Fraudster Elizabeth Holmes Denied Bail and Ordered to Pay $452 Million

Embattled fraudster Elizabeth Holmes has been ordered by the United States Edward Davila to pay $452 million to investors in addition to reporting to prison by May 30.

Holmes will split the payment with her ex-partner Ramesh “Sunny” Balwani with whom she orchestrated a scheme to defraud unsuspecting investors with the now defunct blood-testing company, Theranos.

Balwani served as the company’s president while Holmes was the founder and chief executive officer.

Holmes is expected to spend the next 12 days sorting her affairs following a ruling by a three-judge panel for the US Appeals Court for the 9th Circuit which denied her a motion requesting she stays out of jail as she appeals her 11-year conviction.

Last month, Holmes through her legal representatives challenged Davila’s earlier decision that denied her bail.

She requested the 9th Circuit Appeals Court to reconsider the matter. As a result of this move, there was an automatic postponement in the commencement of her 11-year-and-three-month prison sentence while the appeals court reviewed her argument.

Prior to this, Davila had directed Holmes to report to prison on April 27.

US Appeals Court Denies Holmes Bail

Holmes’s latest legal battles allowed her a few more weeks of freedom but it was no surprise when the appeals courts denied her motion for bail.

The three-judge panel in a one-page ruling on Tuesday said that Holmes’ appeal had not brought up a “substantial question” regarding the law nor did it raise fact in her lawsuit. The appeals court ruled that there was no reason to reverse Holmes’ sentence or call for a fresh trial if the court sided with her.

Holmes’s ongoing appeal for her 11-year sentence is expected to continue as it was previously scheduled and that Judge Davila had the mandate to settle a new date for her to report to prison.

In a subsequent filing on Wednesday, the former CEO requested the court allow her to report to prison on May 30, allowing her time to get her affairs in order such as making arrangements on how her two young children would be taken care of.

Balwani, who was found guilty on all 12 charges of defrauding investors and patients of Theranos, is already serving his prison sentence of nearly 13 years. Although he is appealing the verdict, Balwani had tried to avoid going to prison on a technicality of waiting for the appeal by requesting bail.

The Rise and Fall of a $9 Billion Empire

Holmes and Balwani sold Theranos blood-testing device as a magic bullet that could carry out hundreds of medical tests from a tiny drop of blood requiring only a finger prick.

Her fame exploded in Silicon Valley, and media coverage painted her as one of the world’s self-made women billionaires.

Forbes valued Theranos at $9 billion in 2015 while her wealth was estimated at $4.5 billion.

However, things took a different turn in 2018 as federal prosecutors went after her for duping investors to put money into her startup which never really worked.

In summary, Davila said that federal prosecutors had reason to believe between 2010 and 2015 both Holmes and Balwani made “false statements regarding the capabilities of Theranos’s proprietary analyzer, its financial revenue streams, and device demonstrations, as well as misrepresenting Theranos’s relationships and interactions with Walgreens, the US Department of Defense, the Food and Drug Administration, pharmaceutical companies, and research institutions.”

While Theranos was a going concern, federal prosecutors claimed that the duo continued with their dubious means to defraud doctors and patients between 2013 and 2016.

On that account, it was said that the two participated in “delivering marketing materials to doctors and patients regarding Theranos’s blood tests, posting misrepresentations on Theranos’s websites, and transmitting blood test results with inaccuracies and modifications.”

Holmes was later convicted in January 2022 on four counts in connection to defrauding investors while Theranos’ president Balwani was sentenced last July on 12 charges relating to defrauding investors, doctors, and patients.

Splitting the Bill Between Holmes and Balwani

Holmes and Balwani have been ordered to pay back $450 million in restitution which Davila calculated to include $397,547,268 to Theranos’ individual investors – encompassing the largest investment of $124,999,997 from Rupert Murdoch, Safeway’s $14.5 million, and Walgreens’ $40 million for collaborating with the scammers to provide the blood-testing kits in its neighborhood stores.

Although Walgreens requested Theranos to provide documents to support their technology, Holmes and Balwani presented the pharmacy chain with fake validation documents containing Pfizer’s logo.

Pfizer confirmed that it had never endorsed Theranos technology and had expressed concerns over the claims, therefore, choosing not to invest in the company.

While Davila ordered the $450 million bill be split between Holmes and Balwani, he did not provide further guidance.

As per the legal documents, Holmes possesses limited assets that are eclipsed by a $450,000 loan she acquired to settle matters with the Securities and Exchange Commission (SEC). Additionally, she has accumulated more than $30 million in legal expenses.

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