Ramesh Balwani, a former chief operational officer of Theranos, was given a sentence of almost 13 years in jail for fraud.

Ramesh Balwani, a former chief operational officer of Theranos, was given a sentence of almost 13 years in jail for fraud.

Ramesh Balwani, a former chief operational officer of Theranos, was given a sentence of almost 13 years in jail for fraud.

Ramesh Balwani and Elizabeth Holmes were accused of continuing to deceive their investment victims despite numerous technological setbacks and moving forward with their complex investor fraud plot.

Ramesh “Sunny” Balwani, a man of Indian descent who served as Theranos’ former COO, was given a term of nearly 13 years in prison for fraud that, according to the prosecution, put patient health at danger and cost the blood testing company’s investors millions of dollars.

According to US Attorney Stephanie Hinds, Balwani, 57, of Fremont, was sentenced on Wednesday to 12 years and 11 months in federal prison for fraud that endangered patient health by misrepresenting the reliability of Theranos’ blood analysis technology and that defrauded the company’s investors of millions of dollars.

US District Judge Edward Davila also ordered Balwani to undergo three years of supervision after his release from jail in addition to the 155-month prison term. The amount of compensation that Balwani must pay will be decided at an upcoming hearing. On March 15, 2023, Balwani was told to turn himself in to start serving his prison term.

Balwani worked for the Palo Alto-based blood testing business started in 2003 by his ex-girlfriend Elizabeth Holmes, who was once hailed as Silicon Valley’s emerging star, from September 2009 to July 2016.

District Judge Davila sentenced Holmes to 11 years and 3 months in federal prison last month and commanded that she turns herself in so that she may start serving her term on April 27, 2023. When he first met Holmes, who was 18 years old, Balwani was 37.

In a video statement, lawyer Hinds stated, “There is an unpleasant adage in Silicon Valley: fake it till you make it.”

Hinds stated that Balwani’s choice to deceive doctors and patients also put patients’ health at danger. Holmes and Balwani “extended this idea to a point much farther than the law allows and in doing so, put massive amounts of investor monies at risk,” he added.

Although Silicon Valley has long been the home of healthcare start-ups that improve patient care through technological advancements and patient safety is the highest priority of the US healthcare system, according to Hinds, Balwani valued business success and personal wealth far more than patient safety in his quest to become a Silicon Valley titan.

In a statement, Hinds claimed that “he chose dishonesty above candour with individuals in need of medical care, and he treated his investors no better.”

According to trial testimony, Balwani gained “exceptional personal fortune” as a result of the deception. At the height of the scheme, he controlled about 30 million Theranos shares, or over 6% of the firm, and they were valued hundreds of millions of dollars.

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Balwani was reportedly born in Pakistan, although his family later relocated to India. In the 1980s, he relocated to the US from India and attended the University of Texas.

According to FBI Special Agent in Charge Robert Tripp, Balwani not only knowingly endangered patients’ health by concealing flaws in Theranos’ blood-testing technology to deceive investors.

Balwani served as president, chief operating officer, and a board member while working for the now-defunct Theranos.

Theranos allegedly created a “new blood analyzer,” according to Balwani and Holmes, who served as chairperson and CEO, that could do any blood test offered by regular labs with just a small amount of blood collected via fingerstick as opposed to the usual draw from a vein.

According to Balwani and Holmes, Theranos’ unique analyzer gave results that were more rapid than ever before, more accurate, and less variable than those from other approaches.

The trial’s testimony, however, showed that Balwani and Holmes were aware that the analyzer only ran a few simple tests and moved more slowly than competing machines. According to the statement, they continually turned to using traditional equipment to get the blood test results that the Theranos analyzer was meant to produce.

However, it claimed that they misled investors and the general public into thinking that Theranos performed virtually all of its tests alone using its Theranos analyzer.

Theranos analyzer’s limited capabilities meant it could not compete in the market, but evidence showed that Balwani and Holmes knew this. Despite knowing this, they trumpeted false claims and representations about the analyzer’s capabilities and colluded to persuade patients and investors that they were true, the statement said.

The “dark reality” that these misrepresentations for patients created is shown by evidence presented at trial and by illustrations in a sentencing statement submitted by the government. Despite internal concerns from Theranos workers and even staff resignations, Theranos eventually made the blood analyzer available to the general public to conduct a “complete range” of tests in an effort to present itself as a respectable business.

This, according to the accusers, led to countless incorrect diagnoses.

A pregnant woman who had experienced many miscarriages and obtained HCG values from Theranos testing that strongly suggested she was miscarrying again was one of the cases mentioned during the trial. But confirmatory testing using traditional techniques revealed a viable pregnancy, and the woman went on to give birth to a healthy child.

Prosecutors claimed that “this scenario played out with several pregnant women who received incorrect HCG results from Theranos tests.” According to the prosecution, despite their numerous technological setbacks, Balwani and Holmes continued to deceive their investment victims and carried out the complex investor fraud scheme.

By making consistent, flattering claims about the analyzer’s development and capabilities to investors and potential investors, many of whom were well-known public figures, they persuaded dozens of investors to spend hundreds of millions of dollars in Theranos.

Investor-facing statements made by Balwani and Holmes claimed that Theranos technology had undergone thorough validation by numerous significant pharmaceutical firms and was being used by the Department of Defense to treat injured soldiers, where it “really saved lives in the war.”

The Department of Defense never employed Theranos’ analyzer to clinically treat soldiers, and pharmaceutical companies did little work with the company and did not validate its technology, according to the statement.

Additionally, the pair misrepresented Theranos’ severe financial situation while promoting the company’s analyzer as a healthcare breakthrough. Theranos claimed to investors in late 2013 and early 2014 that company had hundreds of millions of dollars in revenue from a combination of pharmaceutical firms and the military, while having no revenue in 2012 and 2013 at all.

Based on fake pharmaceutical industry endorsements and fanciful revenue estimates, Balwani tried to persuade retail chains Walgreens and Safeway to invest in Theranos. Following a public relations campaign in 2013, Theranos raised more than USD 730 million from investors by March 2015.

Balwani and Holmes were initially subject to federal criminal accusations in June 2018. A federal grand jury delivered a superseding indictment in July 2020 that included 10 counts of wire fraud and two counts of conspiracy to commit wire fraud against both people. After a four-month trial, a federal jury found Balwani guilty on all counts in July of this year.

Holmes wasn’t found guilty of all charges in Balwani’s trial, which was held independently from Holmes’.

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