Theranos hit with new lawsuit, allegations of fraud
- Embattled blood-testing company Theranos, Inc. faces a new legal challenge after two investors, including the co-founder of the investment firm Roberston Stephens, allege Theranos misrepresented its proprietary technology in a lawsuit filed in federal court Monday.
- In the suit, Roberston Stephens co-founder Robert Colman and another investor accuse Theranos CEO Elizabeth Holmes and former president Ramesh Balwani of knowingly deceiving the public and potential investors about the accuracy of Theranos' finger-prick blood-testing technology.
- Filed by Seattle-based law firm Hagens Berman in the U.S. District Court for the Northern District of California, the lawsuit seeks class-action status. Theranos has already been hit with other investor suits, along with one from former partner Walgreens.
As Theranos continues to flounder in the wake of federal sanctions, its legal troubles are beginning to pile up. The suit filed by Hagens Berman is the first to seek class-action status, which could potentially draw in others who had invested in the company when it was soaring through the ranks of Silicon Valley unicorns.
Colman invested in Theranos through the California-based Lucas Venture Group in 2013, while the other plaintiff bought shares at $19 each in August 2015, just before reporting by The Wall Street Journal began to peel back the highly polished marketing surrounding Theranos' technology.
The second plaintiff, named Hilary Taubman-Dye, attempted to cancel her share purchase through SharePost, a broker for private companies, after the first report from The Journal.
The suit alleges Theranos issued false and misleading press statements about its technology. Colman and Taubman-Dye also accuse the company of luring in investors based on contracts with partners that were "preliminary, immaterial or non-existent".
Theranos has defended itself fiercely from previous legal challenges, even after the Centers for Medicare and Medicaid Services issued a two-year ban to founder Elizabeth Holmes and forced the closure of the firm's Newark lab. Theranos has since announced the company would close its clinical lab business to focus on a new technology known as the miniLab.
Theranos claims another suit brought by a San Francisco hedge fund is "without merit", attacking that plaintiff for "engaging in revisionist history."
It's not just investors. Walgreens previously had a partnership with Theranos placing "Wellness Centers" in company stores across Arizona and California. This was initially put on hold, and then shut down as accusations of deceit mounted. Walgreens has now brought a $140 million breach-of-contract suit against Theranos.
Theranos also faces federal investigations into whether the company misled investors. By pivoting away from the clinical lab business, Holmes appears to be attempting to reinvent the company on the fly. But its legal troubles might hinder any such transformation.
- Hagens Berman Statement
- Hagens Berman Complaint
- The Wall Street Journal Theranos sued for alleged fraud by Roberston Stephens co-founder Colman
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