Theranos Misled Investors and Consumers Who Used Its Blood Test
bloomberg.comI have been a voice in the wilderness since about 2007 on this one, so this is shadenfraude on a level that makes me kind of embarrassed about myself.
My background is biomedical engineering, and I just never, ever understood how the sampling rate could ever work. If you're looking for a low-energy signal and your sampling rate is really low, you're just going to miss it and this should've been screamingly obvious to everyone since the beginning.
It's like going to the beach, drawing a 5 gallon pail of seawater, looking into it, and then declaring that the beach is shark-free today and it's safe to swim.
I don’t think you had to be a biomedical engineer to have called this one, even years ago. Its attributes hit HN (and the gushing tech media) in all the soft spots: young, female founder, college dropout, wore black turtlenecks like Steve Jobs, disruptive tech, attacking a stodgy conservative industry, order(s) of magnitude claimed improvements. It was simply too good and aligned perfectly with the HN zeitgeist. Just like the poster: “I Want To Believe!” Everyone’s blinders were on, and nobody wanted to recognize the obvious signs of fakery.
This has been my favorite tech story of the decade. Watching a rich, well-connected phony get knocked down and called out on all the bullshit fills me with glee. It excites me in ways we don’t talk about in polite company. So many hard working smart people out there toiling away in obscurity while these “elite” fakers get all the recognition and money. The schadenfreude in watching one of them finally and spectacularly burn up is too good to bear.
I've actually never seen a HN thread that was overall positive about Theranos. The top comments were shears critical of the company, despite all the worthy surface level virtue it carried.
I believe that this [1] is the oldest thread in HN about Theranos. There are two sub-threads that are negative and one which seems quite spot-on in hindsight. But the top comments are all quite positive.
I have no background in biomedical engineering, and I'll take your (and others') word that it could clearly never work.
However, I have had a related experience that stops me, even in these cases, from immediately shouting "the king has no clothes":
Some 25 years ago I was giving a talk at some point, that mentioned spread spectrum communication to a small crowd of physicists and engineers, none of whom was familiar with the concept. When I drew an energy/frequency graph in which the signal level was below the ambient noise level, I got laughing/mocking/disbelieving response, and I had to actually show (a simplified) version of the math to proceed.
None of those people were stupid. In fact, I believe most if not all of them are way smarter than me; but they've all adopted the "s/n ratio must be large enough at every distinct frequency " as an axiom, which is simply wrong.
Since then, when I see extraordinary claims, I just wait for the extraordinary proof.
> It's like going to the beach, drawing a 5 gallon pail of seawater, looking into it, and then declaring that the beach is shark-free today and it's safe to swim.
If shark shed sharkticles that can easily be detected, and the water mixing speed is sufficient, then -- yes, you might be able to make that claim from a 5 gallon pail of seawater.
But before I believe you can do that, I would want to see the theory and a working demonstration. It's astonishing that wasn't demanded of Theranos by any of the investors.
I also have a background in biomedical engineering, and worked on actual diagnostic equipment for several years, and I would like to second this opinion. I only wish I had written down my rants about Theranos for future reference!
Theranos' claims fundentally misrepresented the state of medical diagnostics, and showed at best a failure to grasp the nature of the industry, and at worst a deliberate misrepresentation. Apparently it was the latter.
If any of the investors now saying "gosh who could have guessed" had taken 2 seconds to ask anyone who worked on or with real medlab tech about Theranos' claims, they wouldn't have touched that company with a 10 mile pole.
Existing analysers already use very small samples.
See Siemens Advia 1800 specs under "Microvolume Technology" https://www.healthcare.siemens.com/clinical-chemistry/system...
It only uses 30ul of sample to run up to 15 assays.
How is that any different from what Theranos was doing?
Only difference is that you collect a bigger vial when using the Siemens machine. And then don't use most of it. So why not collect a smaller vial?
There’s no benefit to doing so; and smaller vials are harder to preserve. Measurements on blood draws are not exact, and pre-measured preservatives in the vials and the blood have to be in the right ratios.
This is easier to do consistently in larger vials, reducing the error in this part of the process to acceptable levels. It’s the same reason why a recipe will normally be more consistent when making a larger batch.
So you could collect less, but the way the modern lab industry operates (collecting samples, preserving them, and shipping them to an offsite lab for analysis) there is little business benefit to using smaller collection vials.
Ok, so you're giving a business reason to not collect smaller samples. Which is fine and totally valid. Theranos was under the impression that there was an untapped opportunity for smaller samples.
But, the wording of the parent comment was saying that it was supposedly clearly technically impossible because of the small sample size. The OP said "I just never, ever understood how the sampling rate could ever work" and "and this should've been screamingly obvious to everyone since the beginning." That seems very different from "this is a very hard problem due to X, Y, and Z", especially since commercial machines that everyone here gets blood results from are already only taking small samples from the collected vials so the biggest challenge just seems to be in the collection and transport.
I agree that everything is easier with a bigger collection size, however "hard" is different from impossible.
Out of curiousity, how tight are the preservative:blood ratios before Bad Things (i.e. things that would invalidate the test results) start to happen?
That's a good question. Looking at this: http://apps.who.int/iris/bitstream/10665/65957/1/WHO_DIL_LAB... for EDTA (a very common anticoagulant "preservative") it is 1.2 to 2.0 mg/mL, so a decent range. But, this is one source and it will also depend on what the test is looking for.
There are a few reasons you collect a full vial instead of a tiny one:
1. Multiple tests. Most people aren't going to the doctor for a single test. A majority of the testing is Comprehensive Metabolic Panels, which covers 20-30 different things at least. Many patients get a CMP plus other stuff, so enough is drawn for all the tests at once.
2. Possible retesting. There are dozens of things that can go wrong between drawing the blood and sending a result to the doctor. Maybe a tech drops the tube and spills some blood out. Maybe the machine has a problem mid-test and you have to rerun the samples after it's fixed. Maybe the patient has a critically high/low range of something and you need to retest for confirmation. The worst possible scenario for a lab is to have to call the patient back in for more blood, because that causes patient pain and could make the doctor start using a different lab if they're perceived as unreliable. There's actually a legal requirement for labs to store blood for a week after testing, just in case.
3. Different test requirements. The CMPs usually test the serum only (i.e. your blood gets put through a centrifuge), but there are a variety of tests that run on whole blood. Because of the possible re-testing above, and because whole blood test samples need to have anticoagulant added, you'll usually have two separate tubes drawn for whole blood vs. serum tests.
OK, so these are more business reasons for bigger samples than technical reasons.
1. Ok, so that can still be done with small samples, it's just a matter of collecting enough. The link I gave showed 15 tests in 30ul of sample. So, 60ul would be enough for your 30 tests. The amount used per test (for many many tests) is still very small compared to the amount drawn.
2. I imagine if a tube is dropped and some sample is lost they consider the whole sample lost. Since if sample got out that also means that stuff can get in, possibly contaminating it. The poor customer experience of having to go back in to be re-drawn is a poor business choice, but again, not a technical hurdle with being able to perform tests. Having enough sample for re-testing a week later is also just a matter of collecting sufficient sample. So, you would need 120+ul of sample (from previous example of 30 tests) to meet that requirement (plus some amount for loss in equipment, etc). But, it is still a far cry from the 2000+ul typically drawn.
3. You actually often have more than 2 drawn, since each tube has a different kind (if any) anticoagulant and if they get sent to different labs they may need duplicates of the same anti-coagulant. This also doesn't have anything to do with the size of the sample required for a test. So, you can collect a bunch of small samples instead of bigger samples. That's not a technical hurdle for being able to perform a test on a small volume of blood.
Well, because you can get a sample that's a lot more representative of the actual bulk bloodstream by a) diluting out the contaminants always present in the first part of the sample, and b) drawing the sample from a large vein rather than tiny ones in the fingertip.
Agree with you 100%.
There are definitely areas where a wunderkind can advance the frontier by ignoring dogma about what is and isn’t possible; but biomedical engineering doesn’t seem like one of them.
I always had my suspicions too; her idea seemed so simple that it had to have occurred to larger med device makers too. If they couldn’t solve the problems related to the small sample size with many years of engineering experience, what made her think her chances of success were any better?
> I have been a voice in the wilderness since about 2007 on this one
The Hacker News commenters have always been quite kind and optimistic about Theranos and Ms. Holmes. Were your doubts downvoted?
That's far from the case, as anyone who wants to comb through https://hn.algolia.com/?query=Theranos%20points%3E10&sort=by... can see for themselves.
i only joined HN in 2016, so i missed much of it.
I haven't found an article or comment that gives me any insight into what Ms. Holmes might have been thinking. Did she earnestly believe she was on the cusp of some breakthrough, or that one was inevitable with enough brute-force application of investor money? Or was she shrewd and cunning to the core, calculating that she could siphon off enough money to make it worthwhile and spend enough money to spin the facts? I'm totally perplexed trying to put myself in her shoes and understand her motivation.
I would expect the truth exists somewhere in between. I wouldn't rule out the possibility that:
* Holmes started with the best of intentions
* Theranos raised capital from starry-eyed investors that didn't carry out proper due diligence
* Realization set in early on that it wasn't going to work out
* Theranos got scared as so much of their time and other people's money had been invested
* The questions mounted
* Stalling became outright deception
* The realization of the consequences after the WSJ article became starkly obvious
* Theranos got spooked and doubled-down on covering up out of fear
.. but this is all speculation, and we'll never really know.
It does seem though that this didn't turn into fraud (which by the end it's quite clear it was) until late on.
It's a bit tragic, really. It seems Holmes could have come clean early on and avoided the worst of the fallout (but for whatever reason that didn't happen).
That part about due diligence is what gets me. How do you sink $700M into a company without going over it all with a fine-toothed comb? Where were the scientists and skeptics for the investors? They fell for the "here's a single customer saying it's good, and here's us in the news" routine. I could understand if this was a seed round for a few million in some software venture, but $700M for healthcare tech? This is incredibly negligent.
If things working out better are predicated on rising tech stars admitting they're wrong and forgoing the accolades and adulation that accompany the identifier... I can see why things went the way they did.
That said, from a personal perspective, I honestly hope Ms. Holmes is either a sociopath or was actually in the dark about how bad things were (e.g. her direct reports were lying to her).
It seems like it would be a pretty excruciating mental burden to go into work every day for an extended period of time, knowing your company was inevitably failing, and just trying to keep the plates spinning. Ugh.
Madoff said he is happier in prison than he was while fearing his scheme would be discovered. [0]
That doesn't really make me any more sympathetic to his criminal and unethical activities.
[0] https://www.cbsnews.com/news/bernie-madoff-happiest-ive-been...
Yeah, committing fraud is pretty nerve-wracking. Won't anyone think of the con men?
Let's not assume the VCs weren't somewhat complicit here. At best through lack of due diligence and thereby messaging their ongoing support for the enterprise.
At worst active or passive concealment because they had a large financial incentive that the fraud remain undiscovered.
Given that Theranos didn't IPO, I have a hard time feeling bad for investors (hopefully) taking a loss on this one.
If you want completeness, there may be another possibility: we know that venture capitalists (who spend other people's money, for the most part) have used their positions to improve their sex lives (#metoo) contrary to the interests of their investors. It's just assumed none of them have ever actually handed over millions of other people's money to hairbrained projects in order to accomplish this. I very much hope that's so. But this is a risk of having too many male (or worse, bro) VC executives.
Well, that line of thinking opens up a whole other angle of speculation (and of course that's all it is, so I won't detail it) regarding how events may have unfolded in this debacle.
If the implication in this is that in some way investment was made in exchange for anything "else" from Elizabeth Holmes, then I have to say that I haven't seen any reason to think that and it's offensive to suggest that any kind of sex-for-investment scenario was happening without any basis for believing that.
I may have completely misunderstood what was being suggested here though..
Not sure what you mean by "won't detail". Do you mean "won't include in the list"? Since you've tried to list all the possible speculative causes of this sort of debacle, without committing to any of them... it would surely be odd to omit one because, like the others, it's speculation. But I'm not sure what else you could mean, since no elaboration of the concept is required.
Granted, I've raised an especially unpleasant possibility (as no more than that), especially for consideration going forward; but fraud from other causes is also unpleasant and has to be considered despite being unpleasant and, according to the article, not necessarily an act of commission. To quote: "But the fact that Theranos was a gigantic fraud doesn't quite mean that it committed fraud." You've considered it, nonetheless, and I think that's reasonable - as speculation.
I honestly believe Holmes, as a sophomore at Stanford University, believed she had come across an idea that nobody had ever thought of before (low-volume microfluidic immunoassays).
The exception is that this science had already been explored, for decades, by the major companies that specialized in this technology. There simply was nothing to show that worked, yet, so there was nothing to commercialize. And the big players aren't going to publish their interim research, or Holmes wasn't motivated to actually do the homework.
She wasn't the first to think of it, but had enough traction (combined with a vaccuum of commercial products) to convince people she had, or had some mystery secret sauce that was going to make it work.
The fact that Theranos hired Cass Grandone, an Abbott Diagnostics exec that pioneered the previous generation of microparticle immunoassay/ELISA technology, and Grandone walked away after six months shows that he knew their science never worked, and was never going to work.
Holmes' lab lead / advisor and orignal bizdev lead was a Dean of Engineering at Stanford. It's not just a sophomore not doing her homework; it's a $$$-eyed senior tenured professor at a premier research university who perpetrated and perpetuated this.
A Steve Jobs-like ability to live in her own reality distortion field, plus much of the salesmanship, but minus Steve's very acute (not perfect) sense of what currently impossible problems were on the cusp of being solved, creating future practical products.
There were two companies that I simply couldn't understand, at all, from media reports in the last couple decades. One was Enron, 'tother Theranos. Turned out there was a reason why.
Jobs's job was to look at stuff and see what he could sell, and to demand that employees invent more stuff to sell. Holmes' job was to invent stuff on demand. She tried (and failed) at a much harder job.
Jobs set the tasks, often demanding very specific inventions and advances - plug and play networking for NeXT, a vastly cheaper mouse mechanism, etc, etc. Only in hindsight can those marked advances be taken for granted. Often very correctly. He was an engineer, starting on the front line as she did, just not the best - I don't know that she was, either.
Yeesh, the Hacker News spin on stuff like this is absurd.
My (limited) understanding of people like this is that they're not really thinking.
Among startup founders, puffery is endemic. You have a vision and you try to talk it into being. Whatever you're doing probably won't work, but you can't say, "Well, there's a 90% chance we'll fail," because nobody gives you money or labor then. You have to develop this (unjustified) confidence, and a deep understanding of what people want to hear. Silicon Valley culture definitely encourages this.
To succeed, one also of course has to develop an equally deep understanding of the reality of the business domain. But as we see with Theranos or Hampton Creek or uBeam, you can get surprisingly far on vigorous self-promotion and creating the appearance of success.
The thing that really keeps me awake at night is that there are surely a lot of companies that faked it nearly as much but managed to find a real business before things caught on fire.
On the "Delusion <-> Con Artist" continuum, I'm inclined to think she's more on the delusion end. If your intent is to defraud, you'd want to avoid a domain that's 1) scientifically accountable, and 2) subject to heavy oversight and regulation. She seems smart enough to know that.
This Vanity Fair piece provides a fair amount of character background: https://www.vanityfair.com/news/2016/09/elizabeth-holmes-the...
> If your intent is to defraud, you'd want to avoid a domain that's 1) scientifically accountable, and 2) subject to heavy oversight and regulation. She seems smart enough to know that.
I would like to comment jokingly here with the saying "If you wish to [defraud] go into politics." But let's not support people in that cause.
Seriously, in this case it appears to me it was more and more a series of cascading lies that had to be added to cover the original lie. Which either stemmed from hope, misconception or lack of due dilligence.
If she thought actually her idea was going to work, and nobody raised a flag from her peers, faculty, ..., I think after some point the weight of capital invested made the executives follow the "fake it till you make it path".
I think in that case there was a lot of emotion, pride and "our name is on the line" that came into play.
However, in that case I wonder, if it is believable that major investors did not do their homework? Or are they also part of the game. Cass Grandone bailing on such a promising project should have been a red flag for any serious investor. I bet in that case, a lot of major investors knew and chose to follow the path. In that case they are accountable.
If the story reported about Tyler Shultz is right that means that George Shultz, and his peers, knew but turned a blind eye. In that case, I wonder if Holmes ended up as the scapegoat just to keep the boat floating a bit longer (or even recover). In that case her mistake was writing down a lie in an official document and signing it. Alas, I see clues everywhere that the whole board and investing body are complicit in this deception.
It also takes a borderline impossibly strong will to have someone look at you, say "You're brilliant, and I want to give you money", and reply "No." Especially when there are others around you who (for their own profit) are echoing the same things.
I decided in undergrad that Honors programs exhibited a lot of the same characteristics. Kids in those tracks are treated with velvet gloves by professors, come to believe their own superiority, are inevitably unprepared for the real world / a colleague proving them wrong.
Hype trains create their own RDFs that effect even the subjects.
Richard Feynman's famous quotation is applicable here: "The first principle is that you must not fool yourself — and you are the easiest person to fool".
False positives are often more dangerous than false negatives. This is why the "fake it until you make it" trope can come back to bite you in the read end.
I apologize for the formatting issues. It is one of the reasons I shut this blog down. But here are some of my thoughts from a few years ago:
http://micheleincalifornia.blogspot.com/2016/05/theranos-cul...
Wow this is a fascinating argument that rings — to me, also a woman, very much having also experienced some of this - so vividly true.
I'm skeptical that this a gender-specific issue. Lots of men complain about the difficulty of getting helpful feedback, too. And feedback is hard to provide, regardless of the recipient's gender. You're always walking a line between being sharp enough to be heard versus gentle enough to avoid offence. Ultimately, the recipient is still responsible for the consequences of their actions, and you just have to let them play it out.
I can only speak personally, but I sure haven't experienced any of this alleged difficulty of getting feedback, especially of the negative variety. Sure, it's not the case that everyone I've mentioned one of my bad ideas to has objected to it, but there's always been someone willing to give me the bad news as they saw it.
I think it's entirely plausible that there's something gender-related going on. Women are often seen as less tough than men.
Lots of men complain about the difficulty of getting helpful feedback, too.
Yes, feedback is generally hard to get. But this situation really blew up crazily. It was valued at $10 billion at one time and was a whole lot of hot air.
My argument is that the "Gee, golly, whiz I am talking to a charming, pretty girl!" factor dramatically magnified the problem and allowed it to get blown far out of proportion, more than would have happened with a male CEO. I can't think of any other debacles of this proportion. This is one whale of a debacle. And I think the gender of the CEO is a contributing factor.
That doesn't mean it wouldn't have been a debacle with a guy at the helm. But the essence of my argument is that it would not likely have run on for so very long and hit such crazy big numbers before the bubble burst if the CEO had not been a pretty, charming young woman.
Part of me dislikes the title "Blood Unicorn" for being sensationalist, but part of me really likes it for being completely accurate and even a little bit poetic. It kind of feels like all titles should strive for this balance, but I also kind of hate it. I'm sure there's a German word for what I'm feeling!
"Blood Unicorn" is a great name for a metal band, though.
Came here to laugh and and celebrate a really silly name. BLLOOOOOOODDDD UNIIICORNNNN.
… or for a gruesome Viking ritual human sacrifice.
Ambivalent (and its the same in German)
I've always thought of ambivalent as meaning no strong feelings either way, but I see that it can also mean mixed feelings (even strong ones). Is there a word that doesn't also include the first part, where it means solely having strong mixed feelings?
Torn?
"I'm all out of faith / This is how I feel, I'm cold and I am shamed / Lying naked on the floor ..."
And appropriately for this story, "illusion never changed / into something real" :)
I've always thought of "ambivalent" as indicating fairly strong mixed feelings. I think it's actually the word you want. For the first meaning, I would go with "indifferent".
"Conflicted" seems to capture it but isn't very poetic.
There is more interesting language available if you are oscillating between views e.g. "vacillate" but not really the same as ambivalence.
"Zwiespältig"
Goodbad
They are ambivalent, but the headline isn’t.
It seemed to me as if the author semi-sheepishly is admitting being caught up in the fervor surrounding Theranos:
> I used to refer to it pretty regularly as the Blood Unicorn, Elasmotherium haimatos, because it was a Silicon Valley unicorn with a peak valuation of $9 billion that managed to raise $700 million from investors.
I suppose if "unicorn" is meant to describe fundraising activities, it's accurate. They really raised that money.
I believe this[1] is the article in which the author, Matt Levine, introduced the phrase “blood unicorn”. That article continues with a quote about Theranos's “bait and switch”; the author concludes the section with “‘There will be an appropriate time and place to talk about the past,’ said Theranos; my guess is that the place might be court.”
EDIT: This article[2] (also by Matt Levine) predates [1]. “And here is a unicorn being barbecued in what looks like a medieval manuscript that I will just assume prophesies the coming of Theranos. ‘And lo, a Unicorne shall come among ye, and ye shall call it by the name Theranos, or in the Old Tongues, Elasmotherium Haimatos. And it shall take your Bloode, but only a lyttle bit of your Bloode, and it shall do strange Magick upon said Bloode, and tell ye many Things. But then it shall come to pass that its Magick was [makes 'so-so' hand gesture], and that those Things were mostly not true. And ye shall barbecue that Unicorne.’”
[1] https://www.bloomberg.com/view/articles/2016-08-02/mergers-u...
[2] https://www.bloomberg.com/view/articles/2016-05-26/libor-cha...
Matt would appreciate your use of footnotes!
He's always been skeptical of them as far as I can remember. The whole "Blood Unicorn" thing is a long running joke in his column.
At one time, it was valued at $10 billion and being called a dekacorn based on valuation.
FYI, the author regularly discusses unicorns in his daily column, and often gives them funny/appropriate names. E.g. Blood Unicorn for Theranos, Decacorn for Unicorns over 10b in value, and other ones I can't remember now.
I'm sure there are all sorts of dark actors in the shadows on this one. Holmes is being hung drawn and quartered in public, but there were many other people involved in building up this chimera. The board of directors are an interesting bunch and Ramesh "Sunny" Balwani is a colorful character. Holmes may have been a patsy, who knows...
Bloomberg and most other media companies pumped Theranos up for all it was worth, then Murdoch's WSJ deflated the balloon, having previously blown it up to dekacorn dimensions.
It feels like the pump and dump plays so popular in the dot com era by the money.
Was she the CEO or not? If the CEO does not bear responsibility for egregious, dangerous fraud who does?
I think the point is that others likely should also be held responsible. Not sure I understand your argument here.
I'm specifically disagreeing with the usage of the term "patsy", which implies that she's not morally complicit on grounds of naivete.
Fair but she might be a clueless rube who got played...
Played by who? Who made money on Theranos? Anyone who knew it was a fraud wasn't going to profit from investing. They wouldn't be able to cash out before the product failed at market. Maybe a supplier would profit from selling supplies, but not the investor/advisors.
'Although Holmes settled her complaint with the SEC Wednesday, agreeing to a broad series of penalties without admitting guilt, Balwani did not settle with SEC, which will continue investigating him'.
'Theranos' board heft was anchored to a 2011 meeting Holmes had with former secretary of state George Shultz, who after joining the board recruited his fellow former secretary, Henry Kissinger. Other notables around the table were former U.S. senators Sam Nunn and Bill Frist, former secretary of defense William Perry, and James Mattis.
Mattis came up in the SEC's investigation. It found that while Mattis was leading the U.S. Central Command he lobbied for Holmes' tech to be used in the military, though regulators flagged issues before the notion took wing. Mattis resigned from Theranos' board when he become U.S. Defense secretary in 2016'.
https://www.usatoday.com/story/tech/news/2018/03/15/behind-t...
While I don't think the investors/advisors were necessarily in on this, you're actually mistaken here.
First of all, an advisor could certainly be making money just by drawing a salary or any other compensation. As did Elizabeth Holmes, actually, who drew a salary of 200k (not very large for a CEO, I believe, but certainly this is a very real compensation she got from the fraud).
As for investors, theoretically speaking, early round investors could've sold their shares to later round investors and cashed out.
Again, I'm speaking hypothetically here - I assume there weren't that many people involved in the fraud, just by virtue of the fact that it was kept alive for many years and it's hard to get many people to keep a secret.
These companies pay journalists to promote their scams. Everyone who took their money and wrote a favorable article should go to prison.
Also, the way she compatmentalized her business and threatened former employees proves she was complicit.
As she long is able to dodge criminal charges, I think she got away with a slap on the wrist. A $500,000 fine and returning most of her Theranos equity is hardly proportionate punishment for a supposed-$700M fraud.
By comparison, Shkreli is going to prison over a mere $10M fraud.
Shkreli fought it - she took the deal.
Oh, wow..
Honest question: I know that plea deals and other rather arcane behind-the-scenes agreements are a thing, but as someone who is not all too familiar with the American justice system, is that really the only relevant difference?
So, what kept Shkreli from taking a deal?
The US has two parallel justice systems. One is civil, the other is criminal. The purpose of the civil justice system is to resolve disputes and amend harms. The purpose of the criminal system is to punish.
Shkreli was charged in the criminal system; Theranos was caught up in the civil system.
You can’t take a plea deal in the civil system because there’s nothing to plead to. You can only settle, which essentially means the parties to the dispute figured out an agreement without the help of the court.
> The US has two parallel justice systems. One is civil, the other is criminal.
Yes, so far it's all pretty clear I think..
But since my reply has been to this comment:
> Shkreli fought it - she took the deal.
I was a bit confused by this. Because this implies there was a deal (or maybe more than one deal) in Shkreli's case, as well as in the Theranos case.
From my limited understanding, he broke the law but was able to return all the funds to investors. So there weren't damages per se, but I think statutory penalties instead.
SEC cannot bring criminal charges. The Justice Department can. We will see if they do in the case of Elizabeth Holmes.
Okay, interesting. Although it seems a bit strange that this would end up in Washington at the federal level, i.e. Justice Department.. I don't think that they have to deal with just any case of fraud, even big ones. But I could be mistaken.
But if the Justice Department handles this I wouldn't be surprised if this whole thing gets kind of, well, political..
Also, this somehow begs the question who brought the charges in Shkreli's case.
Well, that is also my limited understanding so far..
Is it accurate to say that he broke the law by misleading his investors?
He thought he could get away with it.
Apparently. And it seems that Theranos actually gets away with it.
Shkreli was charged criminally. She hasn't even been charged criminally.
Reading this article, I've had a nagging feeling - ok, the founder may have presented a wrong picture, but isn't it the task of tech journalists to call them on that? I am sure some would always be fooled, but how comes pretty much all of them, according to the article, were fooled? And not by some ingenious heist that takes a genius to unravel, but by buying a device from another company, showing it to journalists and telling them "we invented this new awesome thing" and nobody is the wiser? Where's the added value in journalists then, are they reduced now to repackaging press-releases and writing "oh, we've got fooled again" postmortems? OK, let's say they don't have the expertise. A lot of people do. Did they ask those people and report what they are thinking? How comes then I am reading both "any person with med test background should have seen it" and "nobody was seeing it"? If a thing like this happened with some software system, there would be a place for deep redesign of monitoring and evaluation systems, that should have prevented such failure. Yet it happens again and again with reporting and as far as I can see no work is done to fix it.
Agreed. Honestly, you could visit some of the old HN threads and at least see a ton of skepticism. If HN commenters can find reasons for suspicion, then how could a journalist not? Isn't that their job? Or are they just PR mouthpieces. How is it that I can go to forums like HN and get more information on this company than in the articles of prestigious publications?
How much ability to do this is possible short of subpoena though?
Theranos history is littered with staged demos (not being described as such), deception (running tests with other manufacturer machines), and outright lies.
For all the upbeat press release regurgitation (of which there was a lot, absolutely), there's limits to investigative journalism of those who _were_ skeptical.
Well, interviewing a bunch of specialists saying "this contradicts all I know about medical diagnostics for this and this reason" - like we see happening here - and then asking the Theranos reps "could you please explain what these experts are missing here, in detail" would be a good start. Of course, Theranos could bullshit their way out of it, but distinguishing bullshit answers from substantial answers is usually much easier and more accessible to non-specialists than figuring out if the whole thing is bullshit from zero.
"Theranos made direct use of its positive press to raise money: It "sent investors a binder of background materials," which included "articles and profiles about Theranos, including the 2013 and 2014 articles from The Wall Street Journal, Wired, and Fortune"
I can't decide if the investors were foolish for trusting in news articles, or if the news articles should have been trustworthy.
Matt Levine proves, again and again, that there’s more nuance to any situation than one might think.
He’s the living embodiment of the law’s “reasonable observer”.
I like Matt Levine very much, but exactly what nuance is he adding in this specific case?
Is there any data on how much the executives of Theranos profited while trying to produce these blood tests?
The SEC report says about Holmes
> Holmes was paid a salary of approximately $200,000 to $390,000 per year between 2013 and 2015
> Holmes has never sold any of her Theranos stock.
> Due to the company’s liquidation preference, if Theranos is acquired or is otherwise liquidated, Holmes would not profit from her ownership until – assuming redemption of certain warrants – over $750 million is returned to defrauded investors and other preferred shareholders.
So she probably didn't profit that much financially from the fraud (especially not compared to the sums in play), unless Theranos somehow magically comes back from the grave.
$700M is a pretty big scheme, what's the likelihood Elizabeth Holmes gets jail time?
Matt Levine is a national treasure.
Seemed that way from the beginning. What kind of people become journalists?