Appeals Court Upholds Elizabeth Holmes’ Fraud Conviction

Looks like Elizabeth Holmes’ post-prison reinvention will have to wait a bit.

The disgraced Theranos founder lost a bid to overturn her 2022 fraud conviction, having failed to prove any legal missteps by federal prosecutors or the district court handing her fraud case. Both Holmes (a mother of two) and her former business partner/lover Ramesh “Sunny” Balwani appealed their respective fraud convictions and prison terms by accusing the lower court of major violations.

For example, Holmes and Balwani (former lovers/business partners) argued that former Theranos employees should have been prohibited to testify against them, with Balwani accusing the district court of failing to correct false testimony against him. A three-judge appellate court panel, however, rejected those arguments and others set forth in the pair’s appeal.

Related: The Legacy of Elizabeth Holmes

In a 54-page decision, U.S. District Court Judge Jacqueline Nguyen ruled that neither Holmes nor Balwani proved any violations or major errors by the lower court.

‘“[O]ne tiny drop changes everything.’ That was the vision shared by Elizabeth Holmes and Ramesh ‘Sunny’ Balwani, who set out in the mid-2000s to revolutionize medical laboratory testing through a biotechnology company called Theranos,” Nguyen wrote in her opinion. “But the vision sold by Holmes and Balwani was nothing more than a mirage.”

Indeed it was: Holmes’ claim that her company’s devices could detect hundreds of potential diseases from just a few drops of blood proved false. “The grandiose achievements touted by Holmes and Balwani were half-truths and outright lies. Theranos’s blood-testing device failed to deliver faster and more accurate testing results than conventional technology,” Nguyen’s opinion read. “Pharmaceutical companies never validated the technology, as Holmes and Balwani had told investors.”

A 30-month federal investigation culminated in an 11-count indictment against Holmes and Balwani in June 2018. Federal prosecutors tried the pair’s cases separately; both were convicted of fraud charges. Balwani is currently serving a 12-year, 11-month prison term while Holmes is passing the days (roughly 2,579 more to go) at a federal prison in Texas. Both are required to pay $452 million in restitution to 14 investors.

In her appeal, Holmes argues and that restitution should have been based on the value of Theranos’ shares after the fraud was discovered rather than based on shareholders’ total investments. But the appellate judges sided with the lower court, which concluded the defrauded investors could not liquidate their shares after Holmes’ and Balwani’s ruse was discovered.

“…we find that any error by the district court was harmless because the district court’s factual findings compel the conclusion that the victims’ actual losses were equal to the total amount of their investments. Most importantly, the USA V. HOLMES 53 court found that the victims were ‘[un]able to liquidate their shares’ after the fraud came to light,” Nguyen stated in her opinion. “In other words, for restitution purposes, the victims were never able to recover any amount of residual value that the stock may have retained. One investor who testified at both trials explained he had no opportunity to sell his stock ‘once the cascade of negative publicity was unleashed’ and that ‘there was never a legitimate opportunity from the company or from a third party to buy my stock.’ The evidence Holmes and Balwani cite—which suggests, at best, there was some opportunity to sell shares to some parties at some unidentified time—is not enough to render the district court’s finding clearly erroneous.”