
Theranos Misled Investors and Consumers Who Used Its Blood Test - savara
https://www.bloomberg.com/view/articles/2018-03-14/theranos-misled-investors-and-consumers-who-used-its-blood-test
======
hprotagonist
I have been a voice in the wilderness since about 2007 on this one, so this is
shadenfraude on a level that makes me kind of embarrassed about myself.

My background is biomedical engineering, and I just never, ever understood how
the sampling rate could ever work. If you're looking for a low-energy signal
and your sampling rate is really low, you're just going to miss it and this
should've been screamingly obvious to everyone since the beginning.

It's like going to the beach, drawing a 5 gallon pail of seawater, looking
into it, and then declaring that the beach is shark-free today and it's safe
to swim.

~~~
2YwaZHXV
Existing analysers already use very small samples.

See Siemens Advia 1800 specs under "Microvolume Technology"
[https://www.healthcare.siemens.com/clinical-
chemistry/system...](https://www.healthcare.siemens.com/clinical-
chemistry/systems/advia-1800-chemistry-system/technical-specifications)

It only uses 30ul of sample to run up to 15 assays.

How is that any different from what Theranos was doing?

Only difference is that you collect a bigger vial when using the Siemens
machine. And then don't use most of it. So why not collect a smaller vial?

~~~
exelius
There’s no benefit to doing so; and smaller vials are harder to preserve.
Measurements on blood draws are not exact, and pre-measured preservatives in
the vials and the blood have to be in the right ratios.

This is easier to do consistently in larger vials, reducing the error in this
part of the process to acceptable levels. It’s the same reason why a recipe
will normally be more consistent when making a larger batch.

So you could collect less, but the way the modern lab industry operates
(collecting samples, preserving them, and shipping them to an offsite lab for
analysis) there is little business benefit to using smaller collection vials.

~~~
ethbro
Out of curiousity, how tight are the preservative:blood ratios before Bad
Things (i.e. things that would invalidate the test results) start to happen?

~~~
2YwaZHXV
That's a good question. Looking at this:
[http://apps.who.int/iris/bitstream/10665/65957/1/WHO_DIL_LAB...](http://apps.who.int/iris/bitstream/10665/65957/1/WHO_DIL_LAB_99.1_REV.2.pdf)
for EDTA (a very common anticoagulant "preservative") it is 1.2 to 2.0 mg/mL,
so a decent range. But, this is one source and it will also depend on what the
test is looking for.

------
subpixel
I haven't found an article or comment that gives me any insight into what Ms.
Holmes might have been thinking. Did she earnestly believe she was on the cusp
of some breakthrough, or that one was inevitable with enough brute-force
application of investor money? Or was she shrewd and cunning to the core,
calculating that she could siphon off enough money to make it worthwhile and
spend enough money to spin the facts? I'm totally perplexed trying to put
myself in her shoes and understand her motivation.

~~~
headmelted
I would expect the truth exists somewhere in between. I wouldn't rule out the
possibility that:

* Holmes started with the best of intentions

* Theranos raised capital from starry-eyed investors that didn't carry out proper due diligence

* Realization set in early on that it wasn't going to work out

* Theranos got scared as so much of their time and other people's money had been invested

* The questions mounted

* Stalling became outright deception

* The realization of the consequences after the WSJ article became starkly obvious

* Theranos got spooked and doubled-down on covering up out of fear

.. but this is all speculation, and we'll never really know.

It does seem though that this didn't turn into fraud (which by the end it's
quite clear it was) until late on.

It's a bit tragic, really. It seems Holmes could have come clean early on and
avoided the worst of the fallout (but for whatever reason that didn't happen).

~~~
ethbro
If things working out better are predicated on rising tech stars admitting
they're wrong and forgoing the accolades and adulation that accompany the
identifier... I can see why things went the way they did.

That said, from a personal perspective, I honestly hope Ms. Holmes is either a
sociopath or was actually in the dark about how bad things were (e.g. her
direct reports were lying to her).

It seems like it would be a pretty excruciating mental burden to go into work
every day for an extended period of time, knowing your company was inevitably
failing, and just trying to keep the plates spinning. Ugh.

~~~
Sangermaine
Yeah, committing fraud is pretty nerve-wracking. Won't anyone think of the con
men?

~~~
ethbro
Let's not assume the VCs weren't somewhat complicit here. At best through lack
of due diligence and thereby messaging their ongoing support for the
enterprise.

At worst active or passive concealment because they had a large financial
incentive that the fraud remain undiscovered.

Given that Theranos didn't IPO, I have a hard time feeling bad for investors
(hopefully) taking a loss on this one.

------
ukulele
Part of me dislikes the title "Blood Unicorn" for being sensationalist, but
part of me really likes it for being completely accurate and even a little bit
poetic. It kind of feels like all titles should strive for this balance, but I
also kind of hate it. I'm sure there's a German word for what I'm feeling!

~~~
wyldfire
It seemed to me as if the author semi-sheepishly is admitting being caught up
in the fervor surrounding Theranos:

> I used to refer to it pretty regularly as the Blood Unicorn, Elasmotherium
> haimatos, because it was a Silicon Valley unicorn with a peak valuation of
> $9 billion that managed to raise $700 million from investors.

I suppose if "unicorn" is meant to describe fundraising activities, it's
accurate. They really raised that money.

~~~
osteele
I believe this[1] is the article in which the author, Matt Levine, introduced
the phrase “blood unicorn”. That article continues with a quote about
Theranos's “bait and switch”; the author concludes the section with “‘There
will be an appropriate time and place to talk about the past,’ said Theranos;
my guess is that the place might be court.”

EDIT: This article[2] (also by Matt Levine) predates [1]. “And here is a
unicorn being barbecued in what looks like a medieval manuscript that I will
just assume prophesies the coming of Theranos. ‘And lo, a Unicorne shall come
among ye, and ye shall call it by the name Theranos, or in the Old Tongues,
_Elasmotherium Haimatos_. And it shall take your Bloode, but only a lyttle bit
of your Bloode, and it shall do strange Magick upon said Bloode, and tell ye
many Things. But then it shall come to pass that its Magick was [ _makes 'so-
so' hand gesture_], and that those Things were mostly not true. And ye shall
barbecue that Unicorne.’”

[1]
[https://www.bloomberg.com/view/articles/2016-08-02/mergers-u...](https://www.bloomberg.com/view/articles/2016-08-02/mergers-
unicorns-and-vampires)

[2] [https://www.bloomberg.com/view/articles/2016-05-26/libor-
cha...](https://www.bloomberg.com/view/articles/2016-05-26/libor-chats-and-
bitcoin-scams)

~~~
mathattack
Matt would appreciate your use of footnotes!

------
olivermarks
I'm sure there are all sorts of dark actors in the shadows on this one. Holmes
is being hung drawn and quartered in public, but there were many other people
involved in building up this chimera. The board of directors are an
interesting bunch and Ramesh "Sunny" Balwani is a colorful character. Holmes
may have been a patsy, who knows...

Bloomberg and most other media companies pumped Theranos up for all it was
worth, then Murdoch's WSJ deflated the balloon, having previously blown it up
to dekacorn dimensions.

It feels like the pump and dump plays so popular in the dot com era by the
money.

~~~
ng12
Was she the CEO or not? If the CEO does not bear responsibility for egregious,
dangerous fraud who does?

~~~
sephlietz
I think the point is that others likely should _also_ be held responsible. Not
sure I understand your argument here.

~~~
ng12
I'm specifically disagreeing with the usage of the term "patsy", which implies
that she's not morally complicit on grounds of naivete.

------
zaidf
As she long is able to dodge criminal charges, I think she got away with a
slap on the wrist. A $500,000 fine and returning most of her Theranos equity
is hardly proportionate punishment for a supposed-$700M fraud.

~~~
jstarfish
By comparison, Shkreli is going to prison over a mere $10M fraud.

~~~
JackFr
Shkreli fought it - she took the deal.

~~~
milankovic
Oh, wow..

Honest question: I know that plea deals and other rather arcane behind-the-
scenes agreements are a thing, but as someone who is not all too familiar with
the American justice system, is that really the only relevant difference?

So, what kept Shkreli from taking a deal?

~~~
cwkoss
From my limited understanding, he broke the law but was able to return all the
funds to investors. So there weren't damages per se, but I think statutory
penalties instead.

~~~
zaidf
SEC cannot bring criminal charges. The Justice Department can. We will see if
they do in the case of Elizabeth Holmes.

~~~
milankovic
Okay, interesting. Although it seems a bit strange that this would end up in
Washington at the federal level, i.e. Justice Department.. I don't think that
they have to deal with just any case of fraud, even big ones. But I could be
mistaken.

But if the Justice Department handles this I wouldn't be surprised if this
whole thing gets kind of, well, political..

Also, this somehow begs the question who brought the charges in Shkreli's
case.

------
smsm42
Reading this article, I've had a nagging feeling - ok, the founder may have
presented a wrong picture, but isn't it the task of tech journalists to call
them on that? I am sure some would always be fooled, but how comes pretty much
_all_ of them, according to the article, were fooled? And not by some
ingenious heist that takes a genius to unravel, but by buying a device from
another company, showing it to journalists and telling them "we invented this
new awesome thing" and nobody is the wiser? Where's the added value in
journalists then, are they reduced now to repackaging press-releases and
writing "oh, we've got fooled again" postmortems? OK, let's say they don't
have the expertise. A lot of people do. Did they ask those people and report
what they are thinking? How comes then I am reading both "any person with med
test background should have seen it" and "nobody was seeing it"? If a thing
like this happened with some software system, there would be a place for deep
redesign of monitoring and evaluation systems, that should have prevented such
failure. Yet it happens again and again with reporting and as far as I can see
no work is done to fix it.

~~~
FireBeyond
How much ability to do this is possible short of subpoena though?

Theranos history is littered with staged demos (not being described as such),
deception (running tests with other manufacturer machines), and outright lies.

For all the upbeat press release regurgitation (of which there was a lot,
absolutely), there's limits to investigative journalism of those who _were_
skeptical.

~~~
smsm42
Well, interviewing a bunch of specialists saying "this contradicts all I know
about medical diagnostics for this and this reason" \- like we see happening
here - and then asking the Theranos reps "could you please explain what these
experts are missing here, in detail" would be a good start. Of course,
Theranos could bullshit their way out of it, but distinguishing bullshit
answers from substantial answers is usually much easier and more accessible to
non-specialists than figuring out if the whole thing is bullshit from zero.

------
ericmcer
"Theranos made direct use of its positive press to raise money: It "sent
investors a binder of background materials," which included "articles and
profiles about Theranos, including the 2013 and 2014 articles from The Wall
Street Journal, Wired, and Fortune"

I can't decide if the investors were foolish for trusting in news articles, or
if the news articles should have been trustworthy.

------
IAmEveryone
Matt Levine proves, again and again, that there’s more nuance to any situation
than one might think.

He’s the living embodiment of the law’s “reasonable observer”.

~~~
fwdpropaganda
I like Matt Levine very much, but exactly what nuance is he adding in this
specific case?

------
econner
Is there any data on how much the executives of Theranos profited while trying
to produce these blood tests?

~~~
detaro
The SEC report says about Holmes

> _Holmes was paid a salary of approximately $200,000 to $390,000 per year
> between 2013 and 2015_

> _Holmes has never sold any of her Theranos stock._

> _Due to the company’s liquidation preference, if Theranos is acquired or is
> otherwise liquidated, Holmes would not profit from her ownership until –
> assuming redemption of certain warrants – over $750 million is returned to
> defrauded investors and other preferred shareholders._

So she probably didn't profit that much financially from the fraud (especially
not compared to the sums in play), unless Theranos somehow magically comes
back from the grave.

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rs999gti
$700M is a pretty big scheme, what's the likelihood Elizabeth Holmes gets jail
time?

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JackFr
Matt Levine is a national treasure.

------
model_m_warrior
Seemed that way from the beginning. What kind of people become journalists?

