Theranos has been sued for fraud by one of its largest investors, charging that the company engaged in a "series of lies" to keep its investments, reported the Wall Street Journal. It's the latest jarring bump in the blood-testing company's downhill slide.
San Francisco hedge fund Partner Fund Management filed the lawsuit in Delaware Court of Chancery, according to a letter sent to its investors, said The New York Times. The suit is currently under seal, but was confirmed by the hedge fund.
"Through a series of lies, material misstatements, and omissions, the defendants engaged in securities fraud and other violations by fraudulently inducing (Partner Fund Management) to invest and maintain its investment in the company," said the fund's letter, per WSJ.
Theranos, founded by Elizabeth Holmes in 2003 at 19, had claimed it would change the world of blood diagnostic testing with technology it developed that could test for cancer and other ailments with only a few drops of bloods, and do it cheaper and faster than current methods, summed up Fortune.
By 2014, Theranos had 500 employees and investors had put $9 billion into the company, and Holmes landed on the cover of Forbes as the youngest self-made female billionaire in the world.
But Partner Fund Management is now charging, per WSJ, that Theranos and Holmes deceived the fund by telling it that the company developed "proprietary technologies that worked" and was close to getting regulatory approvals.
The NYT said the Partner Fund in its letter told investors it could show "myriad deceptions, falsehoods and fraudulent conduct by Theranos, Holmes and (Sunny) Balwani (former president) in connection with PFM’s investment."
Theranos told the NYT it would fight the lawsuit.
"(Partner Fund Management) is engaging in revisionist history, making claims that are not rooted in facts," Theranos stated. "The company remains committed to its mission and is appreciative of its strong investor base that understands and continues to support those efforts."
A damaging 2015 Wall Street Journal investigation that cast doubts on Theranos's tests, and a January letter from the Centers for Medicare and Medicaid Services claiming its blood tests "pose immediate jeopardy to patient health and safety," started the company on the downward slide, said Forbes.
This month, Theranos is laying off 340 people — 43 percent of its staff — and has ended its laboratory business, said Forbes.
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