The Department of Justice on Friday charged Theranos founder Elizabeth Holmes and former Theranos president Sunny Balwani with nine counts of wire fraud and two counts of conspiracy to commit wire fraud.
For those following the Theranos saga, Holmes’ name was synonymous with the blood testing startup. Balwani, who had served as the company’s president and chief operating officer, stayed behind the scenes with a nearly invisible digital footprint.
Now, he’s speaking out through his lawyer.
Balwani’s lawyer, Jeffrey Coopersmith, said in a statement Friday that Balwani had committed no crimes. “Mr. Balwani looks forward to trial because he did not defraud anyone, and it will be an honor to defend him vigorously,” Coopersmith said.
Balwani has also been charged with “massive fraud” by the Securities and Exchange Commission, a case Theranos and Holmes settled. Coopersmith is representing Balwani in both cases.
Balwani’s legal argument
Coopersmith said in a interview with Business Insider that the case brought by the Department of Justice is an “odd case.”
Balwani left Theranos in May 2016 after seven years at the company, but during his tenure, he received $1 as his annual salary and purchased $4.5 million of shares in the private company, so that the funds could be used to build the business, Coopersmith said in a release.
“I don’t have any recollection where a government charged someone where that person didn’t get any financial benefit,” Coopersmith told Business Insider.
By the end of July, Theranos will fall below the $3 million liquidity line it needs to maintain and will default on its agreement with investment firm Fortress if it doesn’t receive approval for its Zika test by then. Should that happen, Fortress can take control of Theranos’ assets.
Coopersmith also said the government was under intense scrutiny for not prosecuting cases that arose from the Great Recession, and this is a possible reason for why the agencies decided to go after Theranos.
The DOJ charges last week stem from allegations that Holmes and Balwani had engaged in a scheme to defraud investors and a separate scheme to defraud doctors and patients. Coopersmith said investors knew what they were getting themselves into by investing in a startup. Balwani, for his part, did his best to communicate with them, Coopersmith said.
“He was as honest with them as he could have possibly been short of revealing trade secrets,” Coopersmith said.
On the side of doctors and patients, Coopersmith argued that Balwani had done his part to hire scientists that were meant to develop blood-testing technology that could give accurate information. Balwani’s family also used Theranos lab tests.
“He completely believed in the company,” Coopersmith said. “He thought it could really change the course of healthcare.”
The DOJ alleges that Holmes and Balwani developed technology that they claimed could run a full range of blood tests using a small amount of blood more accurately than traditional blood-testing methods. It also alleges that Holmes and Balwani knew that their claims were false and that their analyzer technology had problems with accuracy and couldn’t run as many tests as it claimed to run.
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