UPDATE 1-Theranos and its founder settle U.S. fraud charges -SEC


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WASHINGTON (Reuters) – Theranos Inc and its Chief Executive Elizabeth Holmes have agreed to settle “massive fraud” charges in a deal that strips her of majority control over the embattled blood-testing company, among other penalties, U.S. regulators said on Wednesday.

FILE PHOTO: Elizabeth Holmes, founder and CEO of Theranos, speaks at the Wall Street Journal Digital Live (WSJDLive) conference at the Montage hotel in Laguna Beach, California, October 21, 2015. REUTERS/Mike Blake/File Photo

As part of the settlement, the Securities and Exchange Commission said company founder Holmes must also return millions of shares to the privately held company and cannot serve as an officer or director of a public company for 10 years.

Theranos was founded in 2003 aimed at developing an innovative blood testing device with quicker results using one drop of blood. In 2015, however, its fortunes waned after Wall Street Journal reports suggested the devices were flawed and inaccurate.

FILE PHOTO – Elizabeth Holmes, CEO of Theranos, attends a panel discussion during the Clinton Global Initiative’s annual meeting in New York, September 29, 2015. REUTERS/Brendan McDermid/File Photo

The SEC’s complaint alleged that the company, Holmes and Theranos’ former president, Ramesh “Sunny” Balwani, “made numerous false and misleading statements in investor presentations, product demonstrations, and media articles” about its key product.

The SEC, describing the case as involving “massive fraud,” said Theranos, Holmes and Balwani were charged “with raising more than $700 million from investors through an elaborate, years-long fraud in which they exaggerated or made false statements about the company’s technology, business, and financial performance.”

Jina Choi, the head of SEC’s San Francisco Regional Office, said the company’s troubles offered “an important lesson for Silicon Valley.”

“Innovators who seek to revolutionize and disrupt an industry must tell investors the truth about what their technology can do today, not just what they hope it might do someday,” she said in a statement.

Reporting by Susan Heavey and Tim Ahmann, Editing by Franklin Paul and Dan Grebler


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