Late Tuesday, Theranos CEO David Taylor emailed investors to announce that the company is shutting down.
According to a report from CNN Money, the Silicon Valley startup’s founder and former CEO, Elizabeth Holmes, faces charges of fraud in connection with her practices with the company. A Stanford dropout who was once dubbed “The Next Steve Jobs” before her downfall, Holmes briefly became the world’s youngest female self-made billionaire. She started the company in 2003 as a teenager.
Taylor’s email insisted that the blood-testing firm is out of time after it had reached out to some 80 potential buyers, none of whom were interested in purchasing the embattled business. Some of the company’s famous investors include Oracle founder Larry Ellison along with mogul Rupert Murdoch. Ultimately, the startup has defaulted on a loan from Fortress Investment Group, which gives the group the right to take control of the company’s remaining assets. Investors will receive a certificate of dissolution for tax purposes.
Over the next few months, Theranos will pay investors back out of existing cash, according to a Time report. In June, both Holmes and the Silicon Valley company’s one time president Ramesh “Sunny” Balwani received criminal charges accusing them of defrauding investors as well as doctors and patients. According to the charges from the U.S. Attorney in San Francisco, Balwani and Holmes lied to investors about their technology while they raised $700 million for the startup. They also face allegations of wire fraud. They both claim they’re not guilty of these charges.
'We are now out of time:' Theranos, accused of perpetrating massive fraud, is finally going to dissolve https://t.co/ze7DIDddFj
— FORTUNE (@FortuneMagazine) September 5, 2018
At one point, the biotech company received a valuation of $9 billion, but Wall Street Journal investigative reporter John Carreyrou found that the company’s claims of having new technology to radically change traditional medical testing that was cheaper and more efficient turned out to be lies. They claimed to need a small finger prick of blood as opposed to vials most traditional blood tests require. Carreyrou first exposed the details of his investigation into the claims in October 2015, and six months later a federal investigation began. One month after the feds launched their probe, Holmes voided the results of two years of the startup’s blood tests.
In March, Holmes reached a settlement with the Securities and Exchange Commission related to its fraud charges, which further damaged Theranos and helped lead to its demise. Ultimately, the once highly sought after Silicon Valley biotech company owes Fortress Investment Group and others $60 million, and it hopes to settle for less so that the company’s remaining $5 million could be distributed among other creditors.