Elizabeth Holmes & The Theranos Deception | 60 Minutes Archive
Summary
TLDRElizabeth Holmes founded Theranos with the promise of revolutionary blood testing technology, the Edison device, which she claimed could perform hundreds of tests from a single finger prick. The company soared in value, making Holmes the youngest self-made female billionaire. However, as exposed by the Wall Street Journal, Theranos was built on a massive fraud, with investors and patients deceived by false claims and staged demonstrations. Insiders reveal the company's failure to deliver on its promises, leading to regulatory crackdowns, invalidated test results, and a plummeting valuation from $10 billion to zero.
Takeaways
- 🚀 Elizabeth Holmes founded Theranos at 19 with the vision to revolutionize blood testing.
- 💉 Theranos' technology, named 'Edison,' claimed to perform hundreds of lab tests from a single pinprick of blood.
- 💸 At its peak, Theranos was valued at nearly $10 billion, making Holmes the youngest self-made female billionaire.
- 🕵️♂️ The Wall Street Journal exposed Theranos as a multi-year fraud, with investors and patients being deceived.
- 🛑 Theranos' board, including high-profile figures like Henry Kissinger, failed to verify the scientific validity of Holmes' claims.
- 🔥 Holmes was compared to tech visionaries like Bill Gates and Steve Jobs, adopting a similar black turtleneck style and persona.
- 🔍 The company staged fake demonstrations for investors, using traditional lab tests to deceive about the capabilities of the Edison device.
- 🚫 Federal regulators eventually shut down Theranos' laboratory for posing 'immediate jeopardy to patient health and safety'.
- 📉 Theranos' valuation plummeted to zero, with investors like Rupert Murdoch and Betsy DeVos losing significant amounts.
- 🚨 Holmes and company president Sunny Balwani were charged with 'massive fraud' by the SEC in March; Holmes settled without admitting guilt.
- 🔒 Theranos employees were closely monitored, required to sign NDAs, and faced threats from a team of lawyers and private investigators.
Q & A
What was Elizabeth Holmes' dream when she dropped out of Stanford University at the age of 19?
-Elizabeth Holmes' dream was to create a company that would revolutionize blood testing.
What was the name of the startup Holmes founded and what did it promise to achieve?
-Holmes founded a startup called Theranos, which promised that her technology could perform hundreds of laboratory tests from a pinprick of blood on the finger.
What was the name of the invention Holmes claimed would disrupt the lab testing industry?
-Holmes named her invention the Edison, a miniaturized blood analyzer.
How did Theranos' board of directors, which included national security heavyweights, influence the company's reputation?
-The board of directors, which included figures like Henry Kissinger and James Mattis, added credibility to Theranos, making it appear more trustworthy and influential.
What was the pivotal moment for Theranos when it announced a partnership with Walgreens?
-The pivotal moment was when Theranos announced a partnership with Walgreens, which would put an Edison machine in every store, supposedly performing all the tests that big lab machines could.
What did Tyler Schultz, who joined Theranos in 2013, observe about the Edison device?
-Tyler Schultz observed that the Edison device did not work as claimed. Components would fall off during testing, doors wouldn't close, and the device had issues with temperature regulation.
Why did Theranos employees stage fake demonstrations for investors?
-Theranos employees staged fake demonstrations to deceive investors into believing that the Edison device was successfully performing blood tests, which helped to keep the funding coming in.
What did the employees do with the blood samples after investors had their fingers pricked during fake demonstrations?
-After the finger pricking, an engineer would run in, grab the cartridge, and bring it out to the lab where scientists would manually test the blood, not the Edison device.
What was the reaction of the New York State Department of Health when Tyler Schultz alerted them about questionable lab practices at Theranos?
-The New York State Department of Health responded by saying that what was happening at Theranos was cheating and not how it was supposed to be done.
What were the consequences for Theranos after the Wall Street Journal published its first article about the company in October 2015?
-After the Wall Street Journal's article, Theranos faced increased scrutiny, and federal regulators eventually shut down the company's laboratory, invalidation nearly one million test results.
What were the final outcomes for Elizabeth Holmes and Sunny Balwani after the SEC charged them with massive fraud?
-Elizabeth Holmes settled the SEC case without admitting guilt and paid a half a million dollar fine. Sunny Balwani, who left Theranos two years prior, called the SEC charges unwarranted and is fighting them.
Outlines
🔬 The Rise and Fall of Theranos
Elizabeth Holmes, at 19, left Stanford to found Theranos, promising a revolutionary blood testing technology that could perform hundreds of tests from a single finger prick. The company's value soared to nearly $10 billion, making Holmes the youngest self-made female billionaire. However, it was revealed to be an elaborate fraud. Insiders exposed how Theranos deceived investors and put patients at risk with its non-functional Edison device, which was falsely claimed to perform a wide range of tests at a fraction of the cost of traditional methods. Despite a star-studded board and significant media attention, the company's technology was non-functional, and employees were instructed to stage fake demonstrations to maintain the illusion of success.
📉 The Theranos Deception Unravels
Theranos raised nearly $900 million from investors who were misled by Elizabeth Holmes and company president Ramesh 'Sunny' Balwani. The pair falsely claimed that Theranos' technology was FDA-approved and used by the U.S. military. As the company's deception began to unravel, it was revealed that Theranos conducted less than 10% of its tests on the Edison device. Federal regulators eventually shut down Theranos' laboratory for posing an immediate risk to patient health and safety. Investors, including high-profile individuals like Betsy DeVos and Rupert Murdoch, lost significant amounts of money. The Securities and Exchange Commission charged Holmes and Balwani with massive fraud, though Theranos' value once reached $10 billion, it is now worth nothing.
📚 The Downfall of a Tech Entrepreneur
The downfall of Theranos and its charismatic founder, Elizabeth Holmes, is chronicled, highlighting her ambition to become a celebrated tech entrepreneur. The narrative includes allegations of Holmes being a pathological liar, with a desire for wealth and fame at any cost. The board of Theranos is criticized for its failure in corporate governance, having not verified Holmes' scientific claims. The company's technology was exposed as ineffective, with Holmes' promises of presenting proof at industry conferences never materializing. The company faced legal and regulatory challenges, leading to the invalidation of nearly one million test results and the eventual collapse of Theranos. Despite ongoing legal battles and a federal criminal investigation, Holmes remains the CEO of a now-worthless Theranos.
Mindmap
Keywords
💡Elizabeth Holmes
💡Theranos
💡Edison
💡Fraud
💡Investors
💡Regulators
💡Non-disclosure Agreements (NDAs)
💡Board of Directors
💡Clinical Lab Specialist
💡Deception
💡Securities and Exchange Commission (SEC)
Highlights
Elizabeth Holmes founded Theranos at 19 with a dream to revolutionize blood testing.
Theranos claimed its technology could perform hundreds of tests with a pinprick of blood.
Holmes was once the youngest self-made female billionaire, with Theranos valued at nearly $10 billion.
The Wall Street Journal exposed Theranos as the center of a massive fraud.
Theranos' 'Edison' device was marketed as a miniaturized blood analyzer that could disrupt the lab testing industry.
Insiders reveal that the Edison device was not functional, with components falling off during testing.
Investors were deceived with staged demonstrations and faked test results.
Theranos raised nearly $900 million from investors, who later claimed they were defrauded.
Claims of FDA validation and military deployment of Theranos technology were fabricated.
Employees reported a culture of fear, with non-disclosure agreements and threats from lawyers.
Tyler Schultz, a former employee, alerted authorities about questionable lab practices.
Theranos was charged with massive fraud by the SEC, leading to a $500,000 fine for Holmes.
Federal regulators shut down Theranos' laboratory for posing immediate jeopardy to patient health.
Nearly one million Theranos test results were invalidated, deemed an unauthorized medical experiment.
Investors, including Betsy DeVos and Rupert Murdoch, lost millions on their Theranos investments.
Elizabeth Holmes, despite the scandal, remains CEO of Theranos and is facing a federal criminal investigation.
Transcripts
60 minutes rewind elizabeth holmes was just 19 years old when she dropped out of
stanford university with a dream of creating a company that would revolutionize blood testing
she founded the startup theranose it boasted her technology could take a pinprick worth
of blood from the finger and perform hundreds of laboratory tests it was she claimed quote
the most important thing humanity has ever built added zenith theranos was worth nearly 10 billion
dollars and elizabeth holmes became the youngest self-made female billionaire in the world she
was also as the wall street journal uncovered at the center of a massive multi-year fraud you're
about to hear from insiders how the theranose deception hoodwinked gullible investors and
worse endangered unsuspecting patients our work is in being able to make testing more accessible
elizabeth holmes built her company theranose on this invention she named the edison a miniaturized
blood analyzer that would disrupt the 60 billion lab testing industry dominated by giants labcorp
and quest diagnostics holmes called her invention the ipod of healthcare and it made her a celebrity
she graced magazine covers and was praised by politicians and the press alike
you founded this company 12 years ago right tell them how old you were i was 19.
she sold her vision with grandiose claims that her blood tests would cost a fraction of current
prices homes biotech startup was backed by an illustrious board packed with national security
heavyweights like henry kissinger and james mattis the current defense secretary the board was filled
with friends of george p schultz the former secretary of state who helped end the cold war
he introduced his grandson tyler to holmes dazzled tyler schultz became a believer and joined the
company soon after getting his degree in biology from stanford university when you met her and
you heard about elizabeth holmes vision what did you think i was totally sold on it tyler schultz
began working at theranos in september 2013. it was a pivotal moment as the company announced a
partnership with walgreens the deal would put an edison machine in every store elizabeth holmes
claimed the edison performed all the tests big lab machines like these could from cholesterol to
cancer all from a painless finger prick but tyler schultz says the edison he saw just didn't work
was it a sophisticated piece of machinery no there were components that would kind of fall off in the
middle of testing that you would have to then fish out they had doors that wouldn't close they
would get too hot and then they would get too cold when i was there we could not complete any
test accurately on the devices that we were manufacturing in 2000 doug matchy joined
theranos in 2012 after getting his doctorate in biochemistry his job was to adapt blood tests for
the edison tests which holmes told investors were ready to use on patients but elizabeth holmes had
told walgreens in 2010 that it had developed this device that was capable of running any blood test
from a few drops pricked from a finger in real time and less than half the cost of traditional
labs was that true no certainly not do you think she was lying to walgreens i do yeah are you a
clinical lab specialist no erica chung was fresh out of berkeley with a degree in molecular and
cell biology when she went to work at theranos she was just 22 but even the novice lab tech
suspected something was very wrong when she saw faulty test results sent to walgreens patients
when did you think i probably shouldn't be doing this pretty pretty soon in the process especially
when we started to pick up more patient samples and when those samples were retested she says
there were often contradictory results did you ever alert the patient no we didn't let them
know hey we re-ran your patient sample and we're not actually positive about what the diagnosis is
this is someone's health information exactly this isn't an app crashing this isn't
you know someone's food delivery coming late it's just a different ball game it's not the
only game elizabeth holmes was playing theranos employees told us they were instructed to stage
fake demonstrations for investors who visited company headquarters it was kind of a show all
they would see was their blood getting collected they didn't see what was going on behind closed
doors about how it was processed they would get their finger pricked with a small amount of blood
then they'd be let out of the room they'd go have a meeting go have lunch whatever and at
which point an engineer would run in the room grab the cartridge bring it out to the lab so was the
edison doing the testing no absolutely not who was doing the testing it was scientists at the bench
by hand by hand yeah it was a bait and switch for investors that kept the money rolling in
theranos raised nearly 900 million dollars from those investors
who now say they were swindled by elizabeth holmes and company president ramesh sunny bolwani
the pair claimed in investor documents obtained by 60 minutes that theranos technology was validated
by the fda pharmaceutical companies and was deployed on the battlefield by the u.s military
in afghanistan those claims were fabricated and in one public appearance after another holmes pitch
became even more fantastic and reckless we've done some work with people at hopkins who have
developed and demonstrated that in blood you can see the onset of pancreatic cancer 17 years before
a tumor forms we called johns hopkins medicine they told us they never collaborated with theranos
and doug mache says test data he compiled for the food and drug administration was falsified there
was so much pressure from above to get good looking results that are going to be able to
pass fda guidelines that people were pressured into making things disappear the bad results
bad results that's deceptive yeah for sure did you ever go to your boss and say this isn't right
absolutely all the time but you know he was under a lot of pressure from the people above him and he
was trying to do his best to make to make everyone happy this invention is going to be way up there
with the discovery of antibiotics day-to-day operations were run by company president sunny
balwani balwani is a millionaire software engineer with no training in the biological sciences
but he did have a powerful connection to elizabeth holmes sonny balwani was her secret boyfriend some
people are here because of the mission the cause some people are hopefully here for the science
balwani was also home's enforcer firing employees on the spot and berating scientists for failed
tests after a year and a half machi quit i saw that there was potentially fraud taking
place there was far too much illegitimate things going on there i talked to sunny decided i didn't
want to be there anymore and i left tyler schultz was also becoming disillusioned i had a personal
relationship with elizabeth she was close to my family and i felt like she was deceiving
my family and the public and almost every media outlet including us here at cbs bought into
the theranos myth a healthcare pioneer is being compared to visionaries like bill gates and steve
jobs do you think she wanted to be the next steve jobs she just really idolized him so she wore the
black turtleneck i think she created a world where she was steve jobs for a little bit as her wealth
and reputation sword elizabeth holmes took on the trappings of power she bragged bulletproof
windows were installed in her office and she traveled with a full-time security detail theranos
employees told us they were closely watched and required to sign non-disclosure agreements
all reinforced they said by a threatening team of lawyers and private investigators
that's why when tyler schultz alerted authorities in the spring of 2014 he used a fake name
why did you come up with an alias i knew how seriously theranos protected their trade secrets
i knew they would not take it well if they knew that i was talking to regulators in his email to
new york state department of health regulators schultz outlined questionable lab practices and
said he believed test results were being switched i just said this happened in my laboratory and
i just want to know if this is okay and they responded and said no this is cheating this is
not how it's supposed to be done tyler schultz was ready to resign but first he sent elizabeth holmes
an email about his concerns he got a response from sonny balwani that i was arrogant ignorant
patronizing reckless and i was lacking the basic understanding of math science and statistics
that if i had any other last name that i would have already been held accountable to the
strongest extent tyler schultz quit in april 2014 and soon after erica chung did too by february
2015 the theranose fairy tale was about to unravel publicly the story will continue after this
at the wall street journal pulitzer prize-winning reporter john kerry roo who has written a book
about the theranos saga got a call it was a tipster casting doubt about the edison
theranos and its charismatic founder elizabeth holmes she is a pathological liar she wanted to be
a celebrated tech entrepreneur she wanted to be rich and famous and she wouldn't let anything get
in the way of that what kind of job did the board do in holding homes accountable this is one of
the most epic failures in corporate governance in the annals of american capitalism they did nothing
to verify that her scientific claims were true careyroo's first article appeared in october 2015
and revealed theranos did less than 10 percent of its tests on edison machines what do you think is
going on here homes struck back 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
but skeptics were no longer buying the theranos deception what i'm showing you now is the result
of hundreds of engineers and scientists work holmes repeatedly insisted she would present
proof at a major industry conference that her technology worked you can see the tray dropping
into the detection module there it was proof that never came and the evidence that you presented
fell far short of that in 2016 after a series of surprise inspections federal regulators shut
down the company's laboratory saying it posed immediate jeopardy to patient health and safety
nearly one million theranose test results were invalidated when she started using
this technology on the blood samples taken from consumers in walgreens stores that was
an unauthorized medical experiment there's no other way to put it
theranos was on the brink of collapse big name investors found their stock was worthless
education secretary betsy devos and her family and media mogul rupert murdoch each lost more
than a hundred million dollars walgreens sued theranos and settled for less than a quarter of
their 140 million dollar investment why do you think this was outright fraud as opposed to any
other silicon valley startup that just wasn't able to deliver on lofty goals well because she raised
money hundreds of millions of dollars on the basis of this technology not only being ready
and working but being commercially rolled out you're also lying to the public you're lying to
patients you're lying to doctors you're lying to regulators most people would call that fraud as
well the securities and exchange commission called it massive fraud when they charged
elizabeth holmes and sonny balwani in march holmes settled the sec case without admitting guilt
and paid a half a million dollar fine balwani who left theranos two years ago calls the sec charges
unwarranted and is fighting them at its height how much was theranos worth 10 billion there
was a period of several months where it was more valuable than uber more valuable than airbnb more
valuable than spotify and how much is it worth now zero elizabeth holmes remains ceo of theranos
she would not comment for our story but last month she wrote to investors asking them to put in even
more where the company would soon run out of cash a federal criminal investigation is ongoing
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