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Verdict in case of Theranos founder Elizabeth Holmes has lessons for investors


Sometimes, an investment seems too good to true.

Elizabeth Holmes is an example of a health-care company. The founder of Theranos and the former CEO was interviewed Monday. found guiltyShe was convicted of criminal fraud.

Holmes, who was almost a decade old, raised $945million from prominent investors, including Rupert Murdoch (media mogul), Betsy DeVos, the Walton family and former Education Secretary Betsy DeVos. Walmart fame.

To lure investors, witnessesHolmes claimed that the blood-testing technology used by his company was either false or exaggerated. Holmes was found guilty of wire fraud and conspiring to commit wire fraud by jurors. She could be sentenced to up 20 years imprisonment.

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Jina Choi from the SEC’s San Francisco Regional Office stated at the time that the Theranos case was an important lesson in Silicon Valley. 

Investors must hear the whole truth from innovators who want to disrupt and revolutionize an industry. Not just their hopes for it, but what its technology is capable of doing today.

Theranos didn’t go public so it was not subject to the same public and government scrutiny as more well-known companies. Investors had the opportunity to invest in Theranos while the startup was still on the rise. However, they were also responsible for vetting the startup’s blood-testing capabilities largely on their own.

Elizabeth Holmes, former CEO of Theranos and founder of Theranos, arrives at Robert F. Peckham Federal Building San Jose on December 16, 2021.

Justin Sullivan | Getty Images

Theranos doesn’t have to be the worst apple in the world. It’s not the only one.

Another black eye for the industry has been uBiome. investigated by the FBI for fraudulent billingOutcome Health is a company that provides health-care marketing services. misleading information to drugmakers on where their ads were showing up and how they performed.

Fraud extends well beyond the realm of health care.

Waves of corporate malfeasance are common. Len Sherman is professor of business at Columbia Business School. Enron, WorldCom, Bernie Madoff, and now Theranos all represent “another era” that is conducive to fraud. 

What to do if you spot a problem?

Ruby Gadelrab (founder and CEO, MDisrupt), a company that conducts medical due diligence for the industry of health-tech, stated that it is important to not assume every company is like Theranos.

Gadelrab stated that health care is complicated as a whole. It’s the most difficult area in which to invest.

Gadelrab advises investors to first establish if the product’s clinical and commercial viability in order to assist them in evaluating potential companies.

“Investors use experts to perform technical and financial diligence, but in the case of health care, we must do our medical diligence by using specialists.

As much as you spend time booking your next vacation, take the time to review your portfolio.

Winnie Sun

Sun Group Wealth Partners’ managing director

Next, find out if the scientific evidence backs up founders’ claims.

Gadelrab suggested that validation should be done on the technology. Gadelrab said, “Show me your data.” To illustrate, it might ask “Does it pick up a biomarker or disease when it is present?”

She added that “not all data is equal.” External collaboration is important with researchers and scientists, excellent data is published in peer reviewed journals and is replicated.

The team structure is also important. Are they staffed with clinical specialists in high-ranking positions? “Are they their investors?

Gadelrab said, “Make certain that the health specialists have a seat at this table and a voice during the process.”

Sherman stated that Theranos was secretive about its technology, and Sherman paid close attention to the CEO. This is part of Sherman’s mystery as well as a big red flag. Sherman said, “I wish that the next time this kind of thing happens, somebody says ‘wait!’

Lessons learned

Sun stated, “If you do this alone, it is a lot more difficult, especially if the investment idea was shared by a friend, or online.” Spend as much time reviewing your portfolio as booking your next vacation.

Otherwise, invest in an exchange-traded fund or mutual fund rather than picking individual stocks.

Many experts agree that diversifying in these areas is the best strategy to lower risk and maximize long-term performance.  

Sun stated that diversification is a core principle for investors.