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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

#481

Post by kahnjw »

c3534l wrote: post #455
lxm wrote: post #74

Earlier quoted context omitted.

I interpreted it somewhat differently. The money paragraph seems to be > claimed that Theranos’ products were deployed by the U.S. Department of Defense on the battlefield in Afghanistan and on medevac helicopters and that the company would generate more than $100 million in revenue in 2014. In truth, Theranos’ technology was never deployed by the U.S. Department of Defense and generated a little more than $100,000 i…

I had to go through a bunch of SEC cases for an accounting project a while back. One thing stood out to me more than anything: the SEC goes after cases that are easy more than anything else. Multiple crimes committed with lots of evidence and easy-to-spot damages. It actually gave me the impression that avoiding the ire of the SEC is relatively easy if you set your mind to committing fraud without getting caught.

>It actually gave me the impression that avoiding the ire of the SEC is relatively easy if you set your mind to committing fraud without getting caught.

I assure you, it is only possible to avoid risk if you're a small fish and extremely careful. For instance, you have a good chance of getting away with skimming a neighborhood stock fund you setup. If you are managing or receiving millions of dollars in investment, you can bet anything fishy will show up on the SECs radar at some point. Most people with large sums of money don't get where they are by being stupid with it, and if they are the victims of fraud, they know where to go. While the SEC can't bring criminal charges, they have top notch investigators. Once they smell the fish, they won't stop until the entire scheme is unraveled.

I can't speak directly to the observation you made, but I personally know a high up SEC investigator, and he obsesses about the most minute details of the cases he works on and lives to take on the toughest cases possible. My guess is distribution of cases the SEC prosecutes are very heavy tailed. There are many dumb cases that are very easy to find and prosecute that involve 10s to 100s of thousands of dollars. Think skimming, ponzi schemes etc. The more sophisticated and larger cases are also more risky (for the fraudster), harder to execute, and much more rare. That might explain your observations.

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

#482

Post by owens99 »

mbell wrote: post #209
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…

"fake it until you make it" generally refers to the product implementation vs pitch on the consumer side. e.g. You pitch "The best automated way to do X!", but in actuality you have a horde of people doing the work initially to figure out the problem before building the actual automation. There is nothing wrong with this and remains a completely viable approach. What you don't do is tell your investors you've already…

This is "do things that don't scale" not "fake it until you make it."

I have never heard of someone using "fake it until you make it," referring to Wizard of Oz or Concierge as William Pietri (gosu Lean practitioner) below has mentioned.

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

#483

Post by justAnotherNET »

iliketosleep wrote: post #468
samfisher83 wrote: post #290

Earlier quoted context omitted.

How do you not go to jail for this? This isn't fake it until you make it. This is massive fraud. 100 mil vs 100,000 is off by a factor of 1000.

I agree, especially when you use the recent Shkreli case as a point of comparison. You have Shkreli who has been put away for 7 years for a hypothetical 10mil, yet Holmes commits "massive fraud", possibly losing 100's of millions of investors' money, and most likely gets away with a 600,000 fine and no jail time.

This is going to be a golden bone to the men charged with X vs women charged with Y crowd.

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

#484

Post by ben_jones »

ravitation wrote: post #399
Balgair wrote: post #280

His name is Tyler Shultz. He is the main reason we know know what Theranos was doing. He had his life destroyed, he knew it would happen, what Theranos would do to him, and he did the right thing all the same. Tyler Shultz is a hero. Never let someone tell you that you don't matter. Try hard to do what is right. We need more people like him, be one of them too. Be like Tyler Shultz. https://www.vanityfair.com/news/20…

Wait... How did he have his life destroyed? It just says that he hasn't talked to his grandfather in awhile... He went on to start a biotech company (that seems to be doing alright) and was a Forbes 30 under 30 in 2017... I don't see how his life was destroyed...

> The day he quit Theranos, Shultz says, Holmes contacted George Shultz and told him that if his grandson did anything to threaten the startup he would 'lose.'

The entitled thug...

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

#485

Post by justAnotherNET »

hyperbovine wrote: post #478
psergeant wrote: post #472

Earlier quoted context omitted.

Also, regarding the Shrekli case, didn’t everyone end up financially better off than they started?

Umm, the money had to come from somewhere.

Yeah. He failed with A, spun up B. B did well, he paid off A with B and B made money.

Technically fraud. Everyone got paid, but he still committed a process crime

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

#486

Post by ChuckMcM »

ransom1538 wrote: post #466
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 " Sigh. The SEC is concerned with lying about actual numbers. Not about future projections. What a terrible comment on a startup forum. "Fake it until you make it" it as about having confidence -- not about lying to investors. Please downvote this parent comment.

The SEC is concerned with lying about actual numbers. Not about future projections.

Our experiences are different I suspect, Check this out https://www.sec.gov/fast-answers/answers-regfdhtm.html. I sat in the courtroom once as one of the officers of a company was being prosecuted for violating this disclosure rule. There are a number of regulations that the SEC enforces that have nothing to do with "actual numbers" and everything to do with information asymmetry where the company knows something and the investors don't.

They have historically been all about that when non-accredited investors are involved (aka public companies). And reading their action with respect to Theranos suggested to me that they are going to bring that hammer into the startup space.

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

#487

Post by aplummer »

hyperbovine wrote: post #478
psergeant wrote: post #472

Earlier quoted context omitted.

Also, regarding the Shrekli case, didn’t everyone end up financially better off than they started?

Umm, the money had to come from somewhere.

Nah they did. He lost their money on stocks, lied about the state of their investments then paid them all a healthy return from his drug ventures with them none the wiser.

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

#488

Post by mathattack »

make3 wrote: post #456
mathattack wrote: post #409

Earlier quoted context omitted.

I should be more precise... This wipes out her Theranos stock. Who knows what she paid herself. Her VC was a family friend, so I suspect she has family money, and may stand to inherit Palo Alto real estate. The big difference is for all the time invested, her current stock is worth zero.

She lied, and doing so stole people's money, and maybe hurt some people's health. Who cares she got nothing from what she did. That's how it usually works for startups anyways, you risk having wasted your time. That's why we need making it worse, a stronger deterrent then her company dying, otherwise lying can be seen as acceptable to prevent a compagnie's death, as the only negative side effect is the company dying

She’s lost every chance to get a good exec position. The SEC doesn’t send people to jail, that’s out of their jurisdiction. The government will be the ones to do that.

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

#489

Post by mathattack »

spaceflunky wrote: post #432
ericd wrote: post #333

Earlier quoted context omitted.

Did she take money off the table? Not everyone does/can, even when they raise a lot.

I often wonder about this. I know founders that have instantly taken $100k off the table on a $1M angel investment. but such is silicon valley life i suppose?

Per other posts in the thread it looks like she didn’t beyond a 6 figure salary.

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

#490

Post by oldgradstudent »

tenpies wrote: post #360
jedberg wrote: post #354

Earlier quoted context omitted.

> Works like a charm I dunno, I'd say it kinda failed here.

I'd say it worked fantastically. For the sake of timing lets compare Shkreli and Holmes. She committed a much larger fraud and lost people huge amounts of money. She is spending exactly zero days in prison. She is getting a $500,000 fine - which Theranos is probably paying for - and a slap in the wrist[1]. Meanwhile Shkreli - who's "victims" lost zero money - is going to spend 7 years in jail and has lost at least $1…

Well, Shkreli also disrespected the Wu-Tang Clan.[1]

[1] https://www.spin.com/2017/08/martin-shkreli-jury-selection-t...

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