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Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

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Re: Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

#131

Post by gxs »

_m8fo wrote: post #85
DannyBee wrote: post #62

People keep complaining about lack of jail time. As has been repeated in a number of subcomments: The SEC cannot send people to jail. Full stop. They have only civil authority. They refer criminal cases to the US attorneys/DOJ, and offer assistance. All evidence suggests they did so here. The decision to criminally prosecute or not is out of their hands.

Why can't the SEC send people to jail? I don't understand the point you're making. If people believe something is an injustice should they just shut up? Even if they can't send people to jail people should complain if they feel that shouldn't be the case -- it's a signal that perhaps the current process is wrong. After all, all restrictions and rules were created by us to begin with. Complaining can be useful feedbac…

There is a difference between complaining that the SEC should have the authority to send people to jail and complaining that the SEC can send people to jail but won't.

Re: Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

#132

Post by aje403 »

alehul wrote: post #83
aje403 wrote: post #37

Earlier quoted context omitted.

I'm not really sure that's fair. In fact, IANAL and have zero knowledge of law, but the two had seemingly nearly opposite intent of their crimes. Who knows what was going on in the girl's head, but it sounds more like a bunch of idiot investors gave a lot of money to a dreamer who wanted to make an impact and didn't know when to quit and fold her hand rather than an elaborate con. That gets taken into consideration b…

> sounds more like a bunch of idiot investors gave a lot of money to a dreamer who wanted to make an impact and didn't know when to quit and fold her hand rather than an elaborate con Until you said 'her', I actually thought you were referring to Shkreli. He ran a hedge fund starting at 23, and when he lost a lot of the money, he made bigger bets and tried to earn the money back rather than admitting his losses. > I…

While I don't know either of them so it is an unfair judgment to make, I would guess there's a big difference in thoughts in the back of their head:

"These idiots aren't getting their money back, wait for my next play..."

"If I can hold them off for another year, we'll have a big breakthrough..."

Making larger bets to cover for an hide losses is a very common story for traders on wall street. Buying an AIDS drug to price gouge is not. In contrast, it seems like Holmes had an earnest desire to improve medical tech.

Again, I'm speculating, we'll see if this unfolds any further. Fun story to follow.

Re: Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

#133

Post by throwawayjava »

AndrewKemendo wrote: post #80
ChuckMcM wrote: post #23

Ok, this is the money line in that press release for me: “The charges against Theranos, Holmes, and Balwani make clear that there is no exemption from the anti-fraud provisions of the federal securities laws simply because a company is non-public, development-stage, or the subject of exuberant media attention.” For all those entrepreneurs are trying to "fake it until you make it" be aware that the SEC considers your…

Lets not pretend that everyone isn't just following the leaders here with grandiose messaging. Major tech corporations have done this as much as small startups. IBM's Watson comes immediately to mind. The difference is whether or not you can come through with some percentage of your promises. The ones who can eek out some kind of repeatable traction long enough to exit are successes, the ones who never get to scale a…

> IBM's Watson comes immediately to mind.

All of the industry AI labs follow the same pattern, even (perhaps especially) the en vogue ones (well, I guess depending on wtf "solve intelligence" is supposed to mean...). Watson is just old enough that it's now obvious the advertising agency was given too much leash.

Ditto for self-driving.

Ditto, in fact, for basically any basic or applied research happening in the research arm of any for-profit organization. And at a lot of universities besides! In fact, as far as I can tell, positive PR is some non-trivial aspect of the ROI for industry research labs.

BUT... there's a HUGE GAAP ( ;-) ) between marketing hype and lying in financial disclosures. One is eye-rolly and should be called out on internet message boards and during sales pitches. The other is criminal.

Re: Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

#136

Post by SilasX »

evrydayhustling wrote: post #118
SilasX wrote: post #90

Earlier quoted context omitted.

>For all those entrepreneurs are trying to "fake it until you make it" be aware that the SEC considers your strategy both fraudulent and they feel they have the jurisdiction to prosecute you. Holmes was, in many ways, embodying that HN mentality, acting on the basis: - that an entire industry has been doing it wrong - that it can be fixed by a low-bureaucracy, Angel-funded startup - that once you have enough success…

You can have all of those listed beliefs and still be honest about the actual state of your company, progress towards goals, etc. Doing so will probably beat those beliefs out of you, and you can come to an honest understanding of your limits. Arrogant, presumptive behavior is annoying -- but I think it's important to keep a bright line between that and dishonesty, because one self corrects and the other doesn't. And…

Then I'm confused: how can you a) hastily dismiss all self-doubt as Impostor Syndrome and b) believe "no one knows what they're doing either" while remaining able to accurately, honestly self-assess your skill, quality of work, and prospects for success?

Edit: If you have a good answer, then I would suggest we start posting that as the advice ("here's how you know if you're good enough") rather than immediately tell everyone they have they have Impostor Syndrome (as seems to be common practice).

Re: Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

#137

Post by fwdpropaganda »

minimaxir wrote: post #46
ChuckMcM wrote: post #23

Ok, this is the money line in that press release for me: “The charges against Theranos, Holmes, and Balwani make clear that there is no exemption from the anti-fraud provisions of the federal securities laws simply because a company is non-public, development-stage, or the subject of exuberant media attention.” For all those entrepreneurs are trying to "fake it until you make it" be aware that the SEC considers your…

It's worth nothing that one of Theranos's VC funders, Tim Draper, did defend Holmes despite the fraud allegations: https://news.ycombinator.com/item?id=11973102 https://www.vanityfair.com/news/2017/01/theranos-investor-cl...

That's extremely interesting, thanks for sharing.

Think about the decision that he had to make in 2016. He had to choose between admiting his mistake and doubling down. The downside of admitting his mistake is that he's guaranteed to get negative points; the upside is that it will minimise futures downsides. By dubling down, he's guaranteed to reduce his negative points in 2016 but exposes himself to magnified upsides (if he's proven right) and downsides (if he's proven wrong) in the future.

Now think rationally how you'd choose. The second strategy is a lot riskier so it better have better return as well! But the second strategy can only have higher reward if you either believe high probability of future upsides (i.e. Theranos might be faking till you make it, but they'll make it) or low probability of future downsides (i.e. I'm not sure what's going on, but definitely not fraud). I submit that the only way that you could come to believe either is if you're hugely misinformed about the company.

I.e. that guy is just a bit incompetent.

Re: Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

#138

Post by valar_m »

SilasX wrote: post #90
ChuckMcM wrote: post #23

Ok, this is the money line in that press release for me: “The charges against Theranos, Holmes, and Balwani make clear that there is no exemption from the anti-fraud provisions of the federal securities laws simply because a company is non-public, development-stage, or the subject of exuberant media attention.” For all those entrepreneurs are trying to "fake it until you make it" be aware that the SEC considers your…

>For all those entrepreneurs are trying to "fake it until you make it" be aware that the SEC considers your strategy both fraudulent and they feel they have the jurisdiction to prosecute you. Holmes was, in many ways, embodying that HN mentality, acting on the basis: - that an entire industry has been doing it wrong - that it can be fixed by a low-bureaucracy, Angel-funded startup - that once you have enough success…

Which of those ideas caused her to defraud investors for hundreds of millions of dollars?

Re: Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

#139

Post by _m8fo »

Karunamon wrote: post #129
_m8fo wrote: post #100

Earlier quoted context omitted.

I've already read that -- it does not explain why . It simply states that it cannot. What law restricted it? Why was that law put into place? How often are recommendations for prosecution followed up on successfully? EDIT: Thanks everyone for the information -- very interesting.

Criminal litigation authority is on a whitelist, not a blacklist. It's not that a law restricted them, it's that they simply were never granted that authority. Random government authorities can't bring criminal proceedings anymore than the meter maid writing a parking ticket has the ability to haul you to court for parking in the wrong place. They send the information along to the people who do have that authority an…

> The key words in the article are "civil, not criminal".

My keyword is why.

Re: Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

#140

Post by detaro »

seanieb wrote: post #109
detaro wrote: post #86

Earlier quoted context omitted.

The SEC document says that she never sold any of her shares, and says > Holmes was paid a salary of approximately $200,000 to $390,000 per year between 2013 and 2015

Hey, I've no idea how to PM you, but you flagged my submission about the SEC charging another company... Equifax. This story is about Theranos. > https://news.ycombinator.com/item?id=16586011 > "on the front page, please check for duplicates before submitting"

oops, embarassing... there's been discussion about equifax too, but I guess that was the criminal part and not SEC: https://news.ycombinator.com/item?id=16584980
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