This is story of how they caught Elizabeth Holmes and the rise and fall of THERANOS. From youngest female billionaire to convict.
The technology never worked as promised. Was her intent to hope that the tech would “catch up” to what they had promised investors and regulators? Or had Theranos and Elizabeth Holmes crossed the line of NO return when they unleashed their tech through clinics treating patients with incorrect and wildly inaccurate test results?
You can decide for yourself after hearing what unfolds.
Takeaways
Chapters
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This is story of how they caught Elizabeth Holmes and the rise and fall of THERANOS. From youngest female billionaire to convict.
The technology never worked as promised. Was her intent to hope that the tech would “catch up” to what they had promised investors and regulators? Or had Theranos and Elizabeth Holmes crossed the line of NO return when they unleashed their tech through clinics treating patients with incorrect and wildly inaccurate test results?
You can decide for yourself after hearing what unfolds.
Takeaways
Chapters
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Start-Up Fraud Stories. How They Caught Elizabeth Holmes.
This is story of how they caught Elizabeth Holmes and the rise and fall of THERANOS. From youngest female billionaire to convict.
The technology never worked as promised. Was her intent to hope that the tech would “catch up” to what they had promised investors and regulators? Or had Theranos and Elizabeth Holmes crossed the line of NO return when they unleashed their tech through clinics treating patients with incorrect and wildly inaccurate test results?
You can decide for yourself after hearing what unfolds.
Takeaways
The rise and fall of Elizabeth Holmes and Theranos is a cautionary tale about overselling and the dangers of lacking transparency in the tech industry.
Investors should be cautious about investing in companies that refuse to provide audited financial statements and technical verifications.
The case highlights the need for regulation and scrutiny in the healthcare industry, especially when it comes to medical testing and patient care.
The story of Theranos serves as a reminder that data-driven decision-making and scientific validation are crucial in the development and implementation of new technologies.
Chapters
00:00 Introduction to the True Cybercrime Story of Elizabeth Holmes and Theranos
07:22 Elizabeth Holmes' Motives and Goals for Founding Theranos
09:46 The Rise of Theranos and Elizabeth Holmes
14:02 The Technology and Promises of Theranos
23:08 The Downfall of Theranos and Questions Raised
28:36 Investigations and Criminal Charges Against Theranos
29:32 The End of Theranos and Elizabeth Holmes' Legal Battles
38:30 Update on Elizabeth Holmes' Attempts to Dismiss the Case
45:55 Conclusion and Call to Action
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Dino Mauro (00:02.382)
fraud stories like how they caught Elizabeth Holmes touched the lives of many people reaching far beyond the Silicon Valley elite. When you think about how startup companies are caught in fraud, look at Elizabeth Holmes. Today, disgraced Theranos CEO Elizabeth Holmes is in custody at a Texas federal prison where she will spend the next decade. Sentenced to 11 years serving.
sentence. Holmes entered the minimum security federal women's prison camp located in Bryan, Texas on Tuesday, May 30th, 2023, located approximately 100 miles outside of Houston where Holmes grew up before moving to California and attend Stanford where she ultimately dropped out. The federal prison of Bryan is a minimum security federal prison camp housing more than 600 female offenders.
Her arrival into prison was filled with tears and emotion, but with great satisfaction for many in law enforcement. The arrival came more than a year after a jury had convicted her on four felony counts of fraud and conspiracy back in January, 2022. She was sentenced to prison time back then in November of 2022.
She left behind her husband, a billionaire heir, and her two young children, a son who was born July, 2021, and a three month old daughter at the time she went into the Bryan prison camp. Her co -conspirator and former boyfriend, business partner Ramesh Sunny Belwani has also begun serving his sentence of 13 years.
for fraud and conspiracy in a federal prison in Southern California. Elizabeth Holmes became a symbol of the shameless hyperbole that often saturates startup culture. She herself once graced the covers of magazines appearing alongside prominent figures like Bill Clinton at conferences and attracted a who's who of investors on the Theranos.
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board. We talk about that all of that in this episode. Theranos as you'll recall had promised to test for a wide range of health concerns using only a few drops of blood, a prick of a finger instead of vials and vials of blood draws. For those seeking medical care, this was to become a lifesaver. It was anything but. It all began to unravel.
after a damning Wall Street Journal investigation in 2025. Holmes is now the rare Silicon Valley founder to be tried and convicted of fraud. Questions still linger about her true intentions. So many that even the federal judge who presided over her case is mystified. Holmes defenders continue to ask whether the punishment fits the crime, but
Those involved, as well as those in the industry and the emerging tech space, while they seem mystified, they're not surprised in the end result. The technology never worked as promised. Was her intent to hope that the technology would catch up to what they had promised investors and regulators? Or had Theranos and Elizabeth Holmes crossed the line of no return?
when they unleashed their technology through Walgreens and other pharmaceutical stores, directly into clinics treating patients with incorrect and wildly inaccurate test results. You can decide for yourself after hearing what unfolds in this episode. This is the story of how they caught Elizabeth Holmes in the rise and fall of Theranos.
Come join us as we dive deeper behind the scenes of security and cybercrime today. Interviewing top technology leaders from around the world and sharing true cybercrime stories to raise awareness. From the creators of Vigilance, the newest global technology newsletter translating cyber news into business language we all understand. So please help us keep this going by subscribing for free to our YouTube channel.
Dino Mauro (04:57.006)
and downloading our podcast episodes on Apple and Spotify so we can continue to bring you more of what matters. This is Cybercrime Junkies, and now...
Dino Mauro (05:17.966)
Today's true cybercrime story is a favorite of cybercrime junkies. Ripped from the headlines, this true story has been covered throughout the worldwide media. A Google search returns over 57 million responses. There have been hundreds of thousands of articles, a bestselling book by Wall Street Journal author John Keruru, thousands of news reports, a documentary called The Inventor, a Hulu and Disney Plus mini -series called The Dropout by the same name.
So how did we get here? How did this brilliant mind turn into a federally convicted felon facing 20 years in prison? A cautionary tale for tech entrepreneurs walking the fine line between vision and defrauding of people who put faith in her, between sales pitch and federal felony conviction. Wolfle Cybercrime Acts. This cybercrime is a little bit different in the sense that it doesn't involve a criminal
hacker. But it's a cyber crime nonetheless and worse in many ways than a data breach. It involves the intentional defrauding by leveraging of false life and death claims of technology. Criminal activity so vast that former heads of state, US generals and billionaires were duped out of hundreds of millions of dollars.
Today, the Theranos founder, Elizabeth Holmes faces up to 20 years in federal prison for sentencing for federal fraud charges. She was convicted of on January 4th, 2022. Um, that was in January of 2022. Let me redo that. Today, the Theranos founder, Elizabeth Holmes faces up to 20 years in federal prison in sentencing for federal fraud charges. She was convicted of on January 4th, 2022.
four counts of defrauding investors after an almost four -month -long landmark trial in California. Elizabeth Holmes faces 11 charges in total and was found not guilty of four charges relating to defrauding the public. The jury failed to reach a verdict on a further three charges after deliberating for seven days. Journalist Robin Morris reports in the publication Good to Know the following.
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Holmes was originally charged alongside the company's former president, Ramesh Bhawani, who she alleges abused her in 2018. This is the same year that Theranos was dissolved. That fellow indictee and co -conspirator, Sudhi Bhawani, was also convicted on July 7th, 2022 and found guilty on all 12 fraud charges, six months after the founder.
Holmes's conviction. He awaits sentencing as well. One parallel in the trials, the facts, the evidence, the emails, the documentation, the odd behavior, the duping, the false claims, all of that was involved and illustrated throughout both trials. What was interesting though is in Elizabeth Holmes's trial, she took the stand and her personality got to come out and she was able to
to cast shade and point blame directly at Sunny Balwani for abusing her, being more senior in years and experience and saying that she was under his guise, right, under his, his, his, his mystical belief in abuse. That may play out in a sense. Sunny Balwani, during his trial, did not testify whatsoever. So there was no ability.
for the jury to hear, nor the judge in sentencing that's going to be coming up about the fact that maybe he didn't do those things. For right now, it's an open question in the judge's mind when sentencing comes. During the trial, which started in September 2021, multiple lab directors testified to telling Holmes about all of the flaws in the Theranos technology and this box, this Edison machine that they used. We'll talk about that in just a bit.
but they claimed they were instructed to downplay their concerns. They also added that Holmes told investors the technology was operating as planned. The prosecution called 30 witnesses in a bid to prove that Holmes knew the product she was selling to investors was in fact a lie. It was in fact a complete sham. Prosecutor Jeff Schenck said in his closing argument that Holmes, quote, shows fraud.
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over business failure. She chose to be dishonest with investors and more importantly, with patients. That choice was not only callous, selfish, it was criminal. Holmes was found guilty of conspiracy to commit fraud against investors and three charges of wire fraud by the jurors. Her sentencing date is coming up September 22nd, 2022, and she faces a maximum sentence of 20 years.
based on what the judges typically sentence defendants to in similar cases. However, various legal experts believe she will likely be handed a far less severe punishment. She denies her convictions and expects to appear. Once again, she was once touted as the next Steve Jobs with a net worth of 4 .5 billion. She now is a convicted felon unable to vote in the United States and has fallen from grace, currently out on a $500 ,000 bail while she awaits.
sense.
Elizabeth Holmes and Theranos are one of the most infamous cases of a fall from grace from the unicorn startup world of Silicon Valley. They were considered a tech unicorn by the media and by industry watchers, propelling the founder into becoming the youngest billionaire on the cover of Forbes magazine set to disrupt the entire U S healthcare industry. This only resulted in just a few short years later in federal indictment and bankruptcy.
So Elizabeth Holmes, let's start from the beginning. She dropped out of Stanford at the young age of 19 to found Theranos, which purported to revolutionize the way blood tests were done. One simple drop of blood pricked from a finger could diagnose a myriad of diseases and conditions, or so she claimed. Now to judge Elizabeth Holmes and Theranos now is really missing the point. This is a remarkable story of a unicorn healthcare tech.
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It's a cautionary tale for all of us about overselling or over promising something when the technology isn't quite ready. It's a cautionary tale of being very wary of the phrase, fake it till you make it. The more we learn and research the Theranos timeline and the actions of those involved, one underlying theme merged to us. So many brilliant, experienced people were fooled. Why?
because they wanted to believe. We don't feel Elizabeth Holmes even intended to defraud anyone at the beginning at all. I mean, her initial motives and initial goals were good. She was driven by the death of a close uncle. She wanted to cure the delays and death caused in the lab industry run by mostly two main companies with over 80 % market share, Quest Diagnostics and LabCorp of America.
their lab results and their testing for blood tests require you to draw vials and vials of blood from your arm through a venous puncture, right? A big thick needle that goes into your arm. It's painful. It's uncomfortable. It's difficult for a lot of people. It's costly. It takes too long. It's inefficient. So the issue that drove her was fear of needles and the desire to kind of speed up the timeline for diagnosis and to democratize everything into
give us all more control over our own healthcare and treatment. Her vision was very similar to like Jobs, like Steve Jobs, which was one of her idols, to democratize healthcare so that we all have a lab box in our own homes one day, just like Jobs' vision of having us all have a personal computer, which obviously keep true. Thus was born Theranos. The word comes from therapy and diagnosis, Theranos.
Let's rewind a bit to 2014 the blood testing startup Theranos and its founder Elizabeth Holmes run top of the world back then. There was a revolutionary idea thought up by this woman hailed as a genius who stalled herself as a female Steve Jobs. Holmes was the world's youngest female self made billionaire billionaire with a B and Theranos was one of Silicon Valley's unicorn startups valued at an estimated $9 billion of which she owned 50%. So this is how
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Elizabeth Holmes went from a precocious child to an ambitious Stanford dropout to an embattled startup founder now charged with federal fraud charges. She was born February 3rd, 1984 in Washington, DC. Her mom, Noel, was a congressional committee staffer and her dad, Christian Holmes, worked for Enron before moving to government agencies like USAD. She and her family, when they were young, moved away from Washington, DC to Houston.
When she was seven, she tried to invent her own time machine, filling up an entire notebook with detailed engineering drawings. A couple of years later, she told relatives at a family gathering. When asked what she wanted to be, she said, I want to be a billionaire at the age of nine. That was her answer. Her relatives described her as saying it with the utmost seriousness and determination. She had an intense competitive streak from a young age.
She often played Monopoly with her younger brother and cousin, and she would insist on playing until the very end, collecting houses and hotels until she won. If she was losing, she would often storm off. More than once, she ran directly through a screen on the door in a tantrum. Then in high school, Holmes developed her work ethic, often staying up till dawn just to study. She quickly became a straight -A student and even started her own business in high school.
She sold C++ compilers, which is a type of software that translates computer code to Chinese schools. She started taking Mandarin classes and partway through high school, talked her way into being accepted by Stanford University's summer program, which culminated in a trip to Beijing. Inspired by her great grandfather, Christian Holmes, who was a surgeon, Holmes decided she wanted to go into medicine, but she discovered early that she was terrified of needles.
Later, she said this is one of the things that influenced her along with her uncle's death to start Theranos.
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A couple of years later, Holmes started at Stanford to study chemical engineering. When she was a freshman, she became a president scholar in honor, which came with a $3 ,000 stipend to go toward a research project. She spent the summer after her freshman year interning at the Genome Institute in Singapore. She got the job partly because she learned how to speak Mandarin. As a sophomore, she went to one of her professors.
And this isn't just any professor. This was Channing Robertson, the head of the science department at Stanford University. And she said, let's start a company. And with his blessing, she founded Real Time Cures, which later changed the name to Theranos. Ironically, thanks to a typo, early employees of that company actually got paychecks that actually said real time cursers. But what was interesting is the head Channing Robertson.
actually quit his job there to join the board and work for her. That's how much belief these people had in him.
She soon filed a patent for a medical device that would analyte monitoring and drug delivery, a wearable device that would administer medication, monitor patient's blood, and adjust the dosages as needed. By the next semester, she had completely dropped out of Stanford. She wasn't attending school, and she was working full time for her company.
and it started all in the basement of a college house there at Stanford University. Theranos's business model was based around the idea that it could run blood tests using proprietary technology that required only a fingerprint and a small amount of blood. Holmes said the test would be able to detect medical conditions like cancer and high cholesterol immediately and begin rendering therapy. And if they can create this model,
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and place it in everyone's home. The entire democratization of healthcare would be disrupted. It would change the world as we know it. Holmes' attitude towards secrecy and running a company was borrowed from a Silicon Valley hero of hers, former Apple CEO Steve Jobs. Holmes started dressing in black turtlenecks like Jobs, decorated her office with his favorite furniture, and like Steve Jobs, never took vacations.
Even Holmes uncharacteristically deep voice, which if you've seen any interviews with her, is kind of remarkable. It might have been part of a carefully crafted image intended to help her fit in in the very male dominated business world of Silicon Valley. There's a podcast called The Dropout where former Theranos employees talk about her and say that sometimes she would fall out of character, especially after she'd be out drinking and she would speak with a normal
a female higher voice. But most of the time she spoke with a with a lower voice, especially in interviews. She was known to be a demanding boss wanting her employees to work as hard as she did. She had her assistance tracked when employees would arrive and leave each day to encourage people to work longer hours. She started to have dinner catered to the office every night at 8pm. She would often work until midnight or 11pm and get in the office by 7am.
Shortly after she dropped out of Stanford at the age of 19 and started this company, she began dating Theranos president and COO Sonny Balwani. He was 20, 25 years her senior. The two met during Holmes's third year at Stanford's summer Mandarin, the summer before she went to college. She was bullied by some of the other students and Balwani kind of came to her aid. Balwani became Sonny Balwani, who's also one of the people indicted.
in this federal charge, which is facing a trial in the spring, summer of 2021 became Elizabeth Holmes, number two, right hand person at Theranos, despite having very little experience. He was said to be a bully and he often tracked his employees whereabouts. He would monitor everyone's emails, even if he wasn't on the email thread and would monitor all of their behavior. Holmes and Balwani eventually broke up in the summer of 2016 when Holmes
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pushed him out of the company. And we'll get to that in just a bit. But circling back to 2008, Theranos board started to have questions and started to make a move to remove homes as CEO in favor of someone a little bit more experienced. After all, she was just a girl in her twenties. But over the course of a two hour meeting, she sat down with this very impactful board that she had created. We're going to describe who she had on her board in just a second.
And she convinced every single one of them to let her stay in charge of that company. But she did a lot of things. The culture was bad. The the focus on secrecy and lack of transparency was obvious. I mean, even in 2011, she hired her younger brother Christian to work at Theranos, even though he didn't have any medical or science background.
He spent his early days at Theranos reading about sports online and recruiting his Duke University fraternity brothers to join the company. People dubbed Holmes and his crew the frat pack or Therogros. As Theranos started to rake in millions in funding, Holmes became the subject of media attention and a lot of acclaim in the tech world. She graced the covers of Fortune and Forbes magazine. She gave a tech talk, which if you haven't seen, you should check it out on YouTube.
And she spoke on panels with Bill Clinton and Alibaba's Jack May. At one point, Holmes was the world's youngest self -made female billionaire with a net worth around 4 .5 billion. Company was valued at 9 billion, she owned half, and they had raised around $400 million in capital from major venture capitalists and investors. She started raising money for Theranos from prominent investors like Oracle founder Larry Ellison,
Tim Draper, the father of a childhood friend and the founder of prominent VC firm Draper Fisher, Jervis stint. Um, she wound up raising even more than $700 million. What was interesting about this is not the amount of money because we hear about that a lot over in Silicon Valley. Well, what was interesting is she took investors money on the condition that she wouldn't have to reveal how the technology worked. Think about that. Who does that? Who gives?
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hundreds of millions of dollars on the story, not on the data. Plus, she would keep whenever she would take their money and receive their money in investment, she would make it clear that she alone would have final say over everything having to do with the company. And yet, the money came. That obsession with secrecy extended to every aspect at Theranos.
For the first decade, Holmes spent building her company, Theranos, operated in stealth mode. She even took three former Theranos employees to court, claiming they had misused Theranos' trade secrets. And now let's get to the board. Who was this board that, this illustrious board that got her all of this power and accolades? Well,
She had names on there like General Mad Dog Mattis, Henry Kissinger, Secretary of State George Schultz, Larry Ellison, the head of the science department of Stanford, Channing Robertson, even had quit his job to work for her. It was a laundry list of who's who. What was interesting is any of them were physicians. They weren't science or medical people, but they were very politically connected.
and they were very tech savvy.
So this focus in this obsession with security at Ferros was extreme. She had bulletproof glass. She had 20 bodyguards. People were followed to the bathrooms. All emails were monitored by the leadership team. It was a poisonous culture. She asked anyone who visited the company's headquarters to sign non -disclosure agreements before being allowed to even enter the building. And they had security guards escort visitors.
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everywhere.
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So Theranos, as it began to grow, she and Sunny, Belwani, would go to the Silicon Valley airport and they would fly out in their private jets and they would go and they would do pitches. They would pitch for contracts and they got good at it. Again, data doesn't sit in the mind like stories do, right? Emotional stories speak to the part of the mind, kind of like what Simon Sinek talks about.
Why? Right? It talks to the part of the brain that modifies behavior. It gets people emotionally connected, right? And people didn't mind that they didn't have the data. Everyone wanted to believe that this would work. So Theranos quickly began securing outside partnerships. Capital Blue Cross and Cleveland Clinic signed on to offer Theranos tests to their patients. And then the big kahuna happened. Walgreens.
Walgreens made a deal to open Theranos testing centers in their stores. Theranos also formed a secret partnership with Safeway worth $350 million. Now the goal with Walgreens was because Walgreens was located about five miles or so from nearly every U .S. home and they wanted a, their ultimate goal was to put a Theranos box in the Theranos testing.
box, which is the size of like an air fryer or a big toaster. And everyone's homes eventually. That's that was the goal. And so how are they going to do it? They're going to go through a retailer that has credibility that is located near those homes as step one. So they started it with Walgreens in a select group of stores in Arizona. And then their goal was to push it out in select markets after that. But that's when everything changed.
When Walgreens rollout began to happen, those deadlines became real. And then basically the proverbial shit as a fan, right? They had to have the technology catch up with the promises that were sold. And the bottom line is it didn't. In fact, they would resort oftentimes back to drawing vials of blood from veins and shipping them out to third party lab companies. The Edison devices,
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which were designed and and and Sunny and Elizabeth made the engineers keep them so small that it was designed to do so many of these different lab tests and movements all within the small box that things would break. It was it was it was a cluster. It just the results were inconclusive. The results were inaccurate. Things would overheat. Things wouldn't work and then they would.
do almost like a smoke and mirrors and then just go and get it. The lab results done through independent third party lab companies. So their Edison device, that's what they call it because they kept saying we have to make 10 ,000 of them and they keep breaking, but the 10 ,000 first one is gonna be the one that's gonna work perfectly and it's gonna change the world. That's why her idol was Thomas Edison and Steve Jobs. So this Edison device, this like big toaster thing.
was to do approximately 200 tests from just a small drop of blood. Now, understanding that process, that blood needed to be diluted. And then even by diluting it more and more and more, the test results wound up being inconsistent and inaccurate. So what was the result of all this? That's when it all changed. The result was a PR nightmare and something that led to investigations in the ultimate demise.
People got the results back, there were delays and it was just a cluster. The tarnish had set and the house of cards began to fall. And here's perhaps the tip of the iceberg in the fall of Elizabeth Holmes and Theranos. When the Edison tech was brought into question, this is how she described how it worked. Because she was brought on television shows and mad money and all of these financial shows because they're like, hey, what's going on? You're getting all this bad press.
what's happening and she and they all want to know like how does this thing really work. Here was her scientific explanation of how this works and I quote. A chemistry is performed so that a chemical reaction occurs. It generates a signal from the chemical reaction with the sample, which it translated into a result, which is then reviewed by certified lab technicians.
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Think about that. What the heck does that even mean? It's not scientific. It's not data driven. It's not real. We know what she meant. We know she wanted it to do. But that was about as clear and scientific as it got.
So around this time, questions started being raised about the technology. Ian Gibbons, chief scientist at Theranos and one of the company's first hires, warned Holmes and Balwani that the tests weren't ready for the public to take and that there were inaccuracies in the technology. Outside scientists began voicing their concerns about Theranos too. The demise and the pressure that the internal Theranos people were under,
was so great that one of the head scientists there even committed suicide the night before a deposition was having to be given. By August 2015, the FDA began investigating Theranos. Regulators from the government body that oversees laboratories found major inaccuracies, quote unquote, in the testing Theranos was doing on patients.
See, part of the difference between what Thomas Edison was doing is he was going to the media and he was saying, I've created the light bulb, right? And he did this over and over, even though the light bulb filament had not been perfected yet, right? But by the time his funding was running out and his reputation was being thrashed, the technology caught up and the film worked. And then he was lauded as a hero from then on. Here, the technology didn't...
catch up in time. And here, it's not just a light in a room, or for show. This is testing done on patients, people were relying on these tests for their medical care. And it's a very regulated industry. That's one of the biggest differences. So 2014 2015 is when it all starts to spiral. By October 2015, Wall Street Journal reporter John Carreiroo,
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publishes his investigation into Theranos' struggle with its technology. Keraru's reporting is a landmark report and just sets off an explosion in this industry. His reporting sparked the beginning of the company's downward spiral. Keraru found that Theranos' blood testing machine, named the Edison, could not give accurate results. So Theranos was running its sample.
through the same machines used by traditional blood testing companies. Holmes then appeared on CNBC's Mad Money shortly after the Wall Street Journal published its story to defend herself from Theranos. And she's quoted as saying, this is what happens when you work to change things. And first they think you're crazy, then they fight you, and then all of a sudden you change the world. By 2016, the following year, the FDA, Centers for Medicare and Medicaid Services,
and the Security Exchange Committee were all looking into Theranos in formal investigations. By July 2016, criminal charges set in. Holmes was banned from the lab testing industry for two years. By October, Theranos had shut down its lab operations and wellness centers. In March 2018, Theranos, the company, Holmes, Individually, and Sunny Balwani, Individually,
were charged with massive fraud by the Security Exchange Commission, the SEC. Holmes agreed to give up financial and voting control over the company, pay a $500 ,000 fine and return 18 .9 million shares of Theranos stock. She also is not allowed to be the director or officer of a publicly traded company for 10 years. Now, despite the charges, Holmes was allowed to stay on as CEO of Theranos since it's a private company.
The company had been hanging on by a thread and Holmes wrote to investigators or to investors rather asking for more money in order to save terms in light of where we are. This is no easy ask. She wrote. Now today, Holmes and Bellwani are now awaiting federal trial, although their cases have since been separated. If convicted, Holmes and Bellwani can each face up to 20 years in prison and more than a $2 .7 million fine. The U .S. government is safe. And besides the criminal case,
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Holmes is also involved in a number of civil lawsuits, including one in Arizona brought on by former Theranos patients over inaccurate blood tests. Lawyers representing her in the Arizona case said in late 2019, they hadn't been paid over a year and they got asked to be removed from the legal team. So the end of Theranos comes in June 2018, just a couple of years ago. Theranos announced that Holmes was stepping down as CEO in June. On the same day,
The Department of Justice announced that a federal grand jury had charged Holmes along with Balwani with nine counts of wire fraud and two counts of conspiracy to commit wire fraud. Those have since been upgraded and there's many more charges. Theranos sent an email to shareholders in September of 18, just a few months later, announcing that the company was shutting down. Theranos reportedly said it planned to spend the next few months repaying creditors with its remaining resources.
So where are we at today? Well, Holmes today, around the time Theranos' time was coming to an end, she made her first public appearance alongside William Billy Evans, a 27 -year -old heir to a hospitality property management company in California. The two reportedly first met in 2017 and were seen together in 2018 at Burning Man, the art festival in the Nevada desert. Holmes is said to wear Evans' MIT signet ring on a chain around her neck and the couple.
Reportably post photos professing the love for each other on a private Instagram account. Well, that wraps this up. Thanks for joining everybody. Hope you got value out of digging deeper behind the scenes of security and cyber crime today. Please don't forget to help keep this going by subscribing free to our YouTube channel at Cybercrime Justice Podcast and download and enjoy all of our past episodes on Apple and Spotify podcasts so we can continue to bring you more of what matters.
is cybercrime junkies. We thank you for joining us. Engaged nearly 2019 and then married in June in a secretive wedding ceremony. Former Theranos employees were reportedly not invited to the wedding according to Vanity Fair.
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So as you look back at this fall of this unicorn and this just meteoric rise, we're left really with only questions. And the truth is yours to determine. One question was, did she oversell it? Did the tech just not catch up in time? Did she and her leadership team simply become too insulated or out of touch to ignore the data? Is this something like Thomas Edison, who had sold the media on mastering the light bulb phone?
but hadn't, you know, and then right as funding was running out and his reputation, the bulb was fixed, the tech caught up in time for him, but not for her. It's that Edison faked it until you make it so long as you don't defraud or risk the lives of people. Man, as our idol Steve Jobs and Thomas Edison, they kept making errors and sold a vision until the technology would catch up before the time and funding ran out.
I mean, did she fail to stay realistic, right? Or did she just get caught up believing her own BS? Right to the vast amount of money that they get just make them too insulated. You know, she used her story, right? They did not want when they would get investor money, which guys can understand is they would never provide audited financial statements and no technical verifications were ever given. People would give them
hundreds of millions of dollars without any data, without any audited financial statements. Try getting a mortgage for a $300 ,000 house these days. And it's like giving blood. And these people were giving hundreds of millions of dollars without any audited financial statements or any technical verifications. You know, the bottom line is data doesn't sit in the minds of people like stories do. Emotional stories, right?
speak to the part of the mind and it creates a vision and a belief and a faith in someone. So now it rests with the government and we just hope that visionaries aren't hampered by the inability to have that dream and wait for the technology to catch up. But in the same sense, they have to do it.
Dino Mauro (39:27.982)
without risking the lives of people and without defrauding. We welcome you guys to check out the key resources we found. There's a great book called Bad Blood, Secrets and Lies in Silicon Valley. There's the movie called The Inventor for Blood in Silicon Valley, which is based on it. And there's a podcast called The Dropout. Please check it out. We hope you enjoyed the rise and fall of Elizabeth Holmes and Theranos.
Thanks for listening.
Dino Mauro (40:26.03)
Hello, everyone. This is David Moro. I'm the creator and host of this podcast, which we aptly named Cybercrime Junkies. My co -host Mark Moser and I are both true crime fans and have been in the cybersecurity industry as professionals for decades. Our goal is to create a podcast that is fun and interesting, as well as one that serves a greater cause. Our cause here is simple. It's to protect you. Unlike 20 years ago, when there were two versions of our lives.
with one online and one in physical reality, today there is very little aspect of our personal and professional lives that is not digitized. Because of that, we have to think a little differently. All of us do. So our aim in protecting you is to help you understand in common, normal terms what it means to keep security in our minds. This podcast is for you individually, your family, as well as the organization and brands that we serve.
There are a lot of people that unfortunately and sadly want to do us harm, but we can change how we defend ourselves against it. And like any other playground, when we level the playing field, the game is fun. So we hope you listen and hope you download our episodes. The download is really the key. It allows us to keep this podcast going. So in our episodes, you will find interviews with leaders who protect and build great brands, some comedic relief of any kind, says laughter, after all, is what it's all about.
and then some true cybercrime stories so that we can relate what this really means in life. In addition to our regular episodes, which we will release on Monday mornings, we will also have additional premium content available for those who want to subscribe. There you can gain access to exclusive videos, interviews, security awareness training lessons, ridiculous outtakes and some more fun member only things. If you become a fan of the show, one thing we would love and appreciate,
is if you simply bought us a coffee. There's a link in the show notes and on our website. Again, please enjoy the show. Give us feedback right on our website, cybercrimejunkies .com. Thank you so much for listening. And now the show.
Dino Mauro (42:41.806)
Hey everyone, this is a quick update on Theranos and Elizabeth Holmes on their last ditch efforts to get free. So just last week in late August, 2022, Elizabeth Holmes strolled into a California courtroom once again, accompanied by her parents like she had done during her four month trial back in January. This time she and her counsel filed motions to dismiss her case.
It was a long shot attempt to get her fraud conviction thrown out by telling the judge who oversaw her trial back in January all of the highlights and all of the benefits that the company had accomplished. It didn't go very well. And she's set for sentencing later on this month. And we will keep you updated on that. She faces up to 20 years in federal prison and U .S. District Judge Edward de Villa issued the ruling last Thursday.
upholding the guilty verdict reached by the jury back on January 4th. That was for four counts of defrauding investors after almost that four month long landmark trial in California. If you recall also the fellow indicted co -conspirator Sonny Belwani was also convicted on July 7th, 2022, just a couple months ago. He was found guilty on all 12 fraud charges.
Six months after Holmes' conviction. So during Holmes' trial, which started back in 2021, multiple lab directors had testified to telling Holmes about all of the flaws in their technology. You recall the technology was based on this box, the Edison, right? It was supposed to be this silver bullet box with just a small prick of blood. Could do hundreds and hundreds of blood tests, diagnosing cancer, diabetes.
all of these precursor results, which it didn't actually do. And it really gets to the issue of at what point is enthusiasm and sales pitch devolve into fraud. And that is why so many people are watching this case. 30 witnesses were called in that trial in a bid to prove that Holmes knew.
Dino Mauro (45:10.03)
that the product she was selling to investors was in fact not what was claimed to be. Prosecutor Jeff Schenck said in his closing argument that Holmes, quote, chose fraud over business failure. She chose to be dishonest with investors and with patients. That choice was not only callous, it was criminal, unquote.
She wound up being found guilty of conspiracy to commit fraud against investors and three charges of wire fraud by the jurors. The sentencing is coming up on September 26th of this year. She faces a maximum prison sentence of 20 years. People all over Silicon Valley and the country as well as the world involved in the medical diagnosis field. I know that there are several...
companies that are actually trying to drive the technology that she claimed would work. There's one in Israel that we'll report on soon that is getting very, very close and is very promising. That will be a game changer in the health care industry. And that's really key. And so that's what we're watching. And for those who haven't listened to our prior episodes on this topic, please check them out because we even have one with with the transcription there.
about the rise and fall of Elizabeth Holmes and the true cybercrime story that unfolded at her feet. Real quick as a recap, she rose to fame in 2003 when like Steve Jobs, she dropped out of college. She was attending Stanford at the time at the young age of 19. And she started a company that was set to change the world. Theranos. It's a combination of therapy and diagnosis. And it was said to disrupt
the healthcare laboratory industry. Supposed to be able to run hundreds of blood tests from cancer, diabetes, Down syndrome, and more, all from a single prick of a finger, a single drop of blood. Getting rid of painful traditional approaches used for decades and still employed today by taking vials and vials of blood for blood work. Her company went from a single investment by a family friend,
Dino Mauro (47:27.854)
And then through her sales pitches, which were at the heart of this trial, the pitches attracted high profile, wealthy investors like who? Like Rupert Murdoch, like Larry Ellison from Oracle fame, like general and secretary of state, James Mad Dog Maddox, so many more. And it became value just after a few years.
above $9 billion, placing Elizabeth Holmes as the youngest female billionaire in history and landed her on the cover of Forbes magazine. She admired Steve Jobs and acted like him, relentlessly holding meetings and structuring her model like he had done and always donned the black turtlenecks all the time, just like he used to do. The tack at the heart of this whole case.
was a box. The silver bullet tech was called the Edison. And it would transform magically and do what commercial analyzers have been doing for decades, but require vials of blood. Why? Because of the science. There needs to be a sufficient sample in order to run the scientific test.
Her description of how it worked is where we're going to leave you today. Right. When when you think about how valid this was or whether it crossed into the path of criminal intent and fraud. Obviously, the jury found that it did. But for your own belief. Right. Think about this. Her own description of what it does, of what that box did, of what her technology did, that she raised.
billions of dollars on. These are her words. Quote, a chemistry is performed so that a chemical reaction occurs. It generates a signal from the chemical reaction with the sample, which is translated into a result, which is then reviewed by certified lab technicians.
Dino Mauro (49:40.302)
I don't even know what that means. And it's not scientific, it's not data driven, and it's not real. And that was about as clear as scientific as it got.
Dino Mauro (00:01.638)
Today's true cybercrime story is a favorite of cybercrime junkies. Ripped from the headlines, this true story has been covered throughout the worldwide media. A Google search returns over 57 million responses. There have been hundreds of thousands of articles, a bestselling book by Wall Street Journal author John Keruru, thousands of news reports, a documentary called The Inventor, a Hulu and Disney Plus mini -series called The Dropout, and a great
podcast by the same name. Plus there's a new film set to hit screen soon starring Jennifer Lawrence and directed by Adam McKay. This is the true cybercrime story of Elizabeth Holmes and Theranos. Lucky to work for a great group of people you really believe in. Find yourself making an impact. Technology is a river that flows through every aspect of an organization and today is different.
We put ourselves and our organizations literally at risk of complete destruction every single time we get online. One click, one distraction is all it takes. Hi, cybercrime junkies. This is your host, David Morrow, along with co -host Mark Mosher. Come join us as we explore our research into these blockbuster true crime stories. Along with interviews of leaders who built and protect great brands.
Dino Mauro (01:31.438)
So how did we get here? How did this brilliant mind turn into a federally convicted felon facing 20 years in prison? A cautionary tale for tech entrepreneurs walking the fine line between vision and defrauding of people who put faith in her, between sales pitch and federal felony conviction. Wolfle cybercrime acts. This cybercrime is a little bit different in the sense that it doesn't involve a criminal hacker.
But it's a cyber crime nonetheless and worse in many ways than a data breach. It involves the intentional defrauding by leveraging of false life and death claims of technology. Criminal activity so vast that former heads of state, U .S. generals and billionaires were duped out of hundreds of millions of dollars. Today, the Theranos founder Elizabeth Holmes faces up to 20 years in federal prison.
sentencing for federal fraud charges she was convicted of on January 4th, 2022. That was in January of 2022. Let me redo that. Today, the Theranos founder Elizabeth Holmes faces up to 20 years in federal prison in sentencing for federal fraud charges she was convicted of on January 4th, 2022. Four counts of defrauding investors after an almost
four -month -long landmark trial in California. Elizabeth Holmes faces 11 charges in total and was found not guilty of four charges relating to defrauding the public. The jury failed to reach a verdict on a further three charges after deliberating for seven days. Journalist Robin Morris reports in the publication, Good to Know the following. Holmes was originally charged alongside the company's former president, Ramesh Bawani,
who she alleges abused her in 2018. This is the same year that Theranos was dissolved. That fellow indictee and co -conspirator, Sadi Bawani, was also convicted on July 7th, 2022 and found guilty on all 12 fraud charges, six months after the founder, Holmes' conviction. He awaits sentencing as well.
Dino Mauro (03:58.99)
One parallel in the trials, the facts, the evidence, the emails, the documentation, the odd behavior, the duping, the false claims, all of that was involved and illustrated throughout both trials. What was interesting though is in Elizabeth Holmes' trial, she took the stand and her personality got to come out and she was able to cast shade and point blame directly at Sunny Balwani for abusing her.
being more senior in years and experience and saying that she was under his guise, right? Under his mystical belief in abuse. That may play out in the sentencing. Sunny Balwani, during his trial, did not testify whatsoever. So there was no ability for the jury to hear, nor the judge in sentencing that's going to be coming up.
about the fact that maybe he didn't do those things. For right now, it's an open question in the judge's mind when sentencing comes. During the trial, which started in September, 2021, multiple lab directors testified to telling Holmes about all of the flaws in the Theranos technology and this box, this Edison machine that they used. We'll talk about that a little bit in just a bit. But they claimed they were instructed to downplay their concern.
They also added that Holmes told investors the technology was operating his plan. The prosecution called 30 witnesses in a bid to prove that Holmes knew the product she was selling to investors was in fact a lie. It was in fact a complete sham. Prosecutor Jeff Schenck said in his closing argument that Holmes quote, chose fraud over business failure.
She chose to be dishonest with investors and more importantly with patients. That choice was not only callous and selfish, it was criminal. Holmes was found guilty of conspiracy to commit fraud against investors and three charges of wire fraud by the jurors. Her sentencing date is coming up September 22nd, 2022 and she faces a maximum sentence of 20 years.
Dino Mauro (06:19.31)
based on what the judges typically sentence defendants to in similar cases. However, various legal experts believe she will likely be handed a far less severe punishment. She denies her convictions and expects to appeal. Once again, she was once touted as the next Steve Jobs with a net worth of 4 .5 billion. She now is a convicted felon unable to vote in the United States and has fallen from grace, currently out on a $500 ,000 bail while she awaits.
sense.
Elizabeth Holmes and Theranos are one of the most infamous cases of a fall from grace from the unicorn startup world of Silicon Valley. They were considered a tech unicorn by the media and by industry watchers, propelling the founder into becoming the youngest billionaire on the cover of Forbes magazine, set to disrupt the entire U .S. health care industry. This only resulted in just a few short years later in federal indictment and bankruptcy.
So Elizabeth Holmes, let's start from the beginning. She dropped out of Stanford at the young age of 19 to found Theranos, which purported to revolutionize the way blood tests were done. One simple drop of blood pricked from a finger could diagnose a myriad of diseases and conditions, or so she claimed. Now to judge Elizabeth Holmes and Theranos now is really missing the point. This is a remarkable story of a unicorn healthcare tech company.
It's a cautionary tale for all of us about overselling or over promising something when the technology isn't quite ready. It's a cautionary tale of being very wary of the phrase, fake it till you make it. The more we learned and researched the Theranos timeline and the actions of those involved, one underlying theme emerged to us. So many brilliant, experienced people were fooled. Why?
Dino Mauro (08:20.686)
because they wanted to believe. We don't feel Elizabeth Holmes even intended to defraud anyone at the beginning at all. I mean, her initial motives and initial goals were good. She was driven by the death of a close uncle. She wanted to cure the delays and death caused in the lab industry run by mostly two main companies with over 80 % market share, Quest Diagnostics and LabCorp of America.
Their lab results and their testing for blood tests require you to draw vials and vials of blood from your arm through a venous puncture, right? A big thick needle that goes into your arm. It's painful, it's uncomfortable, it's difficult for a lot of people. It's costly, it takes too long, and it's inefficient. So the issue that drove her was fear of needles and the desire to kind of speed up the timeline for diagnosis and to democratize everything into,
give us all more control over our own health care and treatment. Her vision was very similar to Jobs, like Steve Jobs, which was one of her idols, to democratize health care so that we all have a lab box in our own homes one day, just like Jobs' vision of having us all have a personal computer, which obviously came true. Thus was born Theranos. The word comes from therapy and diagnosis. Theranos.
Let's rewind a bit to 2014, the blood testing startup Theranos and its founder Elizabeth Holmes were on top of the world. Back then, Theranos was a revolutionary idea, thought up by this woman, hailed as a genius who styled herself as a female Steve Jobs. Holmes was the world's youngest female self -made billionaire, billionaire with a B, and Theranos was one of Silicon Valley's unicorn startups valued at an estimated $9 billion, of which she owned 50%.
So this is how Elizabeth Holmes went from a precocious child to an ambitious Stanford dropout, to an embattled startup founder now charged with federal fraud charges. She was born February 3rd, 1984 in Washington, DC. Her mom, Noel, was a congressional committee staffer and her dad, Christian Holmes, worked for Enron before moving to government agencies like USAD. She and her family, when they were young, moved away from Washington, DC to Houston.
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When she was seven, she tried to invent her own time machine, filling up an entire notebook with detailed engineering drawings. A couple of years later, she told relatives at a family gathering. When asked what she wanted to be, she said, I want to be a billionaire at the age of nine. That was her answer. Her relatives described her as saying it with the utmost seriousness and determination. She had an intense competitive streak from a young age.
She often played Monopoly with her younger brother and cousin, and she would insist on playing until the very end, collecting houses and hotels until she won. If she was losing, she would often storm off. More than once, she ran directly through a screen on the door in a tantrum. Then in high school, Holmes developed her work ethic, often staying up till dawn just to study. She quickly became a straight -A student and even started her own business in high school.
She sold C++ compilers, which is a type of software that translates computer code to Chinese schools. She started taking Mandarin classes and partway through high school talked her way into being accepted by Stanford University's summer program, which culminated in a trip to Beijing. Inspired by her great grandfather, Christian Holmes, who was a surgeon, Holmes decided she wanted to go into medicine, but she discovered early that she was terrified of needles.
Later she said this is one of the things that influenced her along with her uncle's death to start Theranos.
A couple of years later, Holmes started at Stanford to study chemical engineering. When she was a freshman, she became a president scholar in honor, which came with a $3 ,000 stipend to go toward a research project. She spent the summer after her freshman year interning at the Genome Institute in Singapore. She got the job partly because she learned how to speak Mandarin. As a sophomore, she went to one of her professors.
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And this isn't just any professor. This was Channing Robertson, the head of the science department at Stanford University. And she said, let's start a company. And with his blessing, she founded Real Time Cures, which later changed the name to Theranos. Ironically, thanks to a typo, early employees of that company actually got paychecks that actually said real time curses. But.
What was interesting is the head Channing Robertson who actually quit his job there to join the board and work for her. That's how much belief these people had in her. She soon filed a patent for a medical device that would analyte monitoring and drug delivery, a wearable device that would administer medication, monitor patients' blood and adjust the dosages as needed. By the next semester,
she had completely dropped out of Stanford. She wasn't attending school and she was working full -time for her company. And it started all in the basement of a college house there at Stanford University. Theranos's business model was based around the idea that it could run blood tests using proprietary technology that required only a fingerprint and a small amount of blood.
Holmes said the test would be able to detect medical conditions like cancer and high cholesterol immediately and begin rendering therapy. And if they can create this model and place it in everyone's home, the entire democratization of healthcare would be disruptive. It would change the world as we know it. Holmes' attitude towards secrecy and running a company was borrowed from a Silicon Valley hero of hers, former Apple CEO, Steve Jobs.
Holmes started dressing in black turtlenecks like Jobs, decorated her office with his favorite furniture, and like Steve Jobs, never took vacations. Even Holmes' uncharacteristically deep voice, which if you've seen any interviews with her, is kind of remarkable. It might have been part of a carefully crafted image intended to help her fit in in the very male -dominated business world of Silicon Valley.
Dino Mauro (15:00.364)
There's a podcast called The Dropout where former Theranos employees talk about her and say that sometimes she would fall out of character, especially after she'd be out drinking and she would speak with a normal female higher voice. But most of the time she spoke with a lower voice, especially in interviews. She was known to be a demanding boss wanting her employees to work as hard as she did. She had her assistance tracked when...
employees would arrive and leave each day to encourage people to work longer hours. She started to have dinner catered to the office every night at 8 p .m. She would often work until midnight or 11 p .m. and get in the office by 7 a .m. Shortly after she dropped out of Stanford at the age of 19 and started this company, she began dating Ferenos president and COO Sonny Balwani. He was 20, 25 years her senior.
The two met during Holmes's third year at Stanford's summer Mandarin program, the summer before she went to college. She was bullied by some of the other students and Balwani kind of came to her aid. Balwani became, Sonny Balwani, who's also one of the people indicted in this federal charge, which is facing trial in the spring -summer of 2021, became Elizabeth Holmes number two.
right -hand person at Theranos, despite having very little experience. He was said to be a bully and he often tracked his employees' whereabouts. He would monitor everyone's emails, even if he wasn't on the email thread, and would monitor all of their behavior. Holmes and Bawani eventually broke up in the summer of 2016 when Holmes pushed him out of the company. We'll get to that in just a bit. But circling back to 2008, Theranos board, um,
started to have questions and started to make a move to remove Holmes as CEO in favor of someone a little bit more experienced. After all, she was just a girl in her twenties. But over the course of a two hour meeting, she sat down with this very impactful board that she had created. I'm going to describe who she had on her board in just a second. And she convinced every single one of them to let her stay in charge of that company.
Dino Mauro (17:16.62)
But she did a lot of things. The culture was bad. The focus on secrecy and lack of transparency was obvious. I mean, even in 2011, she hired her younger brother Christian to work at Theranos, even though he didn't have any medical or science background.
He spent his early days at Theranos reading about sports online and recruiting his Duke University fraternity brothers to join the company. People dubbed Holmes and his crew the Frat Pack or Therobros. As Theranos started to rake in millions in funding, Holmes became the subject of media attention and a lot of acclaim in the tech world. She graced the covers of Fortune and Forbes magazine. She gave a tech talk.
which if you haven't seen, you should check it out on YouTube. And she spoke on panels with Bill Clinton and Alibaba's Jack May. At one point, Holmes was the world's youngest self -made female billionaire with a net worth around 4 .5 billion. Company was valued at 9 billion. She owned half and they had raised around $400 million in capital from major venture capitalists and investors.
She started raising money for Theranos from prominent investors like Oracle founder Larry Ellison, Tim Draper, the father of a childhood friend and the founder of prominent VC firm Draper Fisher, Jerviston. She wound up raising even more than $700 million. What was interesting about this is not the amount of money because we hear about that a lot over in Silicon Valley. But what was interesting is she took investors money on the condition that she wouldn't have to reveal how the technology worked.
Think about that. Who does that? Who gives hundreds of millions of dollars on the story, not on the data?
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Plus she would keep, whenever she would take their money and receive their money in investment, she would make it clear that she alone would have final say over everything having to do with the company. And yet the money came. That obsession with secrecy extended to every aspect at Theranos. For the first decade, Holmes spent building her company, Theranos operated in stealth mode.
She even took three former Theranos employees to court claiming they had misused Theranos' trade secrets. And now let's get to the board. Who was this board that, this illustrious board that got her all of this power and accolades? Well, she had names on there like General Mad Dog Mattis, Henry Kissinger, Secretary of State George Shultz, Larry Ellison.
The head of the science department of Stanford, Channing Robertson, even had quit his job to work for her. It was a laundry list of who's who. What was interesting is not any of them were physicians. They weren't science or medical people, but they were very politically connected and they were very tech savvy.
So this focus and this obsession with security at Veros was extreme. She had bulletproof glass. She had 20 bodyguards. People were followed to the bathrooms. All emails were monitored by the leadership team. It was a poisonous culture. She asked anyone who visited the company's headquarters to sign non -disclosure agreements before being allowed to even enter the building. And they had security guards escort visitors.
everyone.
Dino Mauro (21:06.324)
So Theranos, as it began to grow, she and Sunny, Bawani, would go to the Silicon Valley airport and they would fly out in their private jets and they would go and they would do pitches. They would pitch for contracts and they got good at it. Again, data doesn't sit in the mind like stories do, right? Emotional stories.
speak to the part of the mind, kind of like what Simon Sinek talks about, why, right? It talks to the part of the brain that modifies behavior. It gets people emotionally connected, right? And people didn't mind that they didn't have the data. Everyone wanted to believe that this would work. So Theranos quickly began securing outside partnerships. Capital Blue Cross and Cleveland Clinic signed on to offer Theranos tests to their patients.
And then the big kahuna happened, Walgreens. Walgreens made a deal to open Theranos testing centers in their stores. Theranos also formed a secret partnership with Safeway worth $350 million. Now the goal with Walgreens was because Walgreens was located about five miles or so from nearly every US home.
And they wanted a, their ultimate goal was to put a Theranos box in the Theranos testing box, which is the size of like a air fryer or a big toaster.
and everyone's homes eventually. That was the goal. And so how are they going to do it? They're going to go through a retailer that has credibility that is located near those homes as step one. So they started it with Walgreens in a select group of stores in Arizona. And then their goal was to push it out in select markets after that. But that's when everything changed. When the Walgreens rollout began to happen,
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those deadlines became real. And then basically the proverbial shit at the fan, right? They had to have the technology catch up with the promises that were sold. And the bottom line is it didn't. In fact, they would resort oftentimes back to drawing vials of blood from veins and shipping them out to third party lab companies. The Edison devices,
which were designed and Sunny and Elizabeth made the engineers keep them so small that it was designed to do so many of these different lab tests and movements all within the small box that things would break. It was a cluster. The results were inconclusive. The results were inaccurate. Things would overheat. Things wouldn't work. And then they would...
do almost like a smoke and mirrors and then just go and get it. Uh, the lab results done through independent, you know, third -party lab companies. So they're evident, their Edison device, that's what they call it because they, they kept saying we have to make 10 ,000 of them and they keep breaking, but we're going to, you know, the 10 ,000 first one is going to be the one that's going to work perfectly. And it's going to change the world. That's why, you know, her idol was Thomas Edison and Steve Jobs. So this Edison device is like big toaster thing.
was to do approximately 200 tests from just a small drop of blood. Now, understanding that process, that blood needed to be diluted. And then even by diluting it more and more and more, the test results wound up being inconsistent and inaccurate. So what was the result of all this? That's when it all changed. The result was a PR nightmare and something that led to investigations in the ultimate demise.
People got the results back, there were delays, and it was just a cluster. The tarnish had set and the house of cards began to fall. And here's perhaps the tip of the iceberg in the fall of Elizabeth Holmes and Theranos. When the Edison tech was brought into question, this is how she described how it worked. Because she was brought on.
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television shows and mad money and all of these financial shows because they're like, Hey, what's going on? You know, you're getting all this bad press what's happening. And she, and they all want to know like, how does this thing really work? Here was her scientific explanation of how this works. And I quote, a chemistry is performed so that a chemical reaction occurs. It generates a signal from the chemical reaction with the sample, which it translated into a result.
which is then reviewed by certified lab technicians.
Think about that. What the heck does that even mean? It's not scientific, it's not data -driven, it's not real. We know what she meant, we know what she wanted it to do, but that was about as clear and scientific as it got. So around this time, questions started being raised about the technology. Ian Gibbons, chief scientist at Theranos, and one of the company's first hires,
warned Holmes and Balwani that the tests weren't ready for the public to take and that there were inaccuracies in the technology. Outside scientists began voicing their concerns about Theranos too. The demise and the pressure that the internal Theranos people were under was so great that one of the head scientists there even committed suicide.
long before a, or the night before a deposition was having to be given. By August 2015, the FDA began investigating Theranos. Regulators from the government body that oversees laboratories found major inaccuracies, quote unquote, in the testing Theranos was doing on patients. See, part of the difference between what Thomas Edison was doing,
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is he was going to the media and he was saying, I've created the light bulb, right? And he did this over and over, even though the light bulb filament had not been perfected yet, right? But by the time his funding was running out and his reputation was being thrashed, the technology caught up and the film worked. And then he was lauded as a hero from then on. Here, the technology didn't catch up in time.
And here, it's not just a light in a room or for show. This is testing done on patients. People were relying on these tests for their medical care. And it's a very regulated industry. That's one of the biggest differences. So 2014, 2015 is when it all starts to spiral. By October 2015, Wall Street Journal reporter John Careroo,
publishes his investigation into Theranos' struggle with its technology. Kararu's reporting is a landmark report and just sets off an explosion in this industry. His reporting sparked the beginning of the company's downward spiral. Kararu found that Theranos' blood testing machine, named the Edison, could not give accurate results.
So Theranos was running its samples through the same machines used by traditional blood testing companies. Holmes then appeared on CNBC's Mad Money shortly after the Wall Street Journal published its story to defend herself and Theranos. And she's quoted as saying, this is what happens when you work to change things. And first they think you're crazy, then they fight you, and then all of a sudden you change the world.
By 2016, the following year, the FDA, Centers for Medicare and Medicaid Services, and the Security Exchange Committee were all looking into Theranos in formal investigations. By July 2016, criminal charges set in. Holmes was banned from the lab testing industry for two years. By October, Theranos had shut down its lab operations and wellness centers. In March 2018, Theranos,
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company, Holmes individually and Sunny Balwani individually, were charged with massive fraud by the Security Exchange Commission, the SEC. Holmes agreed to give up financial and voting control over the company, pay a $500 ,000 fine and return 18 .9 million shares of Theranos stock. She also is not allowed to be the director or officer of a publicly traded company for 10 years.
Now, despite the charges, Holmes was allowed to stay on as CEO of Theranos since it's a private company. The company had been hanging on by a thread and Holmes wrote to investigators, or to investors rather, asking for more money in order to save Theranos. In light of where we are, this is no easy ask, she wrote. Now today, Holmes and Belwany,
are now awaiting federal trial, although their cases have since been separated. If convicted, Holmes and Bellwani can each face up to 20 years in prison and more than a $2 .7 million fine, the U .S. government has said. And besides the criminal case, Holmes is also involved in a number of civil lawsuits, including one in Arizona brought on by former Theranos patients over inaccurate blood tests. Lawyers representing her in the Arizona case said in late 2019 they hadn't been paid over a year and they got asked to be removed from the legal team.
So the end of Theranos comes in June 2018, just a couple of years ago. Theranos announced that Holmes was stepping down as CEO in June. On the same day, the Department of Justice announced that a federal grand jury had charged Holmes, along with Balwani, with nine counts of wire fraud and two counts of conspiracy to commit wire fraud. Those have since been upgraded and there's many more charges. Theranos sent an email to shareholders.
in September of 2018, just a few months later, announcing that the company was shutting down. Theranos reportedly said it planned to spend the next few months repaying creditors with its remaining resources.
Dino Mauro (31:34.348)
So where are we at today? Well, Holmes today, around the time Theranos' time was coming to an end, she made her first public appearance alongside William Billy Evans, a 27 year old heir to a hospitality property management company in California. The two reportedly first met in 2017 and were seen together in 2018 at Burning Man, the art festival in the Nevada desert. Holmes is said to wear Evans' MIT signet ring on a chain around her neck and the couple.
Reportedly post photos professing their love for each other on a private Instagram account. Evan's parents are reportedly flabbergasted at their son's decision to marry Elizabeth Holmes. So while it's unclear where they currently reside, but they previously were living in a $5 ,000 a month luxury apartment in San Francisco up until April 2019. The apartment was located just a few blocks from one of the city's top tourist attractions. Famous part of the area, it's a crooked block of Lombard Street.
It was later reported that Holmes and Evans got engaged in early 2019 and then married in June in a secretive wedding ceremony. Former Theranos employees were reportedly not invited to the wedding, according to Vanity Fair. So as you look back at this fall of this unicorn and this just meteoric rise, we're left really with only questions. And the truth is yours to determine. One question was, did she oversell it?
Did the tech just not catch up in time? Did she and her leadership team simply become too insulated or out of touch to ignore the data? Is this something like Thomas Edison, who had sold the media on mastering the light bulb filament, but hadn't? And then Wright, as funny was running out in his reputation, the bulb was fixed. The tech caught up in time for him, but not for her.
It's that Edison faked it until you make it so long as you don't defraud or risk the lives of people. I mean, as her idol Steve Jobs and Thomas Edison, they kept making errors and sold a vision until the technology would catch up before the time and funding ran out. I mean, did she fail to stay realistic, right? Or did she just get caught up bleeding her own BS?
Dino Mauro (33:52.972)
right to the vast amount of money that they get just make them too insulated. You know, she used her story, right? They did not want when they would get investor money, which you guys can understand is they would never provide audited financial statements and no technical verifications were ever given. People would give them hundreds of millions of dollars without any data, without any audited financial.
statements. Try getting a mortgage for a $300 ,000 house these days and it's like giving blood. And these people were giving hundreds of millions of dollars without any audited financial statements or any technical verifications. You know, the bottom line is data doesn't sit in the minds of people like stories do. Emotional stories, right, speak to the part of the mind and...
it creates a vision and a belief and a faith in someone. So now it rests with the government and we just hope that visionaries aren't hampered by the inability to have that dream and wait for the technology to catch up. But in the same sense, they have to do it.
without risking the lives of people and without defrauding. We welcome you guys to check out the key resources we found. There's a great book called Bad Blood, Secrets and Lies in Silicon Valley. There's the movie called The Inventor, Out for Blood in Silicon Valley, which is based on it. And there's a podcast called The Dropout. Please check it out and we hope you enjoyed the rise and fall of Elizabeth Holmes and Theranos.
Thanks for listening.
Dino Mauro (36:12.492)
Hello everyone, this is David Morrow. I'm the creator and host of this podcast, which we aptly named Cybercrime Junkies. My co -host Mark Moser and I are both true crime fans and have been in the cybersecurity industry as professionals for decades. Our goal is to create a podcast that is fun and interesting as well as one that serves a greater cause. Our cause here is simple. It's to protect you.
Unlike 20 years ago when there were two versions of our lives, with one online and one in physical reality, today there is very little aspect of our personal and professional lives that is not digitized. Because of that, we have to think a little differently. All of us do. So our aim in protecting you is to help you understand in common, normal terms what it means to keep security.
This podcast is for you individually, your family, as well as the organization and brands that we serve. There are a lot of people that unfortunately and sadly want to do us harm, but we can change how we defend ourselves against it. And like any other playground, when we level the playing field, the game is fun. So we hope you listen and hope you download our episodes. The download is really the key. It allows us to keep this podcast going.
So in our episodes, you'll find interviews with leaders who protect and build great brands, some comedic relief from time to time, say laughter after all is what it's all about, and then some true cybercrime stories so that we can all relate about what this really means in real life.
In addition to our regular episodes, which we will release on Monday mornings, we will also have additional premium content available for those who want to subscribe. There you can gain access to exclusive videos, interviews, security awareness training lessons, ridiculous outtakes, and some more fun member -only things. If you become a fan of the show, one thing we would love and appreciate is if you simply bought us a coffee. There's a link in the show notes and on our website. Again, please enjoy the show.
Dino Mauro (38:15.15)
the show. Give us feedback right on our website cybercrimejunkies .com. Thank you so much for listening and now the show.
Dino Mauro (38:30.124)
Hey everyone, this is a quick update on Theranos and Elizabeth Holmes on their last ditch efforts to get free. So just last week in late August, 2022, Elizabeth Holmes strolled into a California courtroom once again, accompanied by her parents like she had done during her four month trial back in January. This time she and her counsel filed motions to dismiss her case. It was a long shot attempt.
to get her fraud conviction thrown out by telling the judge who oversaw her trial back in January all of the highlights and all of the benefits that the company had accomplished. It didn't go very well and she's set for sentencing later on this month and we will keep you updated on that. She faces up to 20 years in federal prison and U .S. District Judge Edward de Villa issued the ruling last Thursday upholding the guilty verdict.
reached by the jury back on January 4th. That was for four counts of defrauding investors after almost that four -month -long landmark trial in California. If you recall also, the fellow indicted co -conspirator Sonny Belwani was also convicted on July 7th, 2022, just a couple months ago. He was found guilty on all 12 fraud charges. Six months after...
Holmes' conviction. So during Holmes' trial, which started back in 2021, multiple lab directors had testified to telling Holmes about all of the flaws in their technology. You recall the technology was based on this box, the Edison, right? It was supposed to be this silver bullet box with just a small prick of blood, could do hundreds and hundreds of blood tests, diagnosing cancer, diabetes, all of these.
precursor results, which it didn't actually do. And it really gets to the issue of at what point is enthusiasm and sales pitch devolve into fraud. And that is why so many people are watching this case. 30 witnesses were called in that trial in a bid to prove that Holmes knew.
Dino Mauro (40:55.564)
that the product she was selling to investors was in fact not what was claimed to be. Prosecutor Jeff Schenck said in his closing argument that Holmes, quote, chose fraud over business failure. She chose to be dishonest with investors and with patients. That choice was not only callous, it was criminal.
She wound up being found guilty of conspiracy to commit fraud against investors and three charges of wire fraud by the jurors. The sentencing is coming up on September 26th of this year. She faces a maximum prison sentence of 20 years. People all over Silicon Valley and the country as well as the world involved in the medical diagnosis field. I know that there are several.
companies that are actually trying to drive the technology that she claimed would work. There's one in Israel that we'll report on soon that is getting very, very close and is very promising. That will be a game changer in the healthcare industry and that's really key. And so that's what we're watching. And for those who haven't listened to our prior episodes on this topic, please check them out because we even have one with the transcription there.
about the rise and fall of Elizabeth Holmes and the true cybercrime story that unfolded at her feet. Real quick as a recap, she rose to fame in 2003 when like Steve Jobs, she dropped out of college. She was attending Stanford at the time at the young age of 19. And she started a company that was set to change the world. Theranos. It's a combination of therapy and diagnosis. And it was said to disrupt
the healthcare laboratory industry. Supposed to be able to run hundreds of blood tests from cancer, diabetes, Down syndrome and more, all from a single prick of a finger, a single drop of blood. Getting rid of painful traditional approaches used for decades and still employed today by taking vials and vials of blood for blood work. Her company went from a single investment by a family friend.
Dino Mauro (43:13.388)
and then through her sales pitches, which were at the heart of this trial.
The pitches attracted high profile wealthy investors like who? Like Rupert Murdoch, like Larry Ellison from Oracle fame, like General and Secretary of State James Mad Dog Maddox, so many more. And it became value just after a few years above nine billion dollars, placing Elizabeth Holmes as the youngest female billionaire in history.
and landed her on the cover of Forbes magazine. She admired Steve Jobs and acted like him, relentlessly holding meetings and structuring her model like he had done and always donned the black turtlenecks all the time, just like he used to do. The tech at the heart of this whole case was a box. The silver bullet tech was called the Edison and it would transform magically.
and do what commercial analyzers have been doing for decades, but require vials of blood. Why? Because of the science. There needs to be a sufficient sample in order to run the scientific test.
Her description of how it worked is where we're going to leave you today. Right. When when you think about how valid this was or whether it crossed into the path of criminal intent and fraud. Obviously, the jury found that it did. But for your own belief, right. Think about this. Her own description of what it does, of what that box did, of what her technology did, that she raised.
Dino Mauro (45:01.708)
billions of dollars on. These are her words. Quote, a chemistry is performed so that a chemical reaction occurs. It generates a signal from the chemical reaction with the sample, which is translated into a result, which is then reviewed by certified lab technician.
I don't even know what that means. And it's not scientific, it's not data driven, and it's not real. And that was about as clear as scientific as it got. And the reason we brought you this update is because we've had several people over 125 actually reach out to us and ask for an update on this. So it's set for sentencing and we will be back with you then. So the next episode comes right now. Thanks for listening.
Hi, Cybercrime Junkies. Thanks for listening. Got a question you want us to address on an episode? Reach out to us at cybercrimejunkies .com. We explore why cybercrime grows daily, how it is funded, productized, and organized, how to protect yourself, and where cybercrime goes to hide. And thanks for being a Cybercrime Junkie.