The defendant, wearing a gray suit, sat quietly at a table surrounded by lawyers, her expression hidden behind a blue medical mask. Occasionally, she looked around. Her boyfriend and family members sat, also masked, in the packed gallery of Courtroom 4.
A low roaring undercurrent of clacking laptop keyboards began as Robert Leach, an assistant U.S. attorney, declared that the defendant had lied and cheated to get money.
“That’s a crime on Main Street, and it’s a crime in Silicon Valley,” he said.
So began the trial Wednesday of Elizabeth Holmes, who dropped out of Stanford University to create the blood testing startup Theranos at age 19, built it to a $9 billion valuation and herself into the world’s youngest self-made female billionaire — only to flame out in disgrace after Theranos’ technology was revealed to have problems.
In 2018, Holmes and Ramesh Balwani, her onetime business and romantic partner, were indicted with 12 counts of wire fraud and conspiracy to commit wire fraud. According to federal prosecutors, Holmes and Balwani misrepresented the capabilities of Theranos’ technology and the company’s business performance to investors. Both have pleaded not guilty.
Holmes’ trial, in federal court in San Jose began just a month after she gave birth to a son but more than three years after Theranos was dissolved and six years after The Wall Street Journal first exposed problems with the startup’s blood tests. It was expected to last 13 weeks and potentially feature as witnesses high-profile ex-board members and investors such as former Secretary of State Henry Kissinger and media mogul Rupert Murdoch.
If convicted, Holmes, 37, faces up to 20 years in prison. Balwani’s trial is slated to start in January.
Part media spectacle, part modern business parable, the case was the culmination of a decade of Silicon Valley excess, where a seemingly endless fount of capital for money-losing startups created immense wealth for their founders and investors and led to an environment where some were willing to look the other way when companies stretched the truth.
During its fast rise, Theranos was celebrated as a paragon of Silicon Valley’s disruptive business magic — the precise kind of magic that gave rise to Apple, Facebook, Google and Tesla, four of the most valuable companies in the world. But since Theranos’ dramatic collapse, the company has become a symbol of the dark side of tech culture’s “fake it till you make it” hustle. The startup industry has strained to distance itself from Theranos.
Holmes’ trial also stands out for its rarity. Criminal prosecutions in Silicon Valley have declined markedly in recent years.
“The eyes of the world are watching this trial,” said Jessica Roth, a law professor at Cardozo School of Law and former federal prosecutor in the Southern District of New York. “Legally, to fake it when you know you haven’t made it is still fraud,” Roth added. “Did they know they were faking it, or did they believe they were making it?”
Interest in the trial was so high that a line began forming to get into the federal courthouse before 5 a.m. Entering the windy alley in front of the courthouse at about 8 a.m., Holmes was swarmed by camera crews. She was escorted through the scrum by her boyfriend, Billy Evans, and family members.
Curious members of the public also showed up, as did a crew of three blond-haired women in black suits who resembled the defendant. At one point, Evans and the women in black passed around a padded seat for the courtroom’s hard benches.
The case hinges on whether Holmes intended to deceive investors and others and whether she was manipulated by Balwani. Battle lines were immediately drawn by prosecutors and the defense in their opening statements.
Making the government’s case, Leach methodically described the times that Theranos came close to going out of business. “Out of time and out of money, Elizabeth Holmes decided to lie,” he said, in what became a refrain.
Leach showed an image of Theranos’ blood analyzing machine, known as Edison and MiniLab, and said it “was not doing anything that couldn’t be done in an ordinary central blood testing laboratory.” He described Theranos’ false claims that its technology was being used on battlefields. He showed apparently falsified reports that Holmes gave to investors from pharmaceutical companies endorsing Theranos’ technology. He said she had peddled wildly exaggerated revenue projections and had used the media to execute her fraud.
“The scheme brought her fame, it brought her honor, and it brought her adoration,” Leach said.
The defense responded by arguing that Holmes — who had encouraged comparisons of herself with Steve Jobs, including adopting a uniform of black mock turtlenecks — was a hardworking, if naive, entrepreneur who did not succeed but did not commit any crimes.
“The villain the government just presented is actually a living, breathing human being who did her very best each and every day,” said Lance Wade, a lawyer with Williams & Connolly who represents Holmes. “Trying your hardest and coming up short is not a crime.”
Wade argued that the reality of Theranos’ failure was more complicated than the government’s presentation and that the company had built some valuable blood testing technology.
The reality of Theranos, he said, was “far more human, real and oftentimes far more, I hate to say it, but technical and complicated and boring” than what the government presented.
The media coverage made it a challenge for prosecutors and the defense to find a jury of 12 people who had not heard about Holmes, Theranos or the trial. Many potential jurors had read “Bad Blood,” a book about Theranos written by former Wall Street Journal reporter John Carreyrou; had listened to “The Dropout,” a podcast about Theranos; or had seen “The Inventor,” a documentary about Theranos.
Balwani was frequently mentioned by both sides, but Holmes’ lawyers pointedly dwelled on the relationship.
“Trusting and relying on Mr. Balwani as her primary adviser was one of her mistakes,” Wade said.
Holmes’ lawyers have said in filings that Balwani emotionally and mentally abused her and that the abuse negated her ability to intentionally deceive investors. They also said Holmes was likely to testify to this.
Such an argument is extremely rare in white-collar criminal trials, Roth said, possibly because there are so few female chief executives.
In court filings, Balwani has denied any abuse. In text messages revealed by prosecutors Tuesday, Holmes showered Balwani with affection. In May 2015, as Theranos was dealing with questions from Carreyrou, she wrote Balwani a series of messages: “You are breeze in desert for me / My water / And ocean / Meant to be only together tiger.”
This article originally appeared in The New York Times.