Ramesh “Sunny” Balwani, the former chief operating officer of Theranos, the failed blood-testing start-up, was sentenced Wednesday to nearly 13 years in prison for fraud. It marks the end of the shock fall of a high-flying Silicon Valley company that resulted in the rare convictions of two tech executives.
“There’s an unfortunate saying in Silicon Valley: ‘Fake it ’til you make it.’ Elizabeth Holmes and Sunny Balwani took this idea far beyond what is allowed by law and, in doing so, put large amounts of investor dollars at risk,” said Stephanie Hinds, US Attorney for the Northern District of California, in a statement. . “Significantly, today the court also made it clear that Sunny Balwani’s decision to mislead doctors and patients also put patients’ health at risk. Ms. Holmes and Mr. Balwani will now be justly punished for their illegal conduct.”
Added Hinds: “Let this story be a warning to the businessmen of this district: those who use lies to cover up the shortcomings of their promised accomplishments risk considerable jail time.”
Jeffrey Coopersmith, Balwani’s lawyer, said in a statement: “We are disappointed with the outcome. We respectfully disagree and plan to appeal.”
The sentencing comes weeks after Elizabeth Holmes, the founder of Theranos and Balwani’s ex-girlfriend, was sentenced to more than 11 years in prison.
Theranos raised $945 million from a cohort of A-list investors with its promise to test a wide range of conditions with just a few drops of blood. At its peak, the company was valued at $9 billion.
The company began to fall apart after a Wall Street Journal investigation in 2015 reported that Theranos had only performed about a dozen of the hundreds of tests it offered using its proprietary technology and with questionable accuracy. It also came to light that Theranos relied on devices made by third parties from traditional blood testing companies rather than its own technology. Theranos was finally dissolved in September 2018.
Holmes and Balwani they were indicted together for the first time four years ago on the same 12 criminal counts related to defrauding investors and patients about Theranos’ capabilities and business dealings to get money. Her trials were halted after Holmes indicated that he intended to accuse Balwani of sexually, emotionally and psychologically abusing her during her decade-long relationship, which coincided with her time at the helm of the company. . (Balwani’s lawyers have denied her claims.)
In July, Balwani was found guilty of all 12 counts he faced, including 10 counts of federal wire fraud and two counts of conspiracy to commit wire fraud. Holmes was convicted in January of four counts related to defrauding investors and found not guilty on three additional counts related to defrauding patients and one count of conspiracy to defraud patients.
Like Holmes, Balwani faced up to 20 years in prison and a $250,000 fine plus restitution for each charge.
In a recent court filing, prosecutors noted that Balwani was convicted of not only defrauding investors but also defrauding patients. They recommended a 15-year prison sentence for him, as well as an order for Balwani to pay $804 million in restitution. In a separate filing, Balwani’s lawyers requested a sentence of probation, noting that he had no criminal record.
Before joining Theranos, Balwani had a career as a software executive. Balwani, almost 20 years older than Holmes, met her in 2002 before she dropped out of Stanford. He served as an informal adviser to Holmes in the early days of Theranos and the two became romantically involved. Balwani guaranteed a “multi-million dollar loan” to the startup in 2009, court documents show, and took a formal role as president and chief operating officer. Holmes and Balwani kept their romantic relationship largely hidden while working together.
During his trial, Holmes claimed that Balwani tried to control almost every aspect of his life, including disciplining his eating, his voice and image, and isolating himself from others. She testified that while he did not control his interactions with investors, business partners and others, “he impacted everything on who I was, and I don’t fully understand that.”
Holmes is expected to appeal his conviction, but was ordered to turn himself in to custody on April 27, 2023.