Defrauding investors: $945M lost, who's to blame? | Theranos Trial Ep. 1

[Music] elizabeth holmes built her entire theranos empire around a product that was supposed to solve one of the biggest hurdles in healthcare access to affordable blood testing with her revolutionary edison machine a single drop of blood would be able to run up to 240 tests from albumin to white blood cell count and everything in between it was going to change health care as we knew it our work is in [Music] the belief that access to health information is a basic human right by 2015 forbes named holmes the youngest and wealthiest self-made billionaire in the u.s until we put elizabeth on our cover just a few months back i hadn't heard of you i hadn't heard of the company and yet your company is valued at over 9 billion but there was a catch behind closed doors the edison machine simply didn't work nearly as well as promised and theranos was essentially a sham but with hundreds of millions of dollars in funding theronos allegedly continued to persuade investors into believing in their cause and the investments kept coming venture capital funded companies are nothing new for silicon valley in many ways investors have become one of the most important parts of the entire startup ecosystem when i'm an investor in a startup i assume that 60 of them are going to go out of business the question is why did investors embrace a startup like theranos which built its entire empire around a product that didn't work and now with elizabeth holmes on trial for allegedly lying to them why do so few of them seem mad about it there is a great technology and it's going to happen and she will have had a huge hand in making that happen having grand ambitions isn't a crime startups often present some pretty wild ideas this will enable the creation of a luna base but if a company allegedly uses deceptive practices in order to raise hundreds of millions of dollars well that's a different story and why elizabeth holmes is on trial for numerous charges related to wire fraud it's very rare that we see the ceo of a company facing criminal charges much less the founder of a startup russell brandom is policy editor at the verge he's been following the holmes trial since the beginning a lot of the charges here are wire fraud because they wired the money so if they had mailed cash it would be mail fraud most of them are wire fraud against investors allegedly she said things that weren't true and then based on those lies she was raising money and that's fraud in 2015 the wall street journal published a slew of articles revealing multiple levels of deceptive practices theronos allegedly covered up these practices while continuing to coax money from wealthy investors and the list is impressive media mogul rupert murdoch general jim mattis who also served on the thermos board and even the walton family you know the richest family in the world so because of that culture of venture capital investors always always defend their companies and you see even after a lot of the reporting has come out saying look these machines are not working something doesn't smell right here a lot of investors were still defending elizabeth holmes saying oh she's the next steve jobs you're just trying to take down a sort of visionary founder are you willing to admit that you were wrong about this one absolutely not i i feel that we have taken down another great icon i think really it's just they want to give everything as much runway as possible and they figure look either things will work out and then i'll get rich and look like a genius or it won't and it's not really my problem for most of the theranost investors the amount of money lost pales in comparison to their net worth and while some were able to clawback their investment many simply lost it all you know is the victim here rupert murdoch i don't know i don't feel that much sympathy form i don't think this meaningfully affected rupert murdoch's net worth like no one is sleeping on the street tonight because they invested in theranos it was a really bad time for the employees but they're not really sort of represented here it was a really bad time for some patients who got bad medical results it is odd that the investors are at the center of the trial when they're kind of the least sympathetic players here this obviously doesn't justify the fraud that allegedly took place behind the scenes at theranos but it does point to a larger pattern of behavior in silicon valley that has become somewhat problematic investors blindly tossing huge sums of money behind overheated companies that in reality only have a small chance of succeeding in the first place if you really researched what holmes was promising it didn't add up testimony from the trial has revealed that many investors failed to exercise due diligence before handing over millions in funding to theranos many barely knew anything about the healthcare industry at all you got people who were sort of very prestigious and very important but maybe not rigorous enough to really check what was being claimed success builds more success so you hear oh rupert murdoch invested in this company well he must have done his his research well why did rupert murdoch invest well he heard that the army was using it none of these were people who were really experienced in the blood testing world and when you got someone like that who was you know bill gates famously looked at their technology and he has a lot of money he's interested in investing in things but he has this larger background in looking at okay what are the medical interventions what can we what can we be looking at he was like this doesn't make any sense no one could test that much from from a drop of blood and the things they're saying about how they're doing it don't add up ultimately what may have led theranos to use allegedly deceptive tactics was the momentum from the investors themselves who wanted so badly to turn a profit that they ultimately couldn't see through all the hype i think people are very very angry at elizabeth holmes i think you have people who are mad at you know maybe the media that enable terps or if you wrote an article saying oh this is this visionary genius you sort of feel like a bit of a doofus but like even now i don't think the people who invested in theranos and like enabled all of this are seeing any real consequences from it you

Channel: The Verge

Views: 245,798

Keywords: elizabeth holmes, the dropout, elizabeth holmes trial, theranos trial, theranos case, theranos, silicon valley, venture capital, venture capitalist, venture capital explained, venture capital analyst, angel investors, theranos documentary, stock market, news, fraud, steve jobs, elizabeth holmes net worth 2021, elizabeth holmes trial today, theranos ceo elizabeth holmes trial, technology, gadgets, tech, latest, tech news, verge, the verge

Id: ga4xebrUkMk

Length: 6min 37sec (397 seconds)

Published: Wed Dec 15 2021