In October, Trevor Milton, the founder of the electric vehicle company Nikola, was convicted of fraud. And Sam Bankman-Fried, the founder of the cryptocurrency exchange FTX, which collapsed in bankruptcy last week, is under multiple state and federal investigations.
Elizabeth Holmes’s Epic Rise and Fall
The Theranos founder’s story, from a $9 billion valuation to a fraud conviction, has come to symbolize the pitfalls of Silicon Valley’s culture.
Prosecutors in Ms. Holmes’s case urged Judge Davila to consider the message her case would send to the world. In court filings ahead of the sentencing, they wrote that a long sentence for Ms. Holmes was important to “deter future start-up fraud schemes” and “rebuild the trust investors must have when funding innovators.”
In court on Friday, Judge Davila asked if any victims of Ms. Holmes were present. A man in a blue suit stood up and introduced himself as Alex Shultz, the son of George Shultz, the former secretary of state who served on Theranos’s board and who died in 2021, and the father of Tyler Shultz, a Theranos employee who helped expose the fraud.
His voice shaking, Alex Shultz described how Ms. Holmes and Theranos had nearly “desecrated” his family after she suspected Tyler Shultz of speaking to the media about Theranos. She hired private investigators to stalk them, threatened legal ruin and “took advantage of my dad,” Alex Shultz said.
Jeffrey Schenk, an assistant U.S. attorney and a lead prosecutor on the case, criticized Ms. Holmes’s argument that Theranos’s failure was typical of a high-risk, ambitious Silicon Valley start-up. “It is a logical fallacy to suggest that start-ups fail, Theranos was a start-up, and, therefore, Theranos failed because it was a start-up,” he said. “That is not true.”
Kevin Downey, a lawyer for Ms. Holmes, said in court that because she had never cashed out her Theranos stock, there was no evidence of greed, like yachts, planes, large mansions and parties.