formally ceased on 31 August 2018, with Taylor and a few support staff lingering on the payroll for several days after. This arrangement would allow for all of Theranos' assets, other than its intellectual property, to be assigned to a third party in trust for the company's creditors.

If convicted, they could face prison sentences that would keep them behind bars for the rest of their lives, and total fines of $3.69m each.

Balwani issued a statement through a representative: "As an investor who put millions of dollars of his own money and almost seven years of his life into Theranos, Mr. Balwani was saddened to see the letter from Theranos to investors [Tuesday]". The pharmacy chain has said it was misled by Theranos about its technology and prospects.

Theranos claimed to have invented a line of blood-testing machines that can run complicated tests using just a single finger prick of blood.

Theranos become a symbol of the excesses of the current technology boom. Its hope was to save people from painful, drawn out and invasive medical procedures, as well as promising to do it more economically, and with less susceptibility to human error. A biochemist who worked at Theranos for eight years committed suicide in 2013 after becoming distraught by its culture of fear and secrecy and its lack of progress with its technology, according to his widow. Balwani was Theranos' president and chief operating officer until his retirement in May 2016. Each invested $100 million or more in Theranos-investments that are now worthless.

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