Elizabeth Holmes & The Theranos Deception | 60 Minutes Archive

Summary

Elizabeth 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

00:00

🔬 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.

05:05

📉 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.

10:13

📚 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.

Keywords

💡Elizabeth Holmes

Elizabeth Holmes is the central figure in the video, the founder of Theranos, a company that aimed to revolutionize blood testing. Her name is synonymous with the company's rise and fall, and she is portrayed as a young visionary who became the youngest self-made female billionaire, only to later be accused of massive fraud. The video script discusses her claims and the eventual uncovering of the deception at Theranos.

💡Theranos

Theranos is the startup founded by Elizabeth Holmes, which claimed to have developed a revolutionary blood testing technology. The company's downfall is the main narrative of the video, illustrating the consequences of corporate fraud and the impact on investors and patients. The script details the company's high valuation, partnerships, and eventual legal troubles.

💡Edison

The Edison was the name given to the blood analyzer invented by Theranos, which was supposed to perform hundreds of laboratory tests from a pinprick of blood. The video script highlights the device's failure to deliver on its promises, with insiders revealing that it was not a sophisticated piece of machinery and often failed during testing.

💡Fraud

Fraud is a key concept in the video, as it describes the deception practiced by Theranos and Elizabeth Holmes. The script mentions that the company misled investors, patients, and the public about the capabilities of the Edison device, leading to legal actions and the invalidation of test results.

💡Investors

Investors played a crucial role in the Theranos saga, as they provided the capital that allowed the company to grow and expand. The video script discusses how investors were misled by false claims about the Edison device's capabilities, resulting in significant financial losses when the truth was revealed.

💡Regulators

Regulators, such as the FDA and state health departments, are responsible for ensuring the safety and efficacy of medical devices and tests. The video script reveals that Theranos employees alerted regulators about questionable practices, leading to investigations and the eventual shutdown of the company's laboratory.

💡Non-disclosure Agreements (NDAs)

Non-disclosure agreements are legal contracts that prevent employees from revealing confidential information about a company. The video script mentions that Theranos employees were required to sign NDAs, which contributed to the company's ability to conceal its fraudulent activities.

💡Board of Directors

The board of directors of a company is responsible for oversight and governance. The video script criticizes the Theranos board, which included high-profile figures, for failing to verify the scientific claims made by Holmes and for not holding her accountable.

💡Clinical Lab Specialist

A clinical lab specialist is a professional trained in the analysis of medical samples. The video script features interviews with former Theranos employees who held this role and who raised concerns about the accuracy and validity of the Edison device's test results.

💡Deception

Deception is a recurring theme in the video, referring to the deliberate act of misleading others. The script describes how Theranos deceived investors, regulators, and the public through staged demonstrations and falsified test data.

💡Securities and Exchange Commission (SEC)

The SEC is a U.S. government agency responsible for enforcing securities laws and regulating the securities industry. The video script mentions that the SEC charged Elizabeth Holmes and Sunny Balwani with massive fraud, marking a significant legal development in the Theranos case.

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