Major Investor Sues Theranos • Hacker News Board

Re: Major Investor Sues Theranos

#161

Post by jacquesm » Tue, Oct 11, 2016, 9:07 AM UTC

cmadan wrote: post #157

jacquesm wrote: post #155

I'm definitely not a friend of Theranos, but : they failed to do due diligence before investing, the error is theirs. I wonder if they would sue as well if Theranos had scored big time. If you treat investing as gambling don't sue if you lose a hundred million dollars of your customers money.

When I walk into the casinos, I know the odds of each game and know there is a possibility of losing my money. However if the casino rigs the machines to reduce my odds, then it isn't a fair game anymore and now goes into the realm of cheating.

When you're about to wire cash at this level to a company you have a real responsibility to make sure that the technology is real and you shouldn't by default believe everything they tell you. Independent verification is something no reputable/honest company would have a problem with, at least, I've never encountered it and if a company did have a problem with it then I'd see that as a huge red flag.

The whole Theranos affair interests me very much from a professional point of view, I could not imagine that none of those high flying investors and funds had not done actual due diligence, it is the biggest example of the herd mentality at work that I'm aware of involving only one company.

The really big question - and it is one that will inevitably be asked - is at what point in time did Theranos/Holmes realize that their tech wasn't going to work? If that is hard to establish (and they're probably trying very hard to make that even harder) then she may get away with the whole thing. If it can be established beyond doubt that they knew prior to accepting investment then it definitely is a case of fraud and the investors may be able to recoup some of their investment but it still isn't enough to get them off the hook completely for their own role in this.

Re: Major Investor Sues Theranos

#162

Post by camillomiller » Tue, Oct 11, 2016, 9:08 AM UTC

conjectures wrote: post #152

camillomiller wrote: post #136

Earlier quoted context omitted.

As a journalist, I disagree. In this case the technique is used more to portray the way Holmes is perceived publicly (a "neurotic and delusional powerful woman out of control" -- not my opinion, just what the photo conveys), than to add a spin to a story that's already independently and factually spun in a very clear direction. The use FoxNews does of this photo-picking with President Obama or liberal politicians is…

> the way Holmes is perceived publicly ...which presumably is almost entirely based on what they read or see in the media?

Do you know any other way of forming a public opinion about someone you've never met and probably never will?

Re: Major Investor Sues Theranos

#163

Post by spraak » Tue, Oct 11, 2016, 9:12 AM UTC

julianpye wrote: post #6

One thing I find really weird is the choice of CEO photos in media reporting. If there is good news, they chose 'nice', attractive photos. If there is bad news, they look for worse ones. This is true for male and female founders. In this case, everything about this photo is an 'outtake', from hands, choice of framing, facial expression, eyes - it's a photo a photographer would not keep in their image selection.

Also what's done when brown/black people are in the news, except most often it doesn't matter if it's good or bad -- the media in both cases looks for a not so flattering picture.

Re: Major Investor Sues Theranos

#164

Post by johncolanduoni » Tue, Oct 11, 2016, 9:19 AM UTC

NumberCruncher wrote: post #145

camillomiller wrote: post #136

Earlier quoted context omitted.

As a journalist, I disagree. In this case the technique is used more to portray the way Holmes is perceived publicly (a "neurotic and delusional powerful woman out of control" -- not my opinion, just what the photo conveys), than to add a spin to a story that's already independently and factually spun in a very clear direction. The use FoxNews does of this photo-picking with President Obama or liberal politicians is…

>>As a journalist, I disagree. In this case the technique is used more to portray the way Holmes is perceived publicly As a non journalist this is what I call manipulation.

Do you feel picking a photo to match the caption is more manipulative than picking a caption to match the photo?

Re: Major Investor Sues Theranos

#165

Post by ZeroGravitas » Tue, Oct 11, 2016, 9:21 AM UTC

julianpye wrote: post #6

One thing I find really weird is the choice of CEO photos in media reporting. If there is good news, they chose 'nice', attractive photos. If there is bad news, they look for worse ones. This is true for male and female founders. In this case, everything about this photo is an 'outtake', from hands, choice of framing, facial expression, eyes - it's a photo a photographer would not keep in their image selection.

I've been reading some US political news on a reddit app recently, and you can pinpoint the spin from the thumbnail photo better than the headline in most cases.

Would be an interesting art project to collect them all together get people to rate the images on some scale and display a visual political gradient.

Re: Major Investor Sues Theranos

#166

Post by onion2k » Tue, Oct 11, 2016, 9:22 AM UTC

jacquesm wrote: post #160

onion2k wrote: post #158

Earlier quoted context omitted.

The investor's argument is that Theranos lied . The investor believes Theranos fraudulently produced evidence that their product worked in order to fake the responses to the investor's due diligence. If that's true, and the investor can prove it, then that's not simply part of the typical risk of investing, that makes the investor the victim of a serious crime.

That's a dumb argument then. See, when you do due diligence you should assume that the company lies. That's why you go there in the first place, if you believe everything they tell you then you're going to get fleeced if they lie. Theranos did not comply with their duty to inform truthfully, but the investors did not comply with their duty to research. Asking the company is not research, the technology being complex…

The implication of what you're saying is that it's impossible to defraud an investor because the investor is always going to be partly to blame for not doing enough work to prove a business they're putting money in to isn't scamming them.

To an extent I actually agree, but I don't think that should preclude an investor from suing. If a business went to extraordinary lengths to fake some working tech then I think it's fair for the investor to get their money back, and it should be up to a court to decide whether or not that happened and what 'extraordinary lengths' means in any given case.

Re: Major Investor Sues Theranos

#167

Post by jacquesm » Tue, Oct 11, 2016, 9:43 AM UTC

onion2k wrote: post #166

jacquesm wrote: post #160

Earlier quoted context omitted.

That's a dumb argument then. See, when you do due diligence you should assume that the company lies. That's why you go there in the first place, if you believe everything they tell you then you're going to get fleeced if they lie. Theranos did not comply with their duty to inform truthfully, but the investors did not comply with their duty to research. Asking the company is not research, the technology being complex…

The implication of what you're saying is that it's impossible to defraud an investor because the investor is always going to be partly to blame for not doing enough work to prove a business they're putting money in to isn't scamming them. To an extent I actually agree, but I don't think that should preclude an investor from suing. If a business went to extraordinary lengths to fake some working tech then I think it's…

Yes, an investor is always partly to blame if they get scammed.

It's fair for them to sue but I think the court will ask them why they didn't do any independent verification of the technology to make sure it actually worked. That's pretty much the bar for anything that's labeled 'revolutionary' or that you perceive to be 'too good to be true'.

If it were a much more normal product with proven tech then I'd be more inclined to let them get away with 'belief', but in this case (and uBeam, to name another) you really want to see the technology for yourself and you want to verify that it works.

Short of stage magic they shouldn't be able to get away with this.

One of the most interesting DD's I ever did was a company that tried to rig a demo, they didn't get away with it because I went in assuming it was a rigged demo and I figured out how they did it. What makes it interesting is that today what was 'magic' in the 80's is actually quite normal... But back then you'd have to be doing something quite impossible with the technology available in the day to be able to give that demo unless you rigged it.

Re: Major Investor Sues Theranos

#168

Post by radu_floricica » Tue, Oct 11, 2016, 9:51 AM UTC

jacquesm wrote: post #160

onion2k wrote: post #158

Earlier quoted context omitted.

The investor's argument is that Theranos lied . The investor believes Theranos fraudulently produced evidence that their product worked in order to fake the responses to the investor's due diligence. If that's true, and the investor can prove it, then that's not simply part of the typical risk of investing, that makes the investor the victim of a serious crime.

That's a dumb argument then. See, when you do due diligence you should assume that the company lies. That's why you go there in the first place, if you believe everything they tell you then you're going to get fleeced if they lie. Theranos did not comply with their duty to inform truthfully, but the investors did not comply with their duty to research. Asking the company is not research, the technology being complex…

As far as I followed the story, there was basically double bookkeeping in the technology department. Like the fact that they used classic technology while pretending the results came from their own new tech.

There are lies, and there are illegal lies. If you go to the IRS and put in writing a different number, you go to jail. If you go to the bank and get a loan, but you use photoshop to prove your colateral is worth 1 million, you'll also go to jail, albeit the process will take longer.

Here I expect the process to take longer still, but for this degree of lying, jail is definitely on the table.

Re: Major Investor Sues Theranos

#169

Post by SmokyBourbon » Tue, Oct 11, 2016, 9:55 AM UTC

julianpye wrote: post #6

One thing I find really weird is the choice of CEO photos in media reporting. If there is good news, they chose 'nice', attractive photos. If there is bad news, they look for worse ones. This is true for male and female founders. In this case, everything about this photo is an 'outtake', from hands, choice of framing, facial expression, eyes - it's a photo a photographer would not keep in their image selection.

Why it's almost as if journalists manipulate the news to fit a narrative. Weird.

Re: Major Investor Sues Theranos

#170

Post by Gatsky » Tue, Oct 11, 2016, 9:57 AM UTC

jacquesm wrote: post #160

onion2k wrote: post #158

Earlier quoted context omitted.

The investor's argument is that Theranos lied . The investor believes Theranos fraudulently produced evidence that their product worked in order to fake the responses to the investor's due diligence. If that's true, and the investor can prove it, then that's not simply part of the typical risk of investing, that makes the investor the victim of a serious crime.

That's a dumb argument then. See, when you do due diligence you should assume that the company lies. That's why you go there in the first place, if you believe everything they tell you then you're going to get fleeced if they lie. Theranos did not comply with their duty to inform truthfully, but the investors did not comply with their duty to research. Asking the company is not research, the technology being complex…

This is a valid comment. Theranos' claims for their technology should have been readily verifiable. The reason for this mess is they were given money without asking enough questions. It's actually not even that complicated as having to test the machines yourself, if they had just tried asking a few more questions, it would have become pretty obvious this was a bad investment. There were many smart VCs who kept their money because they did this. eg see here: http://www.vanityfair.com/news/2016/05/theranos-silicon-vall...

"When I’ve asked V.C.s why they didn’t pour millions of dollars into a company that appeared to be changing the world, I was told that it wasn’t for lack of trying on Holmes’s part. She met with most top venture firms. But when the V.C.s asked how the technology worked, I was told, Holmes replied that it was too secret to share, even to investors. When they asked if it had been peer-reviewed, she insisted once again it was too secret to share—even to other scientists."