Ramesh “Sunny” Balwani, the former chief operating officer of failed blood testing startup Theranos, was sentenced on Wednesday to nearly 13 years in prison for fraud. It marks the end of the stunning downfall of a high-flying Silicon Valley company that resulted in the rare convictions of two tech executives.
“There’s an unfortunate saying in Silicon Valley: ‘Do it until you make it.’ Elizabeth Holmes and Sunny Balwani took this idea way beyond what the law allows and in doing so put large amounts of investors’ dollars at risk,” said Stephanie Hinds, U.S. Attorney for the Northern District of California, “Significantly, today the court also made it clear that Sunny Balwani’s decision to mislead doctors and patients also put patients’ health at risk. Ms. Holmes and Mr. Balwani will now be punished.” rightly for their unlawful conduct.
Hinds added, “Let this story be a cautionary tale for entrepreneurs in this district: Those who use lies to cover up the shortcomings of their promised accomplishments risk substantial jail time.
Jeffrey Coopersmith, Balwani’s attorney, said in a statement: “We are disappointed with the outcome. We respectfully disagree and plan to appeal.
The sentencing comes weeks after Elizabeth Holmes, the founder of Theranos and Balwani’s ex-girlfriend, was sentenced to more than 11 years in prison.
Theranos has raised $945 million from a cohort of top investors with its promise to test a wide range of conditions using just a few drops of blood. At its peak, the company was valued at $9 billion.
The company began to crumble after a Wall Street Journal investigation in 2015 reported that Theranos only performed about a dozen of the hundreds of tests it offered using its proprietary technology, and with precision. questionable. It also emerged that Theranos relied on third-party devices from traditional blood testing companies rather than its own technology. Theranos was finally dissolved in September 2018.
Holmes and Balwani were first charged four years ago with the same 12 criminal charges relating to defrauding investors and patients of Theranos’ capabilities and business dealings in order to obtain money. Their lawsuits broke down after Holmes indicated she intended to accuse Balwani of sexually, emotionally and psychologically abusing her throughout their decade-long relationship, which coincided with his time at the head of the company. (Balwani’s lawyers have denied his allegations.)
In July, Balwani was found guilty of the 12 counts he faced, including ten counts of federal wire fraud and two counts of conspiracy to commit wire fraud. Holmes was found guilty in January of four counts related to defrauding investors and found not guilty of three additional counts relating to defrauding patients and one charge of conspiracy to defraud patients.
Like Holmes, Balwani faces up to 20 years in prison as well as a $250,000 fine plus restitution on each count.
In a recent court filing, prosecutors noted that Balwani was convicted of not only defrauding investors, but also defrauding patients. They recommended a 15-year prison sentence, along with an order forcing Balwani to pay $804 million in restitution. In a separate filing, Balwani’s lawyers requested a probation sentence, noting that he had no criminal history.
Prior to joining Theranos, Balwani had a career as a software manager. Balwani, nearly 20 years older than Holmes, first met her in 2002 before she left Stanford. He served as an informal adviser to Holmes in the early days of Theranos and the two became lovers. Balwani secured a “multi-million dollar loan” to the startup in 2009, according to court documents, and assumed a formal role as president and chief operating officer. Holmes and Balwani have largely hidden their romantic relationship while working together.
During his trial, Holmes claimed Balwani tried to control nearly every aspect of his life, including disciplining his diet, voice and image, and isolating him from others. She testified that while he wasn’t in control of his interactions with investors, business partners and others, “he impacted everything that I was, and I don’t quite understand that.”
Holmes is expected to appeal his conviction but was ordered into custody on April 27, 2023.