SEC charges Theranos founder Elizabeth Holmes with massive fraud

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Investors have poured more than $400 million into Theranos, valuing it at $9 billion and her majority stake at more than half that.

The Securities and Exchange Commission, a top United States financial regulator, said Elizabeth Holmes and Theranos deceived investors about the firm's technology.

Theranos previously settled a lawsuit with one of its biggest investors, Partner Fund Management, which invested more than $96 million in Theranos in 2014.

The SEC's co-director of enforcement, Steven Peikin, said on a conference call with reporters that the move to remove control of the company from Holmes was very rare for the agency. Theranos CEO Elizabeth Holmes has been charged alongside Ramesh Balwani with knowingly committing "elaborate, years-long fraud".

Theranos, which had touted a new way of testing that uses far less blood and delivers faster results at much lower cost than traditional methods in United States labs, has been under civil and criminal investigation over its claims.

Theranos, its CEO Elizabeth Holmes, and a former executive have been charged with fraud by the SEC.

Theranos said Wednesday that neither the company nor Holmes admitted or denied wrongdoing.

Theranos' independent directors issued a statement, saying "the company is pleased to be bringing this matter to a close and looks forward to advancing its technology". But as investigations by the Food and Drug Administration as well as the Centers for Medicare & Medicaid Services (CMS) would find, the company's technology was critically flawed and hit numerous regulatory problems.

"The Theranos story is an important lesson for Silicon Valley", Jina Choi, director of the SEC's San Francisco regional office, said in a statement. However, the SEC says the product could perform just a small sample of tests and used tools made by other companies. According to the SEC's complaint, Holmes failed to tell investors that much of the blood testing analysis was conducted by third parties.

Theranos also settled with the state of Arizona for $4.8 million previous year over consumer fraud claims pertaining to its "flawed" Edison device blood tests. Theranos made its name touting blood processing technology that could conduct hundreds of tests in a less than an hour with a single finger prick.

For instance, Theranos claimed the U.S. Department of Defense deployed its portable blood analyzers to Afghanistan for use aboard medevac helicopters, generating $100 million in revenue in 2014.

The Defense Department never deployed the products and Theranos actually received $100,000 in revenue, the SEC said.

"Innovators who seek to revolutionize and disrupt an industry must tell investors the truth about what their technology can do today, not just what they hope it might do someday", she said in a statement.