Elizabeth Holmes starts 11-year prison term for Theranos fraud

Elizabeth Holmes, the founder of the now-defunct Theranos, reported to a federal prison in Texas to serve her 11-year sentence. The 39 year old was convicted of four counts of fraud related to her failed blood testing start-up early last year. Her request to remain free on bail while challenging the original conviction was denied in mid-May. The Federal Bureau of Prisons confirmed her arrival at the minimum-security prison in Bryan, Texas, which houses between 500 and 700 inmates.

Holmes, once hailed as the world’s youngest self-made billionaire, may now work alongside other inmates for wages ranging from 1 baht to 40 baht per hour. A significant portion of her earnings will go towards court-mandated restitution payments. Earlier this month, a US judge ordered Holmes and her former romantic and business partner, ex-Theranos boss Ramesh “Sunny” Balwani, to pay US$452 million to victims. Balwani is currently serving a 13-year prison sentence in California for his involvement in the scheme.

Together, Holmes and Balwani are accused of deceiving some of the world’s wealthiest and most prominent investors, such as media mogul Rupert Murdoch and former US Treasury Secretary George Shultz, into supporting Theranos. The company, once valued at US$9 billion, claimed to have technology capable of detecting conditions like diabetes with just a few drops of blood. However, the technology never worked, and Theranos ultimately collapsed in 2018.

The 37-acre prison camp where Holmes will serve her sentence primarily houses inmates convicted of non-violent crimes, low-level drug dealing, or white-collar offences. The facility’s handbook suggests that life there revolves around work and extracurricular activities, including foreign language, computer literacy, and business courses.

Holmes had sought to delay her imprisonment while her legal appeal progressed through the courts, arguing that a postponement would allow her to raise “substantial questions” about the case that could warrant a new trial. Her defence team also contended that she should remain free to care for her children, aged nearly two and three months old. The prison has facilities for hosting gatherings and children’s play areas, and official Bureau of Prison guidelines permit mothers to hold their children in their laps and breastfeed their infants.

Holmes’ entry into a federal prison serves as a stark warning to other Silicon Valley executives, where a “fake it until you make it” mentality has long been a concern. However, it is uncommon for tech bosses to face prison time for fraud charges. The US government hopes that Holmes’ predicament will deter executives from making exaggerated claims about their technology’s capabilities while seeking financial support.

Eileen Lepera, who lost part of her savings investing in Theranos, told the BBC this week that she is “glad she [Holmes] got 11 years.” She added…

“Her hubris is beyond belief. I don’t believe she’s still taking any responsibility for what has happened.”

In emotional remarks before her sentencing in November, Holmes expressed regret for her failures at Theranos “with every cell in my body” but did not admit to any criminal wrongdoing.