The true story of The Dropout's shamed Theranos mogul Elizabeth Holmes

Photo credit: CNBC - Getty Images
Photo credit: CNBC - Getty Images
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

At one point in time, Elizabeth Holmes was the head of a billion-dollar company that could have changed the medical world forever.

Now she’s awaiting sentencing for fraud, her business has collapsed and the story of what happened is playing out on podcasts and new Disney+/Hulu series The Dropout.

With Amanda Seyfried in the starring role, viewers will see how Holmes managed to create an entire industry around just an idea, with frustrations around the toxic work environment at Theranos and lack of any real development of a product soon giving way to fraud, secrecy and deceit.

Photo credit: Hulu
Photo credit: Hulu

But what actually happened in the case that, according to New York Times, “came to symbolize the pitfalls of Silicon Valley's culture of hustle, hype and greed”?

Here’s the full true story about what happened to Elizabeth as her story is given the Hollywood treatment.

Who is Elizabeth Holmes and what did she promise at Theranos?

In 2003, at the age of 19, a mission-focused Elizabeth Holmes launched the company that became known as Theranos.

Known to be charismatic and charming, Elizabeth wanted to create a portable device that ran blood tests using ‘just a drop of blood’. If successful, Theranos would have revolutionised the entire medical industry, made healthcare more accessible and affordable, and allowed patients to have a clear and concise indicator of their health. It would also almost eradicate the need for needles and painful blood draws.

Photo credit: Kimberly White - Getty Images
Photo credit: Kimberly White - Getty Images

The problem was, despite the high interest around Holmes and her product, she never actually managed to make it work. But she told people that it did.

Elizabeth dropped out of the prestigious Stanford University in order to get her start-up company off the ground in Silicon Valley. A longtime admirer of fellow dropout Steve Jobs, she initially poached key members of her staff from Apple, including designers and engineers.

She even landed Avie Tevanian, Jobs' longtime right hand man, for the board as well. Over time, she allegedly lowered her voice and started wearing all black and turtlenecks in order to emulate Jobs further.

During her time at Stanford, her initial idea for a microfluidic patch that sampled blood and administered antibiotics was dismissed by professor Phyllis Gardner, who argued that antibiotics were simply not potent enough to work in this way.

Engineering professor Channing Robertson, however, was more receptive to the determined teen’s idea, and soon took her on as his protégé. That summer, she created her first patent. Robertson eventually become a director on the board of Theranos, claiming he admired her “vision” even though it was purely theoretical.

Photo credit: Hulu
Photo credit: Hulu

In 2005, British biochemist Ian Gibbons was the first hired scientist on the team, after being recommended for the position by his old friend Robertson.

Traditional healthcare venture capitalists passed on the scheme, but wealthy families invested. One family friend cut her a $1million cheque for the business. By 2004, she had raised $6million. In the years that followed, numerous massive, influential names would back Elizabeth and Theranos – including the DeVos family, the Waltons and Rupert Murdoch.

As her company grew, Elizabeth became known for her micromanaging and secretive business style. Staff wrote on Glassdoors about the company, comparing it to being run by a dictatorship. If anyone started questioning Elizabeth and her “mission”, they were promptly fired or moved. The labs were siloed and banned from speaking to other employees about what exactly it was they were working on.

Despite investing $1.5million himself and being on the board, Avie Tevanian eventually quit. Another designer, Justin Maxwell, sent a collection of management books to Elizabeth alongside his resignation, telling her “lying is a disgusting habit and it flows through the conversations here like our own currency.”

As engineers continued to try and make the product viable, Elizabeth was out in public telling people it was not only working, but being used by the US military. Theranos began haemorrhaging money and pressure mounted.

Photo credit: Hulu
Photo credit: Hulu

Tech entrepreneur Ramesh 'Sunny' Balwani, Elizabeth’s boyfriend, was eventually brought on board to work in the office with her as Chief Operating Officer, despite having no medical or engineering knowledge. He became known for his sharp attitude to the staff. His relationship with Elizabeth was kept hidden from everyone.

He invested $20million of his own money in order to keep Theranos afloat, and Elizabeth continued to find backers for her work.

In 2013, Theranos launched “wellness centres” across the US in Walgreens pharmacies in a megabucks deal. They were essentially blood collection points with the potential to expand into every store – putting them within five miles of every home in the continental US. But the product, including their ‘Edison’ machine, still wasn’t working properly, returning errors and wrong data.

The team was running blood samples through rival machines.

The team would also cherry-pick data sets, getting rid of anomalies that indicated the machine wasn’t working properly.

If anyone spoke out or questioned the validity of the Theranos machines, the company used the excuse of protecting their intellectual-property rights to avoid transparency.

By 2014, Forbes named Holmes the youngest female self-made billionaire (a title now held by Kylie Jenner) and put her on the front cover of their magazine. In other publications, she was billed as the "new Steve Jobs", and she would appear at events as a spokesperson for successful women in the industry.

Photo credit: Hulu
Photo credit: Hulu

How was Theranos brought down?

While to the outside eye it looked like Theranos was thriving, on the inside it was collapsing. Several big names attached to the project quit and the company became known for having a high staff turnover. If staff started asking questions about Theranos and its functioning, they would simply be fired.

They were told to tell no one about where they worked or what they did, with thick non-disclosure agreements meaning they could be sued if any information ever got out.

In 2011, former US Secretary of State George Shultz joined the board of directors, and a few years later, his newly graduated grandson Tyler became part of the scientific team. He immediately noticed the bizarre way Theranos was being run and told his grandfather his concerns.

Shultz Sr initially brushed off the concerns, citing Tyler as a newcomer to the business and simply not understanding what was going on at the company.

Erika Cheung, a lab assistant who actively sought out a position at Theranos after admiring Elizabeth’s work, quickly came to realise there was something wrong as well, and later discovered that Siemens machines were running tests, on top of the consistent errors the Edison machine gave. By this point the Edison was being used by actual patients, who ran the risk of being given wrong data as a result.

In 2015, the pair of them spoke to John Carreyrou, a Wall Street Journal reporter who had begun his own investigation into Theranos’s inner workings after hearing rumours of fraudulent practice.

Theranos began to put pressure on the whistleblowers, with private investigators following them, and continued threats they would be sued if they spoke out. It was during this time George Shultz began to realise there was more going on than he realised. Theranos’s legal team were sent a list of 80 questions by Carreyrou but refused to answer any of them.

Talking to podcast The Dropout, Carreyrou explained he was held in a five-hour meeting where Theranos stonewalled on anything to do with the functioning of Theranos machines, citing trade secrets.

The questions included: “Do you use commercial machines made by third parties for some, if not most of your tests?” and “How many tests do you use proprietary Theranos technology for, and are those tests reliable?”

In 2015, the Wall Street Journal article dropped, and after that things began to collapse quickly. Over the next year, Theranos came under fire by medical authority boards, US Securities and Exchange Commission (SEC), Centers for Medicare and Medicaid Services (CMS), and faced a slew of legal battles.

In 2018, Theranos was officially dissolved. The SEC charged both Elizabeth and Sunny with securities fraud. Elizabeth settled out of court, but Sunny refused and maintained his innocence.

Photo credit: CNBC - Getty Images
Photo credit: CNBC - Getty Images

Where is Elizabeth Holmes now?

Elizabeth Holmes is currently awaiting sentencing after being found guilty in January 2022 for three counts of wire fraud and one count of conspiracy to commit wire fraud.

However, Holmes was only found guilty against the investor fraud claims, rather than against the patients of Theranos. She was found not guilty on the four counts made against her on behalf of patients.

In the US, deliberate intent has to be proven in a court case. The result effectively means that the jury acknowledged she intentionally lied to investors in order to secure money, but believed she was not deliberately defrauding patients of Theranos devices, believing she would one day get them to work.

There were three other investor claims that returned with no verdict, with the judge declaring a mistrial on those counts.

Sentencing is currently scheduled for September 26, 2022, with Holmes currently released on bail until the hearing.

She faces up to 20 years in jail, as well as restitution costs for those that she was found guilty of defrauding.

In 2019, Elizabeth got engaged to hotel heir William Evans, and in July 2021, she gave birth to their son.

Sunny Balwani is being tried separately from Elizabeth, with his court case due to begin in March 2022.

The Dropout airs the first three episodes on March 3, 2022 on Disney+ and Hulu, with new episodes dropping weekly.



You Might Also Like