Theranos founder Elizabeth Holmes loses appeal to remain free, is hit with huge restitution bill

Theranos CEO Elizabeth Holmes looks set to go to jail after an appeals court on Tuesday rejected her bid to remain free as she tries to overturn her conviction in the blood test fraud that brought her fame and fortune.

In another ruling issued late Tuesday, US District Judge Edward Davila ordered Holmes to pay $452 million US in restitution to the victims of his crimes. Holmes was held responsible for the amount with her ex-lover and Theranos top lieutenant, Ramesh (Sunny) Balwani, who has been in prison after being convicted of more crimes in a separate trial.

The Ninth Circuit Court of Appeals’ ruling on Holmes’ attempt to avoid prison comes nearly three weeks after he made a last-minute legal maneuver to delay the start of his 11-year sentence. He was previously ordered to surrender to authorities on April 27 by Davila, who sentenced him in November.

Davila will now set a new date for Holmes, 39, to leave his current home in the San Diego area and report to prison.

The sentence will separate Holmes from her current partner, William Evans, their one-year-old son William, and their three-month-old daughter Invicta. Holmes’ tenure with Invicta began after a jury convicted her of four counts of fraud and conspiracy in January 2022.

Davila recommended that Holmes serve her sentence at a women’s prison in Bryan, Texas. It has not been revealed whether the federal Bureau of Prisons accepted Davila’s recommendation or assigned Holmes to another facility.

The ex-partner began serving his sentence in April

Balwani, tried after Holmes, began a nearly 13-year prison sentence in April after being convicted on 12 counts of fraud and conspiracy last July. The 57-year-old was jailed in a Southern California prison last month after losing a similar bid to remain free on bail while seeking sentencing.

The verdict against Holmes came after 46 days of trial testimony and other evidence that shined a spotlight on the culture of greed and hubris that has infected Silicon Valley as technology has become a more pervasive influence on society and the economy over the past 20 years.

The most surprising moment of the trial came when Holmes took the witness stand to testify in his own defense. In addition to telling the story of how he founded Theranos as a teenager after dropping out of Stanford University in 2003, Holmes accused Balwani of abusing him emotionally and sexually.

He also stressed that he never believed Theranos would revolutionize health care with technology it promised would scan for hundreds of diseases and other potential problems with just a few drops of blood.

Rupert Murdoch owes $125M, court rules

In pursuing his ambitions, Holmes raised nearly $1 billion from an impressive list of investors that included Oracle founder Larry Ellison and media mogul Rupert Murdoch. Those sophisticated investors all lost money after a Wall Street Journal investigation and regulatory review revealed dangerous flaws in Theranos’ technology.

In the restitution ruling, Davila determined that Holmes and Balwani must pay Murdoch $125 million — the most among the investors listed in his order. At her trial, the court heard that Holmes personally lobbied Murdoch, unsuccessfully, to spike the “Bad Blood” series that eventually ran in the Journal, which he owns.

Restitution also requires the co-conspirators in the Theranos scam to pay $40 million to Walgreens, which became an investor in the startup after it agreed to provide some of the defective blood tests to pharmacies in 2013. Another $14.5 million is owed to Safeway, which has also agreed to be a partner. Theranos business before the retreat.

In separate hearings, attorneys for Holmes and Balwani tried to persuade Davila that their respective clients should pay little, if anything. Prosecutors have pushed for a restitution penalty in the $800 million range.

Balwani and Holmes — whose stake in Theranos was once worth $4.5 billion — shared that they were nearly broke after millions of dollars in legal bills while pleading not guilty.

Holmes’ attorneys have fought her conviction because of errors and misconduct that occurred during the trial. He also argued that the jury’s bias and abuse were so egregious that he should be allowed out of prison while his appeal is open — a request that has now been rejected by Davila and the Ninth Circuit Court of Appeals.