CNN business
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Ramesh “Sunny” Balwani, the former chief operating officer of failed blood-testing startup Theranos, was sentenced Wednesday to nearly 13 years in prison for fraud. This ends the stunning downfall of a flying Silicon Valley company that resulted in the rare conviction of two tech executives.
“There is an unfortunate adage in Silicon Valley: ‘Fake it until you succeed.’ investor funds were at risk,” said Stephanie Hines, U.S. Attorney for the Northern District of California, in a statement. “Importantly, today, the court has made it clear that Sunny Balwani’s decision to cheat doctors and patients also puts the patient’s health at risk. will be justly punished for their misconduct.”
“Let this story be a lesson for entrepreneurs in the region,” Hines added. .
The ruling comes weeks after Theranos founder and Balwani’s ex-girlfriend Elizabeth Holmes was sentenced to over 11 years in prison.
Theranos has raised $945 million from a cohort of A-list investors, promising to test for various conditions using just a few drops of blood. At its peak enterprise value he was $9 billion.
After a 2015 Wall Street Journal study reported that out of the hundreds of tests Theranos provided using its proprietary technology, only about a dozen were run with questionable accuracy. began to unravel. It also revealed that Theranos relied on third-party devices from traditional blood-testing companies rather than proprietary technology. Theranos eventually broke up in September 2018.
Holmes and Balwani were indicted together four years ago. The same 12 criminal charges allege defrauding investors and patients about Theranos’ abilities and business dealings to obtain money. Their trial after Holmes suggested he intended to accuse Balwani of sexually, emotionally and psychologically abusing her through a decade-long relationship that coincided with the time he ran the company. (Balwani’s attorney denies her allegations.)
In July, Balwani was found guilty of all 12 counts, including 10 counts of federal wire fraud and two counts of wire fraud conspiracy. Holmes was convicted in January of four counts of investor fraud and was acquitted of three additional counts of patient fraud and one count of conspiracy to commit patient fraud.
Like Holmes, Balwani was sentenced to up to 20 years in prison and $250,000 in fines and damages for each count.
In recent court filings, prosecutors noted that Balwani was convicted of not only defrauding investors but also defrauding patients. They recommended ordering him to serve his 15-year prison sentence and pay Balwani his $804 million in reparations. In a separate filing, Balwani’s attorney requested a probation sentence, noting that he had no criminal record.
Prior to joining Theranos, Balwani pursued a career as a software executive. Balwani, who is nearly 20 years older than Holmes, first met her in 2002, before she dropped out of Stanford University. He served as an unofficial advisor to Holmes during Theranos’ early years, and the two became romantically involved. Balwani guaranteed a “multi-million dollar loan” to the startup in 2009 and formally became president and COO, court filings show. Holmes and Balwani mostly hid their romantic relationship while working together.
Holmes alleged that during the trial Balwani tried to control almost every aspect of her life. This includes her diet, voice and image discipline, and isolating her from others. She testified that he didn’t control his interactions with investors, business partners, etc., but “he influenced everything about who I was. I don’t understand.”
Holmes plans to appeal her conviction, but was ordered into custody on April 27, 2023.
