Theranos Lab Is the Subject of a U.S. Criminal Probe

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Key Speakers At 2015 The Fortune Global Forum
Theranos CEO Elizabeth Holmes. Photo: David Paul Morris/© 2015 Bloomberg Finance LP

Theranos lab might be in trouble for more than its sketchy blood-testing practices. According to The Wall Street Journal, “people familiar with the matter” said the company formerly known as Silicon Valley’s golden child is the subject of a federal-criminal probe to investigate whether it deliberately misled investors about the state of its technology and operations. Walgreens and the New York State Department of Health have reportedly both received subpoenas seeking testimony about how Theranos represented its assets. The company was valued at $9 billion in 2014, and CEO Elizabeth Holmes’s majority stake was valued at more than $4.5 billion.

Walgreens announced a partnership with Theranos in 2013, and Walgreens stores in Arizona now include 40 Theranos wellness centers. As part of the deal, the drugstore company reportedly invested $50 million in Theranos, but in January it threatened to end the partnership if Theranos didn’t immediately resolve issues with its testing. As for the New York DOH, it received an application from Theranos for a laboratory license. In other words, both companies have records of the claims Theranos made when pitching itself to agencies and investors.

WSJs sources say federal prosecutors are looking for “broad information” about how the lab described its technologies — most likely meaning its cutting-edge Edison machines, which are supposed to take accurate measurements from just a tiny blood sample — and whether the lab misled government officials, which is a federal crime. 

Officials reportedly submitted informal requests for information in January and February, followed by grand-jury subpoenas from a federal court in San Francisco in March. The FBI and the U.S. Postal Inspection Service are reportedly assisting the investigation.

The subpoenas don’t mean prosecutors are actively seeking an indictment, and the investigation is still in an early stage, but this represents yet another stumbling block for the company. Last week, the U.S. government threatened Theranos with a series of crippling sanctions that would close down its main lab and bar Holmes from the blood-testing industry for up to two years.

Naturally, Holmes and her lab continue to deny any wrongdoing. In a statement, Theranos said, “The company continues to work closely with regulators and is cooperating fully with all investigations.” 

Theranos Lab Subject of U.S. Criminal Probe