Theranos CEO Elizabeth Holmes was sentenced Friday to more than 11 years in prison for duping investors in the failed startup that promised to revolutionize blood testing but instead, ended up committing a years-long fraud in a company valued at $9 billion before it collapsed in scandal.
The sentence imposed by U.S. District Judge Edward Davila was shorter than the 15-year penalty requested by federal prosecutors but far tougher than the leniency her legal team sought for the mother of a year-old son with another child on the way.
Holmes, who was CEO throughout the company’s turbulent 15-year history, was convicted in January in the scheme, which revolved around the company’s claims to have developed a medical device that could detect a multitude of diseases and conditions from a few drops of blood. But the technology never worked, and her claims were false.
Theranos was dashed “by misrepresentations, hubris and just plain lies,” the judge said.
“This case is so troubling on so many levels,” he said. “What was it that caused Ms. Holmes to make the decisions she did? Was there a loss of a moral compass?”
Holmes’ meteoric rise once landed her on the covers of business magazines that hailed her as the next Steve Jobs. And her deception was persuasive enough to draw in a list of sophisticated investors, including software magnate Larry Ellison, media mogul Rupert Murdoch and the Walton family behind Walmart.
She sobbed as she told the judge she accepted responsibility for her actions.
“I regret my failings with every cell of my body,” Holmes said.
The sentencing in the same San Jose courtroom where Holmes was convicted on four counts of investor fraud and conspiracy in January marked another climactic moment in a saga that has been dissected in an HBO documentary and an award-winning Hulu series.
Holmes, 38, faced a maximum of 20 years in prison. Her legal team asked the judge for a sentence of no more than 18 months, preferably served in home confinement.
Her lawyers argued that Holmes was a well-meaning entrepreneur who is now a devoted mother with another child on the way. Their arguments were supported by more than 130 letters submitted by family, friends and former colleagues praising Holmes.
Prosecutors also wanted Holmes to pay $804 million in restitution — an amount that covers most of the nearly $1 billion that she raised from investors. But the judge left that question for a future hearing that has not been scheduled.
While wooing investors, Holmes leveraged a high-powered Theranos board that included former Defense Secretary James Mattis, who testified against her during her trial, and two former secretaries of state, Henry Kissinger and the late George Shultz, whose son submitted a statement blasting Holmes for concocting a scheme that played Shultz “for the fool.”
The judge gave Holmes, who is pregnant, more than five months of freedom before she must report to prison on April 27.
Federal prosecutor Robert Leach described the Theranos scam as one of the most egregious white-collar crimes ever committed in Silicon Valley. In a scathing 46-page memo, Leach told the judge he has an opportunity to send a message that curbs the hubris and hyperbole unleashed by the tech boom of the last 30 years.
Holmes “preyed on hopes of her investors that a young, dynamic entrepreneur had changed healthcare,” Leach wrote. “And through her deceit, she attained spectacular fame, adoration and billions of dollars of wealth.”
Even though Holmes was acquitted by a jury on four counts of fraud and conspiracy tied to patients who took Theranos blood tests, Leach also asked the judge to factor in the health threats posed by Holmes’ conduct.
Holmes’ lawyer Kevin Downey painted her as a selfless visionary who spent 14 years of her life trying to revolutionize health care.
Although evidence submitted during her trial showed the blood tests produced wildly unreliable results that could have steered patients toward the wrong treatments, her lawyers asserted that Holmes never stopped trying to perfect the technology until Theranos collapsed in 2018.
They also pointed out that Holmes never sold any of her Theranos shares — a stake valued at $4.5 billion in 2014.
Defending herself against criminal charges has left Holmes with “substantial debt from which she is unlikely to recover,” Downey wrote, suggesting that she is unlikely to pay any restitution.
“Holmes is not a danger to society,” Downey wrote.
Downey also asked Davila to consider the alleged sexual and emotional abuse Holmes suffered while she was involved romantically with Ramesh “Sunny” Balwani, who became a Theranos investor, top executive and eventually an accomplice in her crimes.
Balwani, 57, is scheduled to be sentenced Dec. 7 after being convicted in a July trial on 12 counts of fraud and conspiracy.