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 Silicon Valley Fraud Trial: The Basics 

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Michael Santos

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The criminal fraud trial of Elizabeth Holmes is underway. Follow all the trial milestones, from jury selection to verdict, on our blog.


On August 31, 2021, after months of delays due to Covid-19 and other reasons, jury selection finally began in the trial of Theranos founder and former Chief Executive Officer Elizabeth Holmes. Theranos, now a defunct company once valued at $9 billion, was a blood-testing biotech startup that Holmes launched in 2003. 

The Theranos trial provides an invaluable opportunity to discuss the criminal justice system through the lens of an actual live trial over the coming months. 

Our Silicon Valley Fraud Trial blog series will cover the trial, starting with the background of the case in Part 1, Holmes’ anticipated defenses to the charges in Part 2. Part 3 explains the jury selection process in federal criminal trials, as well as Holmes’ jury. 

Our blog series will continue to follow all the major milestones in this blockbuster criminal trial as the case continues.


Holmes founded her biotech startup Theranos at age 19, dropping out of Stanford to do so. She officially hired her romantic partner and entrepreneur Sunny Balwani to work at Theranos in 2009. 

The company raised more than $700 million in investor capital and struck high-profile deals with Walgreens and Safeway to offer its blood testing in their stores. In the wake of the arrangements with Walgreens and Safeway, Holmes boasted at a conference in 2014: “We’ve reinvented the traditional laboratory infrastructure; [our technology] eliminates the need for people to have needles stuck in their arm.” Today, Walgreens acknowledges that it did not first validate Theranos’ blood-testing technology before entering into the deals.

By 2015, with the help of courageous and determined whistleblowers, an experienced reporter from the Wall Street Journal, John Carreyrou, published a series of articles exposing the company’s deceptive practices. The accurate and effective blood-testing device that Theranos claimed to have invented did not appear to exist. Instead, the company passed off blood test results conducted on regular, commercially available machines as if they came from their innovative technology.  

Immediately, allegations that the company was a fraud, willfully harmed patients, and bilked investors began to swirl. (Click here for more discussion on the critical role that whistleblowers play in law enforcement investigations: ​​Whistleblowers Play A Critical Role)

Shortly after that, the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) began investigations, eventually charging Holmes and Balwani with massive fraud. 


Elizabeth Holmes and Sunny Balwani stand accused of knowingly misleading investors, doctors, and patients about Theranos’s blood-testing technology. Prosecutors refer to the Theranos case as a “massive fraud scheme,” in which Theranos brazenly lied to doctors, patients, and investors about the company’s ability to perform hundreds of tests for illnesses using just a drop of blood and a Theranos blood-testing device. Prosecutors intend to show how none of it was real. 

According to the DOJ, the indictment charges each defendant with two counts of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349, and ten counts of wire fraud, in violation of 18 U.S.C. § 1343. If convicted, each defendant faces a maximum sentence of twenty (20) years in prison and a fine of $250,000, plus restitution, for each wire fraud count and each conspiracy count. The court would impose any sentence following conviction after considering the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.  

The DOJ maintains that Holmes and Balwani defrauded doctors and patients specifically, 

(1) by making false claims concerning Theranos’s ability to provide accurate, fast, reliable, and cheap blood tests and test results, and 

(2) by omitting information concerning the limits of and problems with Theranos’s technologies.  

The defendants knew Theranos could not consistently produce accurate and reliable blood tests. (Click here for more from the Department of Justice: U.S. v. Elizabeth Holmes, et al.)

Holmes and Balwani have each pleaded not guilty. 


In an unusual ruling, the judge overseeing the case approved separate trials for Holmes and Balwani, due to Holmes’ accusations that Balwani was abusive. 

Holmes’ trial has just begun. Balwani’s trial will begin in January 2022. 


As the trial gets underway with the jury’s selection, many people wonder whether prosecutors offered Holmes (and/or Balwani) a plea deal. After all, over 90 percent of federal criminal cases end in guilty pleas. Of the few that do go to trial, only about 1% win an acquittal. The odds are long.

Neither the media nor the parties have disclosed information about plea negotiations in the Theranos case. On the contrary, the defendants have vehemently denied the government’s allegations that they intentionally defrauded investors or tried to harm patients. 

Now that Holmes’ trial is underway, are plea negotiations off the table? 

Not necessarily. Even now, Holmes could take a plea agreement and cooperate with prosecutors in their case against Balwani. Nothing in the federal rules of criminal procedure would bar such discussions. However, any plea deal is likely to include prison time for Holmes. Holmes and her team may prefer to examine the jury’s composition to evaluate the chances of convincing at least one juror on the panel to hold out. 

Therefore, though theoretically possible, plea negotiations for Holmes are hard to envision. Holmes has vowed to fight these charges, and her team has suggested she might even take the stand to testify on her own behalf.  

Prosecutors and Balwani could also engage in plea negotiations for his cooperation against Holmes. 


In court filings, prosecutors listed close to 280 people as prospective trial witnesses, including some of Holmes’ business associates and Theranos investors. Also, at least 11 patients will testify about the company’s inaccurate test results. Due to the number of anticipated witnesses from the prosecution, the trial may last about four months.  

The number of defense witnesses is undisclosed as of yet. Of course, a criminal defendant does not have to present any evidence in defense at trial. Prosecutors bear the burden to prove their case to a unanimous jury beyond a reasonable doubt. Still, in all likelihood, even if Holmes herself does not take the stand, her lawyers will present some evidence in opposition to the government’s case.


The criminal fraud trial of Elizabeth Holmes is finally underway. The team at Prison Professors follows all the trial milestones, from jury selection to verdict, on our blog and social media. Ultimately, the central question at trial is whether Elizabeth Holmes raised hundreds of millions of dollars in investor capital while knowing that her medical device did not work or would never work. Or was she an unsuspecting victim manipulated by Sunny Balwani? Follow the details of jury selection and Holmes’ anticipated defenses to the government’s charges in upcoming articles.

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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