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 $100M Investor Testifies (Holmes’ Trial Update#17) 

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Michael Santos

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Theranos investors testified at Elizabeth Holmes’ trial that they lost hundreds of millions.


Many investors lost hundreds of millions of dollars investing in Theranos, and the jury is hearing from some of them directly at Elizabeth Holmes’ criminal fraud trial in California. 

Those already inclined to vilify Elizabeth Holmes will add the investors’ stories to the mounting evidence that Holmes had a master plan to defraud. 

Their view is that Holmes specifically targeted ultra-wealthy families as early backers of Theranos so that she could keep Theranos a private company and avoid the potential scrutiny of an IPO. 

On the other hand, Holmes shied away from venture capital firms who would pressure her to take Theranos public and bring increased scrutiny.

Other people are at least just as likely to fault Theranos’ large greedy investors, who failed to take even the most basic due diligence steps. The defense would love nothing more than jurors taking the view that these large investors are only victims of their own greed and carelessness.

So the battle lines are drawn on Theranos investors: are they victims of Holmes’ carefully orchestrated fraud or careless sophisticated investors who had access to all the information they would need to make their investment decisions.


Investors are a crucial group of alleged victims in the 12-count indictment against Elizabeth Holmes. Holmes solicited hundreds of millions of dollars from investors by mischaracterizing what Theranos’ blood-testing technology could accomplish.

Prosecutors call them to testify because they want the jury to hear how Holmes coldly deceived them and how much money they lost. 

On the other hand, the defense wants to highlight the investors’ lack of due diligence and how fortunate most investors felt to be allowed to invest in Theranos. The fact that the business failed does not make Theranos a fraud.

The defense argument begs the question:

Why didn’t Theranos’ large, sophisticated investors ask more questions, investigate the technology, or conduct more due diligence on the claims Theranos made? 

Do they even deserve the jury’s sympathy?

What we learned from Lisa Peterson, a Devos family investment representative, is this: Even investors with $100 million to invest in Theranos were afraid of getting blackballed or uninvited from investing in the hottest healthcare company at the time.

Since Theranos was a private company, Holmes had complete discretion regarding whose investments she would accept. 

The Devos’ Family Office Invests $100 Million

Peterson oversees private equity investments for one of Betsy DeVos’ family investment offices. Peterson told the jury about their $100 million investment in Theranos in 2014. 

What steps did Peterson take to recommend an investment in Theranos?

Peterson said she personally talked with Holmes and reviewed two “very large” binders of information sent by Theranos to help prepare her colleagues for an in-person meeting with Holmes. 

Then, she attended the meeting in Palo Alto, where Theranos presented a live demonstration of its technology and discussed a potential investment. 

Peterson’s overall “impression” from that meeting was positive, and she believed that Theranos “was going to be a game-changer for healthcare.” 

Based on those “impressions,” Peterson supported an investment of $100 million in Theranos. 

Going into the meeting, Peterson was considering $50 million, but in a parking lot discussion after the meeting, Peterson and the Devos family team doubled their investment to $100 million.

And the live demonstration they witnessed at this meeting? That was one of those “VIP demos” that insider Daniel Edlin testified earlier Theranos often staged. 

To recap on those demos, Holmes used them to impress investors, the media, politicians, and board members. The live demos were sleek and smooth, and Theranos rigged them to make it appear as if the blood-testing devices worked. 

But we know now that most of these “demos” were fake. The machines made noise when a technician inserted a blood sample cartridge, but nothing was actually happening. Out of the VIP’s presence, behind the scenes, technicians tested the blood samples either manually or on third-party lab equipment. They then generated a lab report that presented the results as if they came from the Theranos proprietary technology. 

Additional Due Diligence?

How could anyone invest $100 million into anything without conducting a comprehensive, thorough check? 

Apparently, in Silicon Valley, it happens often.

One reason is that some investors want badly to find the next unicorn company in which to invest.  Some would rather take a chance on an unproven biotech company than miss out on the next Apple.

As far as the failure to do more thorough due diligence, Peterson was candid when she said that they did not want to rattle Elizabeth Holmes by asking too many questions. For this reason, they did not follow up with some basic steps like talking to Walgreens, which was already working closely with Theranos. 

Peterson testified that they were part of an “invite-only” group of investors. She did not want to “upset Elizabeth” by asking too many questions and risk being told they could not participate.

Peterson said she got the sense that Holmes was “hand-picking” a select few firms to invest in Theranos. Holmes was looking for firms more interested in partnering with Theranos for the long term rather than monetizing their investment quickly.

“She was inviting us to participate in this opportunity,” said Peterson.

“We were relying on what we were told,” Peterson said.

“If we did too much, we wouldn’t be invited back, that was the issue,” she later added.

But even without talking to Walgreens executives directly, Peterson could have visited Walgreens locations to see a Theranos clinic in action. When asked why she never visited a Theranos blood-testing center in a Walgreens pharmacy, Peterson simply noted that visiting Walgreens stores in Arizona was not part of their decision-making process.

Nor did Peterson and her team hire any regulatory lawyers to advise them on the Theranos investment. They “were told” that Theranos was not subject to Food and Drug Administration approval, and they took it at face value.

Again, Peterson said they did not hire other experts to look into the technology because “They were telling us that it worked.”

In short, Peterson did not talk to Walgreens, visit Theranos’ centers, hire regulatory lawyers, or hire biotech experts, all because Elizabeth Holmes might get upset and refuse their $100 million.

The Jury Hears Holmes Herself

Prosecutors asked Peterson a few questions after playing clips from two television interviews Holmes gave in 2015. These clips come from the aftermath of The Wall Street Journal’s bombshell reports that Theranos’ proprietary devices were unreliable and did not work as promised. 

As one would expect, the WSJ reports rattled Theranos’ investors like Peterson and the Devos family.

During an appearance on CNBC’s “Mad Money,” Holmes defended her company.  That is when Holmes famously said:

“This is what happens when you work to change things. First, they think you’re crazy, then they fight you, and then all of a sudden you change the world.”

The second television clip was from Holmes’ appearance on “The Today Show” in April 2016. 

By then, the Theranos scandal was in full bloom. Again, Holmes defended her company’s technology and said she felt “devastated that we did not catch and fix these issues faster.” Holmes also took responsibility, adding: 

“I’m the founder and CEO of this company. Anything that happens in this company is my responsibility at the end of the day.”

In a 2016 deposition with the Securities and Exchange Commission, Holmes also took some responsibility, saying:

“I mean, I’m the CEO. I’m the ultimate decision-maker for the company,” Holmes told regulators under oath. 

Playing the clips gave prosecutors a rare chance to put Holmes on the witness stand. The jury heard Holmes in action, defending what many people think is indefensible. 

Speculation continues about whether Holmes will testify on her own behalf at this trial.

After the WSJ scandal broke, investors closely followed Holmes’ public statements. After the “Today Show” interview, Peterson and other DeVos representatives met with Holmes to find out what was going on. 

In typical fashion, Holmes “very much downplayed what had been happening in the press” and told Peterson that the issues that Theranos was facing were “not significant.”

Peterson felt blindsided by the WSJ revelations and told the jury she believed Theranos used only its own proprietary devices to run 200-300 different blood tests, which was never the case. She told the jury that Holmes never said Theranos did most of its testing on third-party machines. She emphasized that her decision-making would have been different had she known. 

Revenue Projections

Peterson also said that in investing, the Devos family relied on revenue projections they received from Theranos. These revenue projections claimed Theranos would have a $3 million loss in 2014 on $140 million in revenue and a $230 million profit in 2015 on $990 million in revenue. Those numbers were super optimistic.

Other Lies

Peterson said that knowing Theranos devices were used on military helicopters and in clinical trials with significant pharmaceutical companies influenced her decision-making. Of course, both of those were not true.

When they asked Holmes what risks lay ahead for Theranos, Holmes said executing on the Walgreens rollout would be tricky. Still, she never mentioned that the technology itself could be a problem, Peterson said.


Holmes repeatedly lied to investors about Theranos’ technology, business partners, revenue projections, and many other things.

Still, it is remarkable to see how sophisticated investors like the Devos family, Rupert Murdoch, and others handed over $100 million to Elizabeth Holmes without a thorough investigation. 

Lack of due diligence is not a legal defense to criminal fraud charges. If the jury focuses on Holmes’ conduct and misrepresentations, they will have enough with which to convict her of fraud. 

The defense keeps punching back on cross-examination. Is it landing any punches with jurors by highlighting these large investors’ carelessness, fear of missing out behavior, and utter lack of due diligence? That’s anyone’s guess at this point. 

Follow our blog at Prison Professors for regular updates about the Elizabeth Holmes trial.

At Prison Professors, an Earning Freedom company, our team regularly publishes articles and other materials relating to the criminal justice system.

Prison Professors, an Earning Freedom company, works alongside (not in place of) civil and criminal defense counsel to help clients proactively navigate through investigations and prosecutions. Our team also helps clients prepare mitigation and compliance strategies.

If you have any questions or are uncertain about any of the issues discussed in this post, schedule a call with our risk mitigation team to receive additional guidance.

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