Theranos: Elizabeth Holmes co-defendant Sunny Balwani found guilty of all 12 counts

A Silicon Valley jury closed another chapter on Thursday in the decades-long story of the once-promising biotech startup, Theranos, convicting its former president and chief operating officer, Ramesh “Sunny” Balwani, of criminal fraud.

Balwani, 57, faced a dozen wire fraud and conspiracy charges tied to his roles as an executive in the company and as the former romantic partner of its fallen founder, Elizabeth Holmes. Following a 3-month trial and deliberations over five days, a jury of returned guilty verdicts on all 12 counts — 7 counts of wire fraud for defrauding Theranos investors, 2 counts of wire fraud for defrauding paying patients, 2 counts for conspiring to defraud investors and patients, and one count for wire fraud related to Theranos advertisements to patients in Arizona.

Balwani’s fate unfolded in the same San Jose, California courtroom where a jury convicted Holmes on four fraud counts in January. Holmes, now 38, founded the now Silicon Valley startup in 2003 at just 19 years old, with a vision to overhaul diagnostic health care.

Balwani joined the blood-testing venture about six years later. For nearly a decade, he and Holmes sold investors on the idea of developing an analyzer, the size of a desktop printer, that purportedly could run a suite of common tests on as little as a drop or two of blood taken from a patient's finger.

Prosecutors alleged that the pair later used the company to defraud patients who paid for unreliable Theranos tests. Following their joint indictment in 2018, their trials were severed when Holmes raised allegations of abuse against her former romantic partner.

"Balwani and his legal team are sure to appeal today’s verdict, especially on the counts related to defrauding patients where prosecution’s evidence was more limited and less direct, with the vast majority of the witness testimony and evidence focusing on his interactions with investors," Jen Kennedy Park, a partner at Cleary Gottlieb Steen & Hamilton, told Yahoo Finance.

Park later added that a database containing Theranos patient test information, which the defendants handed over to prosecutors, but prosecutors argued was a useless version of more revealing information decommissioned by Theranos before government attorneys were able to access it, may have played a role in the jury’s verdict.

"This verdict also signals the jurors did not buy Balwani’s highly speculative argument that the database Theranos lost in 2018 would have proven his innocence. Judge Davila seemingly agreed on this point when he denied Balwani’s request for a jury instruction mandating the jurors to assume that the database contained information adverse to the government."

Balwani, who made millions as an executive during the dot com boom, started dating Holmes soon after she dropped out of Stanford University at the age of 19. Holmes testified in her own defense, describing Balwani, 19 years her senior, as a physically and mentally abusive romantic partner whose controlling demands behind the scenes impacted her decisions.

Balwani’s counsel framed the former COO’s role at Theranos as distinct from Holmes.’ In opening arguments, his lawyers told the jury Balwani was a subordinate who joined five years after Holmes established the company. Prosecutors countered that characterization describing the defendant as Holmes' partner in crime.

Theranos raised nearly $1 billion from investors before collapsing in the wake of a bombshell 2015 Wall Street Journal report revealing it was not, in fact, conducting the array of blood tests from a finger prick of blood, as Holmes promoted.

Judge Edward Davila, who also presided over Holmes’ trial, scheduled Balwani’s sentencing for November. Until then, Balwani is free on $750,000 bail. Holmes’ sentencing is scheduled to take place in September.

Each of Balwani’s wire fraud convictions carry a maximum penalty of 20 years in prison and up to $250,000 in fines. His conspiracy convictions each carry a maximum penalty of 5 years in prison.

This story was updated to include Balwani's bail agreement and sentencing scheduled to take place in November and to clarify the government's position that during discovery, Theranos provided an incomplete copy of its blood-testing database.

Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.

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