Less than three months later, the walls began closing in again: on
March 14, 2018, the Securities and Exchange Commission charged
Theranos, Holmes, and Balwani with conducting “an elaborate, years-
long fraud.” To resolve the agency’s civil charges, Holmes was forced
to relinquish her voting control over the company, give back a big
chunk of her stock, and pay a $500,000 penalty. She also agreed to be
barred from being an officer or director in a public company for ten
years. Unable to reach a settlement with Balwani, the SEC sued him in
federal court in California. In the meantime, the criminal investigation
continued to gather steam. As of this writing, criminal indictments of
both Holmes and Balwani on charges of lying to investors and federal
officials seem a distinct possibility.
—
THE TERM “VAPORWARE” was coined in the early 1980s to describe new
computer software or hardware that was announced with great fanfare
only to take years to materialize, if it did at all. It was a reflection of the
computer industry’s tendency to play it fast and loose when it came to
marketing. Microsoft, Apple, and Oracle were all accused of engaging
in the practice at one point or another. Such overpromising became a
defining feature of Silicon Valley. The harm done to consumers was
minor, measured in frustration and deflated expectations.
By positioning Theranos as a tech company in the heart of the
Valley, Holmes channeled this fake-it-until-you-make-it culture, and
she went to extreme lengths to hide the fakery. Many companies in
Silicon Valley make their employees sign nondisclosure agreements,
but at Theranos the obsession with secrecy reached a whole different
level. Employees were prohibited from putting “Theranos” on their
LinkedIn profiles. Instead, they were told to write that they worked for
a “private biotechnology company.” Some former employees received
cease-and-desist letters from Theranos lawyers for posting
descriptions of their jobs at the company that were deemed too
detailed. Balwani routinely monitored employees’ emails and internet
browser history. He also prohibited the use of Google Chrome on the