The walls continue to close in around Theranos and it's founder Elizbaeth Holmes as the first — and probably not the last — of a group of major investors who pumped a cumulative $800 million into the once-promising blood-testing startup filed a lawsuit against it. That suit, brought by San Francisco's Partner Fund Management, is under seal, but the hedge fund has confirmed the legal action against Theranos and the New York Times reviewed a letter sent to Partner Fund investors alleging “a series of lies, material misstatements and omissions" led to its investment in Theranos.
Just last week, the embattled Palo Alto-based company let it be known in a letter to stakeholders that it would be making layoffs of about 340 employees, and turning its attention away from the blood-sampling technology whose shortcomings were exposed by a Wall Street Journal investigation last year to focus on its miniLab platform, a small commercial device that Holmes has some claims about which we'd better not run with. The pivot is also convenient given that it's difficult to run a blood testing startup when you're personally banned from running a blood testing facility by the Centers for Medicare and Medicaid Services, as Holmes is for two years.
Once again, the Wall Street Journal was first to report on Theranos's woes. Partner Fund Management, the Journal observed, made a $96.1 million investment in Theranos. According to a source to the Journal familiar with the suit, Partner Fund Management specifically claims that Theranos engaged in securities fraud, negligent misrepresentation, violations of the Delaware deceptive trade practices act, and more.
According to a Theranos spokesperson, “the suit is without merit and Theranos will fight it vigorously. The company is very appreciative of its strong investor base that understands and continues to support the company’s mission.”
All more fodder, it seems, for Hollywood: Director/screenwriter Adam McKay, who took on the unscrupulousness of Wall Street with The Big Short, plans to turn his eye to a film about Theranos with Jennifer Lawrence attached as founder Elizabeth Holmes. Holmes's net worth fell from $4.5 billion to nothing, nada, zip according to Forbes in June, so any royalties would be much appreciated.