The Theranos investors who were duped out of millions

The conviction of Theranos founder Elizabeth Holmes on Monday has brought some measure of justice to those she defrauded – but the rich and often famous investors she courted have long lost any hope of getting their money back.

Her wealthiest and most high profile victims include Rupert Murdoch, who lost $125m and the DeVos family – including Trump-era Education Secretary Betsy DeVos, who invested $100m.

Other notable figures who lost large amounts include former Secretary of State Henry Kissinger, who invested $3 million,  ex-Defense Secretary Jim Mattis, who lost $85 million, and New England Patriots owner Robert Kraft, who invested $1 million.

Also duped was the Walton family, who own Walmart. They sunk a cool $150 million into Theranos.

Holmes, 37, was found guilty of four counts of wire fraud by a jury in San Jose, at the end of a five-month trial.

The court heard how she dreamt of a blood testing biotech firm, and promised astonishing results – yet failed to deliver. She was a master of marketing, the court heard, and managed to pull the wool over the eyes of some of America’s biggest names in business, tech, politics and finance.

One of the earliest investors was media mogul Rupert Murdoch, who led a $5.8 million Series A fundraising round in February 2005, when the company was called Real-Time Cures.

Murdoch eventually increased his stake to $125 million, having phoned former Cleveland Clinic CEO Toby Cosgrove to ask about Holmes before he invested.

Cosgrove and his clinic were also reportedly weighing an investment in Theranos that never materialized.

According to Carreyrou, Murdoch viewed Theranos’ other investors – including Cox Enterprises, the Atlanta-based conglomerate which invested $100 million – as a signal of legitimacy for the technology and its projected revenues.

Murdoch in turn attracted other investors, and was pivotal to the company’s success.

Holmes assiduously courted Murdoch: in one anecdote from Wall Street Journal reporter John Carreyrou’s book, he recounts a meeting at Murdoch’s California ranch, where the media tycoon was ‘surprised’ by her bodyguards, while he had only one bodyguard himself.

‘When he asked her why she needed it, she replied that her board insisted on it,’ Carreyrou writes.

Carreyrou broke the 2015 story about Theranos’s shaky foundations – writing in the Murdoch-owned Wall Street Journal.

When Holmes found out about the story, she asked Murdoch to stop it being published.

‘You personally went to the owner of The Wall Street Journal to try to quash the story,’ said Robert Leach, an assistant U.S. attorney, at trial during questioning of Holmes.

‘I did,’ Holmes replied.

Carreyrou’s report caused the downfall of Theranos, and the loss of Murdoch’s money.

In March 2017, the company bought back Murdoch’s $125 million shares for just $1.

That price tag could potentially allow Murdoch, worth an estimated $22.4 billion, to write off his investment in Theranos as a loss – a move that could let the media mogul save millions on taxes owed on other investments, the Wall Street Journal speculated.

The 90-year-old Murdoch was not the only veteran public figure to lose out.

Henry Kissinger, the 98-year-old former Secretary of State, invested $3 million in Theranos and his lawyer, Daniel Mosley, invested a further $6 million.

‘Dr. Kissinger explained to me he was on the board of Theranos and that it was a very interesting company,’ Mosely testified in week nine of the trial, in November.

Kissinger himself is worth an estimated $50 million.

During his conversations with Holmes, Mosley said he began evaluating a potential investment for himself.

‘I was still looking at it with an intent to tell Dr. Kissinger what I thought about it,’ Mosley said adding that he found it to be ‘personally interesting.’

Mosley, a lawyer and power broker among wealthy families, asked Holmes for audited financial statements of Theranos in 2014, but when she failed to supply any he invested anyway.

Mosley then recommended that other clients of his invest in the company.

They included the Walton family, founders of Walmart, and headed by Alice Walton – the richest woman in the world, worth $70 billion.

The Walton family invested about $150 million in 2014 through two separate entities, according to the investor list.

Another of Mosley’s clients, the DeVos family – including Betsy DeVos, who served as Donald Trump’s education secretary – invested about $100 million.

‘It’s obvious that they are highly disappointed in them as a company and as an investment,’ said Greg McNeilly, the chief operating officer of The Windquest Group, the holding company of DeVos and her husband.

McNeilly said the $100 million was a joint investment across multiple generations and branches of her family, and described the share held by DeVos and her husband as ‘minor.’

Betsy DeVos, her husband and their four adult children are worth roughly $2 billion.

Tech entrepreneur Larry Ellison, founder of Oracle, was introduced to Holmes by Don Lucas, one of the company’s earliest backers and the founder of Lucas Venture Group. It is unclear how much he invested in the firm, although Holmes is said to have told other investors that he was considering putting up $20 million.

Holmes testified that she met Lucas when the company was raising its Series B financing round.

‘Don Lucas was one of the early VCs in Silicon Valley,’ Holmes told the court.

‘I knew him as someone who focused on building great companies in the long term,’ she said, naming Oracle, National Semiconductor and Adobe as some of his investments.

‘I was introduced to him by someone who had gone to college with my dad,’ she said. ‘He had a lot of questions. He began a very comprehensive diligence process.’

Ellison ended up joining the Series C investment round, along with Lucas and his nephew, Chris Lucas, who was one of the investors called by the prosecution.

Another Trump figure to invest in the company was James Mattis, the four star general who became defense secretary.

Mattis testified against Holmes on the sixth day of the trial, recalling how impressed he was with Holmes when he first met her in 2011 while still serving a four-star general in the Marine Corps, where he oversaw U.S. wars in Iraq and Afghanistan.

A few months after retiring from the military in 2013, Mattis joined the Theranos board and also invested in the startup, adding $85,000 of his own savings so he would have some ‘skin in the game.’

Theranos paid him $150,000 annually as a board member. He resigned in 2016, becoming disillusioned with Holmes, and became defense secretary the following year.

He told the court: ‘There became a point where I didn’t know what to believe about Theranos any more.’

Source: Daily Mail

  1. May 17, 2022
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