Ramesh “Sunny” Balwani, a former high-ranking executive at Theranos, was convicted of fraud Thursday for misleading investors about the financial health of the now-defunct health care startup.
Balwani, who was convicted on all 12 counts of wire fraud and conspiracy to commit wire fraud, was president and chief operating officer of Theranos, a blood-testing company that claimed its technology could detect a multitude of diseases with just a few drops of a patient’s blood.
Balwani and the company was accused of defrauding investors and patients, in part by misrepresenting the efficacy of Theranos’ product and lying about the company’s finances.
Balwani began working at Theranos in 2009 while he and founder Elizabeth Holmes, his alleged co-conspirator, were secretly dating.
Holmes was convicted in January on four of 11 counts of fraud. Each count carries a potential maximum sentence of 20 years in prison. Holmes is awaiting sentencing. In May, she asked a judge to toss out her conviction.
Holmes’ attorneys in her trial accused Balwani of misleading investors and lying about how much money the company was making. Prosecutors accused Balwani of overstating Theranos’ revenues while pitching investors for new cash infusions for the company.
Balwani’s lawyers took the same stance against Holmes, accusing her of controlling all aspects of the business at Theranos, including allegedly providing false data on its blood-testing technology.
The Theranos case has drawn international headlines as a prime example of Silicon Valley’s excesses and failures.
Holmes founded Theranos in 2003, and by 2010, roughly a year after Balwani joined the company, it was valued at $1 billion. Four years later, Theranos raised another $400 million, bringing its valuation to $9 billion.
The promise of revolutionizing the way health care is delivered won Holmes considerable admiration and praise during Theranos’ high-flying years. She was once named the youngest self-made female billionaire.
But Theranos’ fortunes began to unravel in 2015, when the company received criticism for not publishing its research in peer-reviewed journals, typically a standard practice in the medical field. A series of investigative news reports followed.
Erika Cheung, a Theranos lab associate, blew the whistle on the company, telling federal authorities the company’s proprietary blood-testing device, called the Edison, was not reliable enough to be used on human patients.
In 2016, a report from the U.S. Centers for Medicare & Medicaid Services accused Theranos of operating facilities that it said jeopardized patient health and safety, in part by not adhering to its own quality control guidelines. Later that same year, Walgreens ended its partnership with Theranos.
CMS and Theranos reached an agreement in 2017 that locked the company out of the blood-testing business for two years. In June 2018, federal authorities charged both Holmes and Balwani with multiple counts of fraud. The two executives pleaded not guilty. Several months later, the company shut down.