Elizabeth Holmes founded Theranos in 2003 when she was 19 years old. At its height, the company reached a valuation of over $9 billion on the strength of its claim to have revolutionized the blood-testing industry. Friday, an unraveling that began in October 2015 with a series of Wall Street Journal articles accelerated, as Holmes and her colleague Ramesh “Sunny” Balwani were indicted on multiple counts of fraud. Holmes has also stepped down as CEO.

The indictment, which comprises 11 counts, alleges that Theranos misled investors—one of whom sent Theranos nearly $100 million in a single wire transfer October 31, 2014—as well as doctors and patients with its promises of a blood test that delivered quick results with a single finger-*****, rather than the more demanding requirements of conventional methods.

“Holmes and Balwani devised a scheme to defraud doctors and patients, through advertisements and marketing materials, through explicit and implicit claims concerning Theranos’s ability to provide accurate, fast, reliable, and cheap blood tests and test results, and through omissions concerning the limits of and problems with Theranos’s technologies,” the indictment reads.

“This office, along with our other law enforcement partners in the Bay Area, will vigorously investigate and prosecute those who do not play by the rules that make Silicon Valley work.”

John F. Bennett, FBI

This is not the first legal trouble Theranos has found itself in. The Securities and Exchange Commission filed a civil suit in March, but Holmes and the company quickly settled those charges. Holmes paid a $500,000 fine, returned 18.9 million Theranos shares, and was barred from serving as an officer or director of a public company for the next decade.

These latest charges may not be so easily brushed aside. Both Holmes and Balwani, the company’s former president, reportedly face a maximum of 20 years in prison if convicted, as well as additional fines. The Department of Justice has also framed the case as a fight for the heart and soul of Silicon Valley.

“This district, led by Silicon Valley, is at the center of modern technological innovation and entrepreneurial spirit; capital investment makes that possible,” said FBI agent John F. Bennett, who led the investigation. “This office, along with our other law enforcement partners in the Bay Area, will vigorously investigate and prosecute those who do not play by the rules that make Silicon Valley work.”

The indictment itself also serves as a sort of CliffsNotes companion to the work of WSJ reporter John Carreyrou, who has spent the past several years reporting on Theranos, along the way unearthing its many alleged misdeeds. It traces Theranos’ pitch to investors and the medical community that it could get results in hours instead of days, as well as the fact that the proprietary device central to those claims “had accuracy and reliability issues, was slower than some competing devices, and could not compete with larger, conventional machines in high-throughput, or the simultaneous testing of blood from many patients.” To make up for those shortcomings, Theranos used the same commercial devices it had decried as obsolete to complete its testing.

Holmes has been held up as the ultimate symbol of Silicon Valley’s “Fake it til you make it” culture, and for good reason. But the reason the Theranos saga has resonated so deeply, and that Holmes and Balwani face such serious charges now, is that the scandal also transcends the typical tech hype cycle. Theranos wasn’t promising a better juicer or a shift in the human resources paradigm. It had a direct effect on medical diagnoses: The indictment alleges that Holmes and Balwani knowingly passed along test results that were inaccurate and unreliable. You can’t move fast and break things when those things are human lives.

In that sense, look at the Theranos indictment not as an opportunity to avenge the spirit of Silicon Valley, but to expose it. Let whatever reckoning Holmes and Balwani receive serve as an object lesson in irresponsible growth.

Until then? In a brief press release Friday, the company said that Holmes will stay on as the chair of the Theranos board.


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