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Theranos, CEO Holmes, and Former President Balwani Charged with Fraud (sec.gov)
1211 points by kgwgk on Mar 14, 2018 | hide | past | web | favorite | 517 comments

Ok, this is the money line in that press release for me:

“The charges against Theranos, Holmes, and Balwani make clear that there is no exemption from the anti-fraud provisions of the federal securities laws simply because a company is non-public, development-stage, or the subject of exuberant media attention.”

For all those entrepreneurs are trying to "fake it until you make it" be aware that the SEC considers your strategy both fraudulent and they feel they have the jurisdiction to prosecute you. And while I doubt the SEC is going to go after every CEO that raised a Series A on a pitch deck that was pure fantasy, the people who participated in the round might bring them in if it served their purposes.

I interpreted it somewhat differently. The money paragraph seems to be

> claimed that Theranos’ products were deployed by the U.S. Department of Defense on the battlefield in Afghanistan and on medevac helicopters and that the company would generate more than $100 million in revenue in 2014. In truth, Theranos’ technology was never deployed by the U.S. Department of Defense and generated a little more than $100,000 in revenue from operations in 2014.

This was not even a forward-looking statement, it was an outright lie in the legal document.

One can do pretty much whatever they wish with accredited investors' money, but it has to be disclosed in the PPM.

Even if you have a line item where all the money will be spend on CEO's dog's private jet travel, accredited investors who have reviewed and signed the PPM have no legal recourse.

In Theranos case it looks like a straightforward misrepresentation of facts, which is a red flag for SEC.

I had to go through a bunch of SEC cases for an accounting project a while back. One thing stood out to me more than anything: the SEC goes after cases that are easy more than anything else. Multiple crimes committed with lots of evidence and easy-to-spot damages. It actually gave me the impression that avoiding the ire of the SEC is relatively easy if you set your mind to committing fraud without getting caught.

>It actually gave me the impression that avoiding the ire of the SEC is relatively easy if you set your mind to committing fraud without getting caught.

I assure you, it is only possible to avoid risk if you're a small fish and extremely careful. For instance, you have a good chance of getting away with skimming a neighborhood stock fund you setup. If you are managing or receiving millions of dollars in investment, you can bet anything fishy will show up on the SECs radar at some point. Most people with large sums of money don't get where they are by being stupid with it, and if they are the victims of fraud, they know where to go. While the SEC can't bring criminal charges, they have top notch investigators. Once they smell the fish, they won't stop until the entire scheme is unraveled.

I can't speak directly to the observation you made, but I personally know a high up SEC investigator, and he obsesses about the most minute details of the cases he works on and lives to take on the toughest cases possible. My guess is distribution of cases the SEC prosecutes are very heavy tailed. There are many dumb cases that are very easy to find and prosecute that involve 10s to 100s of thousands of dollars. Think skimming, ponzi schemes etc. The more sophisticated and larger cases are also more risky (for the fraudster), harder to execute, and much more rare. That might explain your observations.

What about Madoff though?

In 1999, financial analyst Harry Markopolos had informed the SEC that he believed it was legally and mathematically impossible to achieve the gains Madoff claimed to deliver. According to Markopolos, it took him four minutes to conclude that Madoff's numbers did not add up, and another minute to suspect they were likely fraudulent.[73] After four hours of failed attempts to replicate Madoff's numbers, Markopolos believed he had mathematically proved Madoff was a fraud.[74] He was ignored by the SEC's Boston office in 2000 and 2001, as well as by Meaghan Cheung at the SEC's New York office in 2005 and 2007 when he presented further evidence. He has since co-authored a book with Gaytri Kachroo (the leader of his legal team) titled No One Would Listen. The book details the frustrating efforts he and his legal team made over a ten-year period to alert the government, the industry, and the press about Madoff's fraud.


1. A sufficiently large distribution will contain outliers. 2. Where is Madoff now?

> 1. A sufficiently large distribution will contain outliers.

A sufficiently large enough example which failed to be stopped by investigators for a decade could easily outweigh thousands of outliers ultimately being a serious net-negative and outweighing such a dismissal of facts...

The fact such a blatantly wrong example proceed to scale up for a decade and encompass billions of dollars before being shutdown is quite a good example of how any one investigator's knack for detail in their own limited exposure to particular cases (as in your personal analogy) is hardly sufficient to dismiss the idea that all complex cases need not worry of SEC investigation. Quite the opposite.

If anything that means the SEC has smart people but only a limited capacity of attention as they tend to obsess over details in individual cases (as that is what is required in a significant percentage of them). So as long as you're not one of the easy cases (obvious ponzi schemes or involving large sums, significant amounts of people, or popular advertising) then it's not as worrying a threat as they'd like to make it appear.

Again, point is not just about SEC investigation. I'm pushing back against the notion that getting away with fraud is as simple as setting your mind to it.

1. Enron? WorldCom? The entire real estate bubble collapse that blindsided the country, including the SEC and other regulators?

2. Madoff was caught because his scheme fell apart, not due to any SEC or other government action.

Maybe you didn't carefully read my original post. I'm not claiming the SEC has a perfect record in finding frauds before the hurt anyone (that would be nearly impossible). I am pointing out that getting away with fraud is extremely difficult. Eventually, you'll get caught, the SEC will uncover everything, and you'll be broke forever. From op:

>...avoiding the ire of the SEC is relatively easy if you set your mind to committing fraud without getting caught.

This statement is mostly what I was responding to. Here is a thought experiment. For the sake of this experiment lets say our economy is perfectly competitive. If all an entity had to do to get away with fraud was "set your mind to not getting caught," then every entity that participated in the economy would be committing fraud because it is in their best interest. That sounds wrong, probably because it is. White collar criminals don't plan on getting caught, they do everything they can to get away with their crimes. To me, that qualifies as setting their mind to not getting caught. Well, they get caught anyway.

The companies you bring up (enron, worldcom, madoff) are outliers in the world of securities fraud. they achieved unprecedented levels of success and then failure. Using these cases are counterpoints to an argument that financial crimes are hard to get away with seems silly to me. After all, none of these frauds were successful in the end, instead, people ended up in prison.

Even if it's relatively easy to not get caught, you can't be sure exactly how easy it is, and the downside is catastrophic. So no, I don't think every entity in your thought experiment would be committing fraud. Only ones that knew for sure exactly how easy it is and that they would not get caught for sure. And those ones, by definition, would never be caught so the public would never know ...

You can be sure exactly how easy it is because in a perfectly competitive economy everyone has perfect information, and the experiment's key assumption is getting away with fraud is a endogenous variable in the utility function. The fraudster can manipulate this variable to optimize their utility. This means that every actor knows exactly what they must do to avoid getting caught. It's a simplification so we can consider the implications of the notion that getting away with fraud is as easy as setting your mind to it. Another assumption is entities act solely in their own financial best interest. In this setup, everyone who will be better off by committing some form of fraud, which will be everyone who participates in the economy, will commit fraud.

Oh, okay ... but everyone having perfect information AND fraud being possible to get away with are fundamentally contradictory assumptions; fraud is based on exploiting some people not having perfect information.

They are not fundamentally contradictory, everyone would know they are victims, still if it is in their net benefit to participate, they will. Again, this is an experiment with unrealistic assumptions (getting caught is an endogenous variable), it is intended to bring to bear the the absurdity of the statement that one can control their own fate if they commit fraud.

This experiment just sounds like "what if fraud were not fraud"

From op:

>...avoiding the ire of the SEC is relatively easy if you set your mind to committing fraud without getting caught.

The experiment is a simple application of the economic theoretic framework to the statement above. Nothing more. There isn't all that much to argue about here, as long as you accept the framework upon which almost all of theoretical economics is based.

The counterpoint to that is Bernie Madoff, who was a big fish and careless and by the time he was caught there was an orgy of evidence against him. I think it has more to do with low-hanging fruit than anything else. That doesn't mean SEC investigators aren't diligent and hardworking, but you need to leave behind evidence. Very few schemes struck me as particularly creative frauds, it's like the most obvious stuff you can think of: either just pocketing money or lying to investors like a dumbass, or simple schemes involving capitalizing expenses, or over-payment scams. No Repo 105 or any sophisticated Enron stuff like that. It's like if you studied cyber security in school, and all the big fish are falling because they set their password to hunter5 or got phished.

What I'm hearing is "avoiding the ire of the SEC is relatively easy" because "Bernie Madoff."

IMO that is naive. He is an outlier. Sort of like saying committing mass acts of terrorism is easy because 911.

Also, actual SEC filings. But fine, here's a paper: https://business.illinois.edu/accountancy/wp-content/uploads...

I can't find it now, but I do recall the SEC itself putting the number of frauds they uncovered in the low single digits. I might ask my SEC friend himself what percentage of the iceberg he thinks is uncovered.

I have asked him this. Paraphrasing his words: eventually, the SEC investigates virtually all securities frauds. Some cases are dropped if the act was criminal in nature and the FBI or law enforcement wants it, other cases are dropped if the suspect is deceased or fled, and of course there are cases where leads go cold and the case is back burnered.

The point is, fraud is risky, and it isn't easy. You basically have to be willing to give up your life as you know it. Sometimes I wonder whether fraudsters have an internal dialogue about whether it is worth the risk. And for the fraudsters who aren't psychopaths the guilt of defrauding friends and people who trust you must be enormous. Sounds like a stressful day job that I won't ever be entertaining.

How do you not go to jail for this? This isn't fake it until you make it. This is massive fraud. 100 mil vs 100,000 is off by a factor of 1000.

I agree, especially when you use the recent Shkreli case as a point of comparison. You have Shkreli who has been put away for 7 years for a hypothetical 10mil, yet Holmes commits "massive fraud", possibly losing 100's of millions of investors' money, and most likely gets away with a 600,000 fine and no jail time.

Also, regarding the Shrekli case, didn’t everyone end up financially better off than they started?

Umm, the money had to come from somewhere.

Nah they did. He lost their money on stocks, lied about the state of their investments then paid them all a healthy return from his drug ventures with them none the wiser.

It came from the pockets of insurers and individuals who couldn't afford insurance at all when he jacked up the prices of essential drugs.

That wasn't illegal at all though :)

Just that he lied to his investors about the source of the returns.

People who can't afford insurance can't afford retail price either, and get discounts.

Well, parsing that statement:

> claimed that Theranos’ products were deployed by the U.S. Department of Defense on the battlefield in Afghanistan and on medevac helicopters

That is clearly a statement looking at past events, so if it was false it was clearly a lie

> the company would generate more than $100 million in revenue in 2014.

The important word there appears to be "would", in which case it was a forward-looking statement so easier to argue it was based on projections that just didn't pan out.

My interpretation is that most startups don't deal with life-or-death lines of work, whereas Theranos does. There's no room for "creative" business practices there. The government will take note at some point and come chasing.

Yes, if you want to lie about some drone-based burrito delivery service you're probably not gonna draw the same ire as life-saving medical equipment. Although if you swindle investors for over $700 million in either case I imagine the SEC will be knocking at your door eventually.

> if you want to lie about some drone-based burrito delivery service

I wouldn't suggest lying about anything in the aviation sector either.

Yep, especially don’t lie about doing flights you are not doing, or not doing flights you are.

> drone-based burrito delivery service

Not joking, I have heard this pitch.

A few years ago that would have been peak Silicon Valley but now it would have to be a drone-based burrito delivery service settled on the blockchain to be peak SV in 2018.

Maciej beat Elon to the idea of using tunnels instead: http://idlewords.com/2007/04/the_alameda_weehawken_burrito_t...

That's brilliant, I'm just trying to imagine how NYC will send Pizzas back via a tube to SF in return for the Burritos.

> drone-based burrito delivery service

Well, I'm sold!

More along the lines of pitching their startup to someone at the Wall Street Journal who signs up for a demo account but are thoroughly unimpressed and never login again. But in their pitch deck to investors they proudly claim that the Wall Street Journal is a customer.

What does "PPM" stand for?

"Private Placement Memorandum" - first result on googling 'investor PPM'

probably private placement memorandum

"fake it until you make it" generally refers to the product implementation vs pitch on the consumer side. e.g. You pitch "The best automated way to do X!", but in actuality you have a horde of people doing the work initially to figure out the problem before building the actual automation. There is nothing wrong with this and remains a completely viable approach. What you don't do is tell your investors you've already built the automation tech and hide the labor cost of doing it manually in your financials.

I think the Concierge and Wizard of Oz approaches [1] are just one thing people mean by "fake it 'til you make it", but I definitely don't think they're the most common meaning.

Startups engage in all sorts of puffery, trying to project the appearance of success long before they have actual success. Fancy websites, fancy offices, sales and investment pitches that cherry pick stories, numbers, and milestones that give an enormously positive impression of what's generally a very bumpy reality.

I personally don't like that, but the game is the game. But it's very easy for that puffery to slide over into outright fraud when things get desperate. Which is why I'm so glad that the SEC is going after Theranos with great vigor. Hopefully these clowns will end up sharing a cell with Shkreli, giving every would-be startup CEO a clear example of what happens when they push it too far.

[1] https://www.allencheng.com/concierge-mvp/

This is fine when the elements of automation aren't beyond the state of the art. However when you have startups like Spinvox et-al hoping that automated transcription will show up and save them (I mean transcription of variety of voice in variety of environments, using uncharacterized microphones and transcoded from mobile to core ect) or the current rash of chatbot liars and charlatans then real real damage gets done to real companies where execs believe the trendy w*nkers vs real people who understand technology. I've seen good engineers hounded out and scores of millions of pounds wasted because of "warp drive over powerpoint" and I've had enough. Not that I'm bitter or anything.

Yeah, same.

And it can even be fine when things are beyond the state of the art, as long as the CEO has the bravery to look reality in the face and either a) find another way, or b) say "sorry, startups are gambles, and this one's a busted flush".

And it's the liars and charlatans that really get to me. I figure it's at least 30% likely that I'll end up in jail because somebody says "blockchain" to me one too many times regarding some application which would be better off done with a MySQL database.

Isn't uber just waiting for automated drivers (self driving cars) to show up and save them? I have three businesses at the moment that all use people to do things that maybe one day can be solved by AI/tech. My customers don't care how I get it done and aren't impressed by tech anyway. If automation shows up and helps me then my margins go through the roof. But as it is, the margins are pretty good anyway.

It’s probably “fine” in the sense that nobody will sue you. But you’re basically arguing “it’s okay to lie to consumers about something that’s immaterial.” That’s true, but the standard for materiality under state consumer protection law is pretty low. E.g., under California’s Unfair Competition Law, statements that a lock was Made in America were found actionable under the UCL, even though the lock worked perfectly fine. People might care whether the service is automated or not, even if the end product is the same.

Of course, the benefit from the puffery might outweigh whatever legal risk exists. I’d call that a “calculated risk,” not “fine.”

> But you’re basically arguing “it’s okay to lie to consumers about something that’s immaterial.”

If it's a significant factor in a buying decision, it's not immaterial. If it's not material, it's probably not worth lying about.

>There is nothing wrong with this

Yes there is. You're selling investors on capabilities you don't have, or at least intentionally misleading them about your abilities. Unless you're explicitly telling them that you WILL have "The best automated way to do X!" and are working hard on it, you're deceiving them.

If I, an investor, give you money because you tell me you have automated technology, but really it's people in a room, that's a lie and there is absolutely something wrong with it!!

If you can make the automated technology before I find out, well, maybe I won't sue you, but that sure doesn't make it right or acceptable.

If you say it’s automated, and it’s not, that’s fraud.

> You pitch "The best automated way to do X!"

> in actuality you have a horde of people doing the work

> There is nothing wrong with this

um in what universe does "technically legal in the US of A" equate to "nothing wrong with" ?

using legality as a shortcut for a moral compass is putting the cart before the horse at best, but very often argued out of laziness or pure self-interest at worst. it's a narrative that causes people to stop introspection and think about what is actually right or wrong, instead going for the much, much easier choice of what is legal and what is not. not easier because the legal system is simpler than ethics (it usually isn't), but easier because the choice is made for them.

and as your post demonstrates, once the choice is made, it's easy enough to conflate legality, lawfulness and judgement with morality, rightfulness and justice.

but once you poke at that distinction, the argument just falls apart.

there isn't "nothing wrong with this".

all you're really saying is that it's probably not illegal.

This is "do things that don't scale" not "fake it until you make it."

I have never heard of someone using "fake it until you make it," referring to Wizard of Oz or Concierge as William Pietri (gosu Lean practitioner) below has mentioned.

> You pitch "The best automated way to do X!", but in actuality you have a horde of people doing the work initially to figure out the problem before building the actual automation.

It is plain dishonesty.

"Fake it til you make it" generally refers to acting like you believe in yourself even if you're filled with self-doubt. Not actual fraud.

As with anything there is the way in which something is offered and the way in which it is consumed. I have encountered many people who have internalized "fake it" to mean "pretend that you are hitting all your milestones and you executing against your plan". These folks see this as a way to keep the questions of why they aren't actually doing all of that at bay because later when they are "making it" those questions will be irrelevant.

For example you lie about how your marketing efforts are reaching customers who are signing up in droves while you use mechanical turk and other techniques to make the observable metrics go up. At some point your visibility reaches the point where you actually are reaching your customers and so you can stop doing the shady stuff. By doing this you avoid the inefficiency of the whole "we aren't sure you can do this" discussion which helps no one.

On the outside, one clean narrative, traction and growth from day 1, now a multi-million (or billion) dollar business. Or as my Grandfather would say, all yummy sausage and no discussion at all about what not-yummy things are in there too.

Everyone should believe in themselves. That is just a given, if you don't (or can't) then you won't reach your expectation. There isn't any "faking" there as far as I can see (unless it is suppressing your own doubts about the effort).

"I have encountered many people who have internalized "fake it" to mean "pretend that you are hitting all your milestones and you executing against your plan". These folks see this as a way to keep the questions of why they aren't actually doing all of that at bay because later when they are "making it" those questions will be irrelevant."

This is 100% correct. I also know a fair number entrepreneurs who engage (or have engaged) in exactly what you describe. Also, it's a short and murky step from many of the "naughty" stories that are lauded in entrepreneur lore, to outright fraud. Too often, we make post hoc rationalizations for unethical behavior, based on outcome.

It's a huge dilemma if you want to behave ethically, but you're competing with lots of people who don't have that limitation.

> it's a short and murky step ... to outright fraud.

Staying vigilant against the normalization of deviance[1] is difficult even in ideal situations. Choosing to normalize deviance as a business strategy is practically guaranteed to rapidly accelerate deviations from acceptable behavior.

In any system - including every business - resilience and safety means fixing small problems before they grow into bigger, more damaging problems[2].

> rationalizations for unethical behavior

Often, it doesn't even need to be rationalized. When deviant behavior is slowly normalized in small steps, the human mind tends to only see the "small, insignificant problems", and often skips[3] over big changes that should be "obvious".

[1] https://en.wikibooks.org/wiki/Professionalism/Diane_Vaughan_...

[2] https://www.youtube.com/watch?v=PGLYEDpNu60

[3] https://www.cse.iitk.ac.in/users/se367/10/presentation_local...

You've hit the nail on the head with "normalization of deviance".

First you shade the truth slightly. You're uncomfortable at first, but the line seems to work, so you try it again. You use it another 10 times and you start to believe it.

And then you shade the truth a little more. After the hundredth pitch, you're a fabulist, and you barely noticed.

Well, TBF, if you are doing something genuinely new, it can be hard to figure out what's real and what's not. It can be hard to figure out what are meaningful metrics and what aren't.

I was sympathetic to the Theranos side of things until I learned they actually submitted fraudulent test data. That was the point where it became clear to me they were not confused as to where to draw some line. They were being willfully deceptive. Deception like that doesn't grow out of confusion. It grows out of clarity that you are selling BS.

> For example you lie about how your marketing efforts are reaching customers who are signing up in droves while you use mechanical turk and other techniques to make the observable metrics go up

> By doing this you avoid the inefficiency of the whole "we aren't sure you can do this" discussion which helps no one.

Pretty sure that it would help investors differentiate between those who can actually make it, and those merely good at faking it and making observable metrics go up ... especially if the ones actually capable of making the <big thing> don't make the metrics go up quite as high as the ones putting their effort into faking it.

And like another commenter said, that difference might well be worth billions.

> I have encountered many people who have internalized "fake it" to mean "pretend that you are hitting all your milestones and you executing against your plan".

This thread is the first time I've heard it applied seriously as to encourage lying and fraud.

Another similar common saying is "dress for the job you want, not the job you have." But sayings imply that you should act as if you've made it even if you haven't. You aren't "what you want to be," but you can present yourself in that way.

Finally, while you may have met many people who have turned "fake it" into lying and fraud, they are not the majority.

> Everyone should believe in themselves.

At least you admit here admit I'm right.

Yea, I think people blow up the saying out of context from self-confidence to business. If I say, "We're confident we can develop the machine learning technology to deploy X, even though we are currently using human checking" that's a lot different than saying "We can currently do all these things with this machine learning technology we developed" despite the technology not existing yet.

It's essentially someone stating a vision they have as reality, which is fraud.

Yup agree; the gap between "we're confident we can" and actually doing it is.... v.a.s.t....

And the difference between those whose confidence was justified and those whose plans were 'a bridge too far' is... upwards of $900 Billion.

Every building is a blueprint at some point. Some jabroni pointing at the sky and describing what will be is part of the dilemma of innovation and construction.

You can believe in yourself without faking anything, and it’s healthy to do so.

Faking it implies you want to give others the impression you’re already a big shot, and it dilutes out the accomplishments of people who actually made it.

The downside should be that if you’re faking it and you don’t make it, your shame should be relentless and brutal, and no one should ever take you seriously again. Also, even if you make it you will feel alone and empty in your success, because everyone will have long thought you already “made it” and you have to continue hiding your true story. There is no one to celebrate with except those who are also in on it.

Where as if you would have just been humble and true to where you currently are, people have headroom to express sympathy and support should you encounter a setback.

> You can believe in yourself without faking anything...

I don't think so. Self-doubt is natural. Mandatory, really. Someone who never has moments of self-doubt is a bad investment risk; it means they probably aren't thinking hard enough about what could go wrong. But concealing those doubts is also mandatory: if you can't, it may be a sign that you have more problems than you know how to deal with.

It is not mandatory, it merely requires courage to go forward knowing you could fail and things could go wrong.

If you choose to ignore it and fake your way up, you are not being brave, you are being delusional. I'm not sure if delusional people are good investments.

aphorisms have established common meanings:


meanings are not immutable

No, you just don’t want to admit that you don’t really know the generally-agreed meaning of that phrase.

I thought it was mainly about lying to others about how well you are doing, given that the central idea is that of giving an impression of success before you are successful, in order to gain access to the people and markets you require in order for you to become actually successful.

Most who give that advice are very imprecise about which deceptions they're endorsing.

Almost like they're asserting a confidence in a belief that isn't really merited -- wish we had a term for that.

I’m glad, and frankly I’m tired of all these “fake it till you make it”, “lean” startup, wizard of oz type companies polluting people’s attention with fake or half baked product offerings for shit that doesn’t exist just so they can get a signal to see if something is really worth doing or not. Consumer hostile.

It's worth nothing that one of Theranos's VC funders, Tim Draper, did defend Holmes despite the fraud allegations:




"Venture capitalist Tim Draper, an old family friend of Theranos founder and CEO Elizabeth Holmes, who led an early $1 million investment into the company (split between two investment firms).."

SV/tech/USA is so great, anyone can make it big. You just have to be smart and work hard. Oh, and be family friends with billionaires. Yeah, that's all.

That's one way to get funding, but it's certainly not the only way, there are lots of counterexamples. As one obvious counterexample, one of the founding principles of YC is providing an open application process to provide people who don't have any personal connections access to the SV network. Larry and Sergey weren't well connected when they started, either, afaik, as most PhD students aren't. If you're doing something interesting that seems likely to succeed, and you're motivated, it's not all that hard to become connected to wealthy people who are very interested in turning their money into more money.

This is an incredibly defeatist/self pitying line of thinking that I'm seeing more of (the world is stacked against me, you have to be born into it, etc) and is related to a lot of other self-defeating thought patterns. It's not going to help you or anyone else who subscribes to it. Maybe it's just that bad news is much easier to see, thanks to the web, so people think bad behavior is more common now, and it's turning people cynical.

I think incorrect (or even correct, but rare) narratives are dangerous. Especially when they're the feel-good type that people tell to make themselves feel better about the way the world works. (meritocracy, egalitarianism, etc)

Anecdata, but: I left academic hard science because I realized it was too difficult to get ahead; moved to the bay since I can code and it was a way to create a runway and find myself, and pitch companies. Got a contract coding gig, because a professor on the board of my roommate's company was impressed that I had independently implemented his prototype as a personal side project. Applied to 10+ startups for "real programming jobs", including through triplebyte, rejected by all, finally got hired by a roommate's friend (on reputation only) whose company needed asses in seats for an investor meeting.

Meanwhile, I'd been pitching 3 biotech ideas and one tech idea (I had written verilog for a hardware prototype of a deep learning chip) and got no bites on any of my pitches.

Finally, a friend offered me a VP product position (because he needed someone he could trust) which I was about to jump ship for, and then my current CEO counter-offered by agreeing to put his personal money as a lead in one of the biotech startups I'd pitched (that was somewhat meritocratic because he has seen how I operate as a coder in the company and was impressed, and I think he figures, probably correctly that if I'm that good a coder then my biotech skills are even better because that's what I'm formally trained in)

Since getting here, I haven't once advanced through pure merit, and have always advanced through connections.

Yeah, I don't think any of your friends offered you a position because you're they're friend. They offered you a position because they knew you AND they knew you were smart/talented/a coder/whatever.

I got my first foot in the door via an internship on a referral from a friend who had interned there the year before. I had no formal credentials (just taking CS classes on the side of an Econ degree in college), but I had spent all of my math/CS classes studying with this kid. He knew I was smart and put his own ass on the line to get me an interview.

You can be successful purely by reading books in a room, writing code alone, and building some brilliant startup. (E.g. look at the CD Baby guy, what's his name). But it's SUPER unlikely. You're way better off being a social human being, building relationships/trust, and paying it back/forward to folks that do right by you when you know you deserve it.

my contention is not that I got any jobs because I was a friend (or a contact of a friend) but rather that I very likely wouldn't have gotten any jobs if I weren't a contact of a friend.

A lot of the SV narratives circle around meritocracy (or other ways of 'hacking the signalling game' even. And when you say "it's SUPER unlikely", I think you're 100% correct. And so challenging the meritocracy myth is important.

Your story is the "meritocracy myth" in action. You demonstrating your merit to people who then vouched for you. It'd be nice if we were good at judging people objectively without knowing them for very long, but we're not, especially in very important aspects like trustworthiness.

Being good at making connections and being seen as capable and trustworthy enough by your existing connections is absolutely a form of merit, an important one if you want to marshal enough people and resources and investors to build a successful company. My point was that the seemingly common mentality of "you have to be born into it, the rich only help the rich, etc" is not true, it's not a useful belief, and the counterexamples are not rare. It can help, certainly, but it's not a requirement by any stretch.

So, you are under the impression your connections gave you these opportunities out of friendship, not because they thought you were great for the job?

Arguably, your connections know more about you than your interviewers would. Maybe that's the meritocratic way to do things.

> Larry and Sergey weren't well connected when they started, either, afaik, as most PhD students aren't.

That was 20 years ago. As much history as Larry Ellison's story in 1970s. Things have changed a lot, and the Silicon Valley today is a poster child for cronyism.

The VCs don't even bother opening "cold emails" (a ridiculous term for something that purports to be an open club). It's a herd of arrogant hipster bros who have no clue what they're doing and try to CYA by "warm introductions" (when their bet fails, they can shift the blame on a 3rd party).

The investment is not completely off-limits (my own story is a testament to that), but it's magnitudes harder to get if you're not connected, and oftentimes you have to pay through the nose to the "people who know people". I also know some rare cases when super-angels answer to complete strangers and subsequently invest, but these are exceptions rather than the rule.

> This is an incredibly defeatist/self pitying line of thinking that I'm seeing more of (the world is stacked against me, you have to be born into it, etc) and is related to a lot of other self-defeating thought patterns.

Can you back up this statement? Why is it self-defeating? You put it in your post as if it somehow logically follows from the rest but it doesn't.

The claim is that people who were not born or just lucked into connections with the rich and powerful are going to have to work significantly harder or get lucky to get access to those opportunities. While the people that do, can put some work in and basically claim the opportunity or just simply try again without significant loss or even having to settle for less.

"Lots of counterexamples" don't mean anything unless you can show that there are in fact so many counterexamples that they outnumber them in a similar ratio as the people in the first group utterly outnumber the people in the latter group. Or even by a factor of ten.

But they don't and almost nobody would be having this discussion if they did.

> Maybe it's just that bad news is much easier to see, thanks to the web, so people think bad behavior is more common now, and it's turning people cynical.

And you're going to need more than those words to properly argue that this is a bad thing.

Because a lot of bad news wasn't visible enough. And people have been underestimating the magnitude of bad behaviour. And a lot of people in a lot of places in the world most definitely aren't being cynical enough.

Sure there are psychological downsides to being bombarded with bad news and negative information all day, and we need to find ways to handle that, for our collective mental health. Doesn't mean the bad news is somehow wrong or faulty.

> Larry and Sergey weren't well connected when they started, either, afaik, as most PhD students aren't.

Doubt it. I don't think In-Q-Tel/CIA will write you a check because you just happen to have this shiny new search engine that may or may not change the world.

In-Q-Tel is NOT CIA nor its "venture arm" contrary to the popular misconception, and it's actually one of the more open VCs.

Are you sure. They do seem to be pretty close


100% sure. Like your source says, it's a partnership between the CIA and the private sector.

"Close" does not mean part of the organisation. The founder Norman R. Augustine isn't even a CIA person. It is somewhat similar to a spinned-off company which runs independently but has tight connections (and a contract, in case of In-Q-Tel) with the organization that spinned it off.

* In-Q-Tel (theoretically) may have other contracts and major partnerships.

* In-Q-Tel gets to pick who they invest into; CIA may express interest in a particular area or a company but In-Q-Tel manage their portfolios.

* While In-Q-Tel is non-profit, the profits flow back and the employees may profit from it. Meaning, while part of the funds come from the CIA (taxpayers), part come from the past profits.

More detail to those interested in law: https://scholarlycommons.law.northwestern.edu/cgi/viewconten....

All this sounds like a great coverup for a CIA company :)

Jokes aside, it's a great way of getting free money from the government without too much reporting to do.

It's fairly unusual for the US, but similar structures exist in countries trying to nurture their startup ecosystem.

That's extremely interesting, thanks for sharing.

Think about the decision that he had to make in 2016. He had to choose between admiting his mistake and doubling down. The downside of admitting his mistake is that he's guaranteed to get negative points; the upside is that it will minimise futures downsides. By dubling down, he's guaranteed to reduce his negative points in 2016 but exposes himself to magnified upsides (if he's proven right) and downsides (if he's proven wrong) in the future.

Now think rationally how you'd choose. The second strategy is a lot riskier so it better have better return as well! But the second strategy can only have higher reward if you either believe high probability of future upsides (i.e. Theranos might be faking till you make it, but they'll make it) or low probability of future downsides (i.e. I'm not sure what's going on, but definitely not fraud). I submit that the only way that you could come to believe either is if you're hugely misinformed about the company.

I.e. that guy is just a bit incompetent.

I think you're ignoring the iterated nature of the game he plays. He is looking for founders to fund -- deal flow is the lifeblood of any VC. This is a signal like many other, and what it says is "As an early stage investor I absolutely have your back."

Just curious where you heard the phrase "deal flow is the lifeblood of any VC". I read that exact line last night from a book.

Funny. I didn’t know I was quoting anything - this may just be an obvious statement to people who have investigated the economics of venture capital.

Seems fine for entrepreneurs running scams. Honest founders would rather work with honest VCs.

Those kind of decisions are made on a purely emotional, reactive basis without going through the rational game theory analysis you laid out. Most wealthy investors are no more rational than the rest of us.

An iterated game will tune emotional responses to achieve the same end.

Draper has no doubt had many chances in his life to provide negative but true and positive but false comments on his investments. If society punishes negative but true comments he's damn well going to notice and make fewer of them. If society further fails to punish positive but false comments about his investments, he's not going to invest the mental resources that would be required to avoid them.

A little experience substitutes for a lot of strategy.

What do you mean, "than the rest of us". That's how I think, so I have no reason to believe that other people can't do the same.

How sure are you that you really think that way? Most people make decisions based on emotion and intuition, then rationalize those decisions after the fact and fool themselves into believing they were rational from the start. Since human memory is so unreliable it's almost impossible to accurately determine which decision making process you actually followed.

My understanding is that competence only matters when other people are giving you money, and doesn't matter at all when you're giving people money. I think you're really overestimating the downsides.

Reputation is everything in this business. I think you're underestimating the downsides.

Every VC has 100s of failures. He just proved that he will go to bat for his startups even if they're doing fishy stuff :P

Tim Draper also stands to gain from Theranos being reviewed positively, valid product or not, being an investor.

That's true, which just compounds the problem of newbie investors thinking "fake it until you make it" is OK because they get positive reinforcement from their investors.

Not to condescend, genuinely curious... you really believe Tim Draper is an n00b?

Sorry, meant "newbie entrepreneurs."

He's also stuck by Tezos through its organizational catastrophe, and it's looking as though that might pay off for him.

Generally, "they're family" sounds like a sensible default attitude for a VC towards their investments.

Also Dan Warmenhoven, speaking for the board.

Re a previous Holmes forfeiture: "Warmenhoven added Ms. Holmes showed “a level of selflessness and grace reflecting her commitment to the company’s success.”

Could this be due to the litigation?

Someone called Tim Draper the Trump of Venture Capital[1] :)

[1] https://news.ycombinator.com/item?id=11973420

I think there is a significant difference between lying about what you can do (fraud) and simply saying you hope to accomplish something.

I don't disagree, but recognize that an investor can feel defrauded even when one can show precisely what was said and what was not actually said. Most CEOs I've heard pitch are creating a narrative and they leave out facts that would disagree with that narrative. And sometimes they state the 'facts' in a way that imply more than they actually say.

For example, you can say "We are building a tester that can run tests using only a drop of blood." and "We have test results from blood showing markers" and never mention that the "test results" came from an industry tester and not the "tester you are building". The implication is that your tester did that but you didn't actually say that. What I read from the press release was that this sort of messaging was going to be actionable. If you look at various full disclosure rules the SEC has for public companies, this felt like a shot across the bow to startups that they would do well to think about that instead of glossing over bad news.

Agreed. Here's the support to you:

The complaints further charge that Theranos, Holmes, and Balwani claimed that Theranos’ products were deployed by the U.S. Department of Defense on the battlefield in Afghanistan and on medevac helicopters...[i]n truth, Theranos’ technology was never deployed by the U.S. Department of Defense...

Right, but that doesn't mean that fraud can't happen with very early stage companies....there are plenty of b2b SaaS startups out there who are raising on non-GAAP metrics like "bookings" and who are grossly inflating both the certainty and pro forma value of these projected numbers.

The last para is even crazier.

> Ms. Holmes and Balwani falsely claimed to investors [...] and that Theranos would generate more than $100 million in revenues in 2014, the SEC said in its complaints. In fact, the company’s revenues were a little more than $100,000 that year.

I couldn't figure out why investors were putting all that money in. Telling them you were making $100m makes the investments make a hell of a lot more sense.

What's 3 orders of magnitude between friends? She deserves prison time for this.

"fake it till you make it" is one thing if your product is a new dating app to compete with grindr, or a clone of flappy bird... entirely another thing if you're making tangible claims about the ability of a medical device.

"For all those entrepreneurs are trying to "fake it until you make it" be aware that the SEC considers your strategy both fraudulent "

Sigh. The SEC is concerned with lying about actual numbers. Not about future projections. What a terrible comment on a startup forum. "Fake it until you make it" it as about having confidence -- not about lying to investors. Please downvote this parent comment.

The SEC is concerned with lying about actual numbers. Not about future projections.

Our experiences are different I suspect, Check this out https://www.sec.gov/fast-answers/answers-regfdhtm.html. I sat in the courtroom once as one of the officers of a company was being prosecuted for violating this disclosure rule. There are a number of regulations that the SEC enforces that have nothing to do with "actual numbers" and everything to do with information asymmetry where the company knows something and the investors don't.

They have historically been all about that when non-accredited investors are involved (aka public companies). And reading their action with respect to Theranos suggested to me that they are going to bring that hammer into the startup space.

> Our experiences are different I suspect, Check this out https://www.sec.gov/fast-answers/answers-regfdhtm.html.

What this has to do with the parent comment? I'm asking these because I'm not sure I follow the reasoning. Your concern is that the SEC has very strict reporting standards and regulations. These are intended to provide a fair field between all investors (accredited and non-accredited) in order for the market to function in a more efficient way. In exchange for this increased cost of regulation upfront, the transaction between investors on the company's shares have a much lower friction (and transaction costs).

Private companies have lower regulation because the assumption is that the investors willing to buy shares are open to assume higher transaction costs in terms of due diligence. Obviously, reporting the false could open the company to lawsuits, but that's also part of the potential cost for the investors.

The choice between being a public company and a private one, in the end, is a function also of this trade-off. If I understand your reasoning, you fear that the SEC forcing himself into the private market could increase the regulatory cost of all startup. Am I right?

If that is correct, my answer would be that the SEC is not imposing the full regulation but just a minimum level of accurate reporting on behalf of the investors. This is because there's an assumption that a well behaved private market is essential to make the economy more active (imagine if this level of lying was accepted, how many investors would be willing to invest?). On the other side, I see the risk of a slippery slope and having the SEC power to grow to large and kill the startup ecosystems. I don't have a clear answer for that.

[styling note, I had pulled out the statement made in the GP comment and made it italics to emphasize it, in reference to the above comment's question "what this has to do with the parent comment].

So stylism aside, you have correctly surmised my concern that the SEC is looking to move into private markets more aggressively. I think the reason for that is nuanced but having lived through the dot.com bubble and watched how the government responded to that bubble (Sarbanes Oxley anyone?) And the huge losses that are being taken by the large banks as their Unicorns died in this the Unicorn bubble, basically accredited or not investors with lots of capital get mad when they are mislead, and their anger typically results in them getting their "friends" to do something about it. We currently have an integration between banking interest and the administration that is as deep as it has ever been. So there are many contacts both official and unofficial between Wall Street and DC.

There is also the perception of the disproportionate channeling of wealth creation to a smaller number of people through private company 'trading'. Add the antics of Uber and Theranos to the mix and it provides a convenient place for the powers that be to take "logical" and "needed" steps to curb the abuses. Generally resulting in more regulation and more risk on startups.

Also, "fake it until you make it" might work for photo sharing apps and such but it should never be the case when human health is involved. Holmes and people around her were no other than quacks who promised the world to whoever they met.

Don't get me started on the whole ICO, crypto hype. Responsible optimism and execution is key to a company's success. Disregard this, and you'll face consequences like these.

It really depends on whether the intent to defraud was there or not. The SEC is probably not out to outlaw founders being true believers in their vision, even if their beliefs are often misguided. On the other hand, if there is solid proof that founders knew their vision had no hope of succeeding but presented it as though it did, that could and should be a problem.

These are desperately embattled claims at scale. If you lie to the SEC and you are an ass to the government they will crush you. Oldest story in the valley, and certainly beyond... another tale of hubris that ends in classic tragedy.

Well, 'prosecute'... no one is going to jail. White collar crime is normalized and expected in upper class circles. A single case like this is a drop in the bucket. While certainly not a majority, there are absolutely people in this world that believe if someone will not come to you and put a gun to your head, back you into a cage, and lock you in it, then whatever they are doing is fair game. If people really wanted to stop them, they'd take it that far. So they see any other standard as frivolous and silly to pay attention to. Ethics? What ethics?

>For all those entrepreneurs are trying to "fake it until you make it" be aware that the SEC considers your strategy both fraudulent and they feel they have the jurisdiction to prosecute you.

Holmes was, in many ways, embodying that HN mentality, acting on the basis:

- that an entire industry has been doing it wrong

- that it can be fixed by a low-bureaucracy, Angel-funded startup

- that once you have enough success you can just rewrite the laws that were slowing you down

- that no one knows what they're doing anyway, major projects are 100% guesswork, and you should just "fake it till you make it"

- that any skill is just a matter of 10,000 hours of practice

- that you can outsmart an industry before even passing or placing out of sophomore level classes

- that any self-doubt must be Impostor Syndrome, and so it's not worth your time to even check if that doubt has a factual basis

Yes, I've posted this twice before but I'm citing it and admitting to it, and it got heavily upvoted both times (thanks to Algolia for making comments so easily searchable btw):


Please don't copy and paste content into Hacker News, regardless of how good you think your past comments were. The threads here are for conversation, not reciting from the record.

There is no "HN mentality", just a large statistical cloud that people see what what they want in. Most of that cloud has been the opposite of what you're suggesting. Commenters here have been not just skeptical but cynical and outraged by Theranos for years, to the point that it became tedious. It looks to me like you're engaging in a bit of revisionism for the purpose of posturing above the community. That is a popular sport but a distasteful one.

>Please don't copy and paste content into Hacker News, regardless of how good you think your past comments were. The threads here are for conversation, not reciting from the record.

Would you mind giving some guidance on what I should have done in the situation? I was doing the best I could against the constraints. The situation was that someone made point X, to which I have point Y as a reply. Both X and Y, in some form, have been posted numerous times.

Should I:

1) Not reply?

2) Reply, but make sure to reword Y each time?

3) Link to a previous version of Y?

4) Copy-paste a previous Y but not admit to it so it's not clear I did anything wrong?

I chose 5) copy-paste the best previous version of Y and be transparent that I"m doing so, and why I thought the circumstances merited it. You think that's the wrong choice. 4) and 3) don't seem much better based on what you've said.

I'm guessing you want 2), but IMO that's even worse because it disconnects the discussion from previous ones and forces us to retread the same ground more clumsily.

>There is no "HN mentality", just a large statistical cloud that people see what what they want in. Most of that cloud has been the opposite of what you're suggesting. Commenters here have been not just skeptical but cynical and outraged by Theranos for years,

That's kind of my point. The typical comment is outraged at Theranos. But the typical comment is also endorsing the very kind of behavior that avoids and ignores those very same warning signs. "Well sure, I consistently said over the years to 'never listen to the haters'. But I didn't mean when they were right, of course!"

"HN [most often] tells everyone that no one knows what they're doing either" is not revisionism. Revisionism would be claiming outrage that someone would press ahead when they didn't know what they were doing.

Writing a new comment would be fine! and linking to an old one would also be fine. I agree that what you did is better than #4 (and am grateful for that) but it's still not kosher. Think of how good conversation works. People can make the same points in different contexts without literally repeating past statements. Something about creating each statement in the moment—even though there are only so many ideas to go around—serves conversational flow.

I don't agree with you at all about what the typical HN commenter is endorsing; it seems to me you're adding a lot of interpretation to a lot of disparate information and constructing something of a straw man.

By the way, if anyone is interested, only a small minority (10% if that) of HN users are in Silicon Valley. And plenty of those identify more against it than with it.

People here gave me talking points based on what you are saying years ago when I expressed skepticism about Theranos. I worked in the diagnostic industry and know that 1. Many tests (that are in the comprehensive panel that is routinely ordered) cannot be done with a finger stick, they need venous blood. 2. This isn't like a social network you can start out of a dorm room, it is a 50+ billion dollar industry that is highly regulated and needs real science.

What if some 20 year old business major drop out said they are going to make chipsets double the speed of the old and lumbering tech companies like Intel? Everyone here would say no way and never think that would be disrupted so easily. So yes it is a case of people with HN mentality thinking that well taking blood via a venous draw and giving me my results a day later is cumbersome and stupid, and rife for disruption. Someone thinking outside the box despite me or that person knowing next to nothing about clinical lab tech can easily make it better than Roche, Quest, Lab Corp, Abbot etc. because they can move quicker, and disregard the old paradigms. With no consideration for the physical impossibility with known scientific knowledge!

So yeah please by all means look at how smug a lot of us were on earlier Theranos postings about the Steve Jobs of med tech. It is a valuable lesson to learn. Not everything is inconvenient for no reason, and not everything can be disrupted without some serious demonstrable tech.

I don't doubt that the comments you're referring to existed, but the HN community has been overwhelmingly skeptical about Theranos for years, to the point of cliché.

Yes you are right later on people had more skepticism especially after the FDA piled on. The argument I am making is the initial claims they had about testing a single drop of blood were pretty outrageous to anyone that even knows a little bit about how this stuff works. Look at some of the downvoted comments they said exactly this! There are things that can be said well we didn't know they were hiding this, and there are things that people should have listened to someone that has even elementary knowledge of how this stuff works. Look how many people dismissed the impossibility of this stuff with remarks on her connections and the might of SV....

https://news.ycombinator.com/item?id=8181339 https://news.ycombinator.com/item?id=7951019

I skimmed those threads and read them pretty differently. Even many of the pro-Theranos comments were careful to say things like "How can I know to trust their numbers?" and "the enormous change her company is saying is possible" (emphasis added). Those seem to me to have aged pretty well, and then there are the many skeptical ones, including from people like you who have direct experience in that field.

You can have all of those listed beliefs and still be honest about the actual state of your company, progress towards goals, etc. Doing so will probably beat those beliefs out of you, and you can come to an honest understanding of your limits.

Arrogant, presumptive behavior is annoying -- but I think it's important to keep a bright line between that and dishonesty, because one self corrects and the other doesn't. And, a pinch of presumption is necessary for exploration.

Then I'm confused: how can you a) hastily dismiss all self-doubt as Impostor Syndrome and b) believe "no one knows what they're doing either" while remaining able to accurately, honestly self-assess your skill, quality of work, and prospects for success?

Edit: If you have a good answer, then I would suggest we start posting that as the advice ("here's how you know if you're good enough") rather than immediately tell everyone they have they have Impostor Syndrome (as seems to be common practice).

To me, "zero self-doubt" and "nobody knows what they're doing" are predictive hypotheses that can be falsified by future experience, when you get beat. I guess if you're talking about a psychopathic condition where your self-doubt bit is hard-wired to 0, then yeah you're not going to be able to assess your progress.

Those folks exist, but I meet plenty of basically honest people who are arrogant before experience and humbled after. Far more than the raging narcissists who will do what Holmes is accused of, though those get attention.

As a recent dad, I think a lot about sending my guys into a world with 10B people in it, moving incredibly fast publicizing accomplishments (real and otherwise) in ways that make it seem like every niche is filled up. It's clear to me that irreverence for status quo and honesty with themselves are going to be equally important in them finding a niche for themselves.

What's the original referent of your impostor syndrome comment? As I see the term used, it generally means "I'm an impostor among this crowd of other people who do actually know what they're doing," not "I am unable to do this thing that nobody has ever done."

That is, if you believe that you can't learn kernel hacking, that's (potentially) impostor syndrome. Lots of people have in fact learned kernel hacking, you can learn it too. Your self-doubt about it is based on (falsely) thinking that you are individually incapable of doing a thing plenty of others have done. But if you believe you can't build a perpetual motion machine, that's just thermodynamics. Nobody has built a perpetual motion machine, and doubt about your ability to do so (which isn't really self-doubt) will be quickly confirmed by a survey of the literature.

>That is, if you believe that you can't learn kernel hacking, that's (potentially) impostor syndrome. Lots of people have in fact learned kernel hacking, you can learn it too.

No, the fact that others have learned it is not (strong) evidence that you can learn it too; you would need to know how similar you are to those people, and whether those dimensions are relevant.

IOW, exactly the diagnostic criteria I suggest we search for rather than immediately skip to "so what, other people thought that too".

>Your self-doubt about it is based on (falsely) thinking that you are individually incapable of doing a thing plenty of others have done.

That's generally not what is happening in practice. People don't de novo say "I can't ever do this". Rather, they attempt (or otherwise survey) it, find difficulties ("I can't consistently understand how the stack is doing that"), see others that have no similar difficulties ("what? It would have taken me a day to work through that and it comes naturally to you"), and on that basis conclude that they're unlikely to succeed as well.

"You have Impostor Syndrome" doesn't make any headway on the core problem.

> Then I'm confused: how can you a) hastily dismiss all self-doubt as Impostor Syndrome and b) believe "no one knows what they're doing either" while remaining able to accurately, honestly self-assess your skill, quality of work, and prospects for success?

IDK, I feel like that's a sweet spot most people hit at the end of a PhD. Enough confidence in yourself that you can expend lots of resources trying hard things.

Enough humility to recognize that you'll probably fail at most of those things.

And most importantly, the project management, risk management, and communication skills to hedge your big bets.

Enough experience working with top-tier people to know that all of these things are learnable skills that other successful folks are using (including fields medalists and including high-school dropouts).

Maybe there's a difference between the "informed arrogance" of a researcher working on an open problem in their field (or a serial entrepreneur trying to disrupt a huge industry) and the "uninformed arrogance" of a charlatan, hack, or (in this case) fraudster?

All the less imposter syndrome to jettison if you ask me. If everyone is an idiot than self doubt is normal.

- dropping out is a positive thing (the implication being that education is either a scam or for dumb people, not smart people like us)

This feels more like an over-correction to the prevailing cultural wisdom that everyone needs a post-secondary education. Contrary thesis to the prevailing wisdom is where a lot of startup fortunes have been made.

Hopefully we're about to land in a cultural place where getting an education is seen as getting an education, rather than either a panacea for individual success or a complete waste of time/money for the docile masses.

I agree with every word, but at the same time I think a lot of people here on HN like to use hating on education as a humblebrag for how smart they are.

Theranos was more about using politically connected power-brokers to set up deals with kickbacks (their board/investors were government and military elites), less about "disrupting the industry with new ideas"

- that an entire industry has been doing it wrong

- that it can be fixed by a low-bureaucracy, Angel-funded startup

- that any skill is just a matter of 10,000 hours of practice

Some of these things are correct sometimes. Many industries have been doing things wrong for very long, and massively productive changes disrupted the industry. Who knew that boiling water would change the coal industry forever? Some guy came up with the pump idea and changed everything. The mine owner that invested in him made a lot of money. The industry changed. Things like that happen.

The problem lies in when you try to blindly apply these assumptions without anything to back it up. This is true of anything in life.

I get that we sometimes have gut feelings that we can't explain. We have to be honest with ourselves though. "Is it just that I don't want to face reality, or is there truly something that I can't put into words drawing me in this direction?"

She is too intelligent to have believed even half of these things, so I'm going with wilful deception.

what actual evidence do we have of her intelligence apart from starting theranos and doing the original research that led to starting theranos? honest question

I don't know, but suggesting that Marissa Mayer or Elizabeth Holmes are not among the most intelligent people ever roaming this planet quickly labels you as an insufferable misogynist here.

its a fine line for sure. but MM definitely achieved way more than EH did, going into Yahoo.

> that HN mentality

Is that the HN mentality? It might lean more that way now, I suppose, but I've always felt it was more in the "scratch your own itch" territory and less in the "complete industry outsider disrupts XYZ industry with revolutionary ideas" area

Maybe "that YC/startup news mentality" would be a better qualifier. The whole "better to beg for forgiveness than ask for permission" mentality. You can find some of that on HN but I hope we're a little more diverse than that.

I don't know if there's a single "HN mentality". This site is an ongoing uneasy truce between the entrepreneurs (who have more of the attitude the GP is complaining about) and the developers (who tend to be more cynical about these things and, if they care about startups at all instead of working a 9-to-5, are more likely to have the "scratch your own itch" mentality). There's a lot of back-and-forth between which viewpoint is ascendant in the comments, usually depending on how badly-behaved SV companies have been recently.

good thing you told us it was heavily upvoted before, now i know to upvote it this time too

Which of those ideas caused her to defraud investors for hundreds of millions of dollars?


Could you please start commenting substantively? Many of your recent posts have the effect of trolling, whether that was your intention or not.


Lets not pretend that everyone isn't just following the leaders here with grandiose messaging. Major tech corporations have done this as much as small startups.

IBM's Watson comes immediately to mind.

The difference is whether or not you can come through with some percentage of your promises. The ones who can eek out some kind of repeatable traction long enough to exit are successes, the ones who never get to scale are frauds.

No, Theranos outright committed fraud. They did things like used test results from some other kind of blood test to "prove" their test worked.

That isn't "We are on shaky ground with new, unproven tech." That's "We know it doesn't work. We are comfortable lying about it because money."

Agreed, but that's not what Chuck was talking about which is the "fake it till you make it" attitude/messaging.

> IBM's Watson comes immediately to mind.

All of the industry AI labs follow the same pattern, even (perhaps especially) the en vogue ones (well, I guess depending on wtf "solve intelligence" is supposed to mean...). Watson is just old enough that it's now obvious the advertising agency was given too much leash.

Ditto for self-driving.

Ditto, in fact, for basically any basic or applied research happening in the research arm of any for-profit organization. And at a lot of universities besides! In fact, as far as I can tell, positive PR is some non-trivial aspect of the ROI for industry research labs.

BUT... there's a HUGE GAAP ( ;-) ) between marketing hype and lying in financial disclosures. One is eye-rolly and should be called out on internet message boards and during sales pitches. The other is criminal.

His name is Tyler Shultz.

He is the main reason we know know what Theranos was doing.

He had his life destroyed, he knew it would happen, what Theranos would do to him, and he did the right thing all the same. Tyler Shultz is a hero.

Never let someone tell you that you don't matter. Try hard to do what is right. We need more people like him, be one of them too.

Be like Tyler Shultz.


Edit: Pic: http://www.dailymail.co.uk/news/article-3944392/Theranos-whi...

He has started his own company Flux Biosciences in 2017 after learning some important lessons...

"With Theranos I learned that entrepreneurs have to sell their vision," he said. "But you have to have some line between having a vision and seeing something that’s just not there."

"[Flux Biosciences] is developing point-of-care medical tests on blood, urine or saliva. Right now the company is working on a test for testosterone in saliva which could give a consumer health information but wouldn't serve as a diagnostic test that would affect medical care, as Theranos' tests aimed to."


It seems that there is justice in this world, then.

By going public Tyler Schultz very likely saved lives.

I can only wish him the best in his new endeavors. For certain, anyone doing business with him knows his handshake is worth something real.

Wait... How did he have his life destroyed? It just says that he hasn't talked to his grandfather in awhile...

He went on to start a biotech company (that seems to be doing alright) and was a Forbes 30 under 30 in 2017...

I don't see how his life was destroyed...

It's probably more accurate to say that, at the time he became a whistleblower, he had reasonable idea to believe that it could wreck his life. From the WSJ article:


> He says he was told by his parents that Ms. Holmes called the elder Mr. Shultz in the summer of 2015 to complain that their son was being unreasonable. Tyler Shultz says he also got a tip that private investigators were watching him.

> In a conversation in his parents’ kitchen, they pleaded with him to agree to whatever Theranos wanted, he says. Even though his heart sank when they discussed selling their house to cover the costs of defending him against a potential Theranos lawsuit, Mr. Shultz didn’t make a deal with the company.

> His parents said in a statement: “Tyler has acted exactly like the man we raised him to be, and we are extraordinarily proud of him.”

"His parents said in a statement" -- I remember when reading this story when it was originally published (2016) thinking how odd it was that his parents didn't agree to be interviewed in person. Or at least were worried about speaking out of turn at that point in time.

If you're involved in a complicated legal case, and you're not 100% sure what you're doing, no speaking to the press at all is your first preference, by a wide margin, and only speaking to the press in carefully considered, short, written statements in your second. Actually speaking to the press is for those with nothing to lose, and plenty to win -- or specialised training.

This is exacerbated by the dynamic that the part of the press you'll feel most eager to speak to, is that which are making upsetting misrepresentations about you or something you care about -- ie., those who have something to gain by manipulating you to say something controversial or incriminating.

"He and his parents have spent more than $400,000 on legal fees" for doing the right thing https://www.wsj.com/articles/theranos-whistleblower-shook-th...

Here are Tyler Shultz's grandfather and his wife:



It's unlikely that $400k will drive the family to bankruptcy.

You are making a subtle mistake here. Tyler's legal defence came from his parents' finances, not his grandparents.

Also, Tyler opting to become a whistleblower on Theranos caused a strain between his grandfather, who is a Theranos board member, and his own family.

So unless they resolve the impasse, it is unlikely that the grandfather will offer a helping hand (financially) to his son and grandson after outing the fraud in a company associated with him.

> The day he quit Theranos, Shultz says, Holmes contacted George Shultz and told him that if his grandson did anything to threaten the startup he would 'lose.'

The entitled thug...

and this would create a pretty awesome movie... think "erin brockovich"

I liked the bit where they tried to use the "women in tech are oppressed" narrative to cover her ass:

> Tim Draper, the founding partner of Draper Associates and Draper Fisher Jurvetson, appeared on television on Tuesday—not for the first time—to defend Holmes and Theranos. In an interview on Closing Bell, the world’s most loyal V.C. said Holmes has been “totally attacked,” and that she is “a great example of maybe why the women are so frustrated.”

Same narrative that was invoked in defense of Ellen Pao in her game of thrones with billionaires.

There are people who are fighting for a noble cause, and then there are parasites that use it for their selfish gain.

It's a little unclear to me how this is comparable to the Ellen Pao situation. Admittedly I haven't followed it as closely, but it sounded to me like she had some different ideas about where reddit should go and mishandled a key employee change. One can criticize those choices, but they hardly amount to being terrible at her job or fraud or not deserving the position in the first place.

I think a stronger case could be made that she was mistreated than that Elizabeth Holmes was. I don't know enough to have a position on whether that's right or wrong in Pao's case, but I can see the argument. I think Holmes was pretty clearly being attacked for all the right reasons however, and not for being a powerful woman CEO/founder.

The reference was to https://en.wikipedia.org/wiki/Pao_v._Kleiner_Perkins , not the reddit situation.

It's not too surprising. As soon as any kind of principle, good or bad, starts to have some kind of power when it's invoked, bad actors will swarm around it to use it for their own ends.

It isn't just bad actors. Its our fawning nature. I think that many people were reluctant to question Theranos precisely because she was a female entrepreneur.

Nowadays, you have many, many successful female tech entrepreneurs: stitch, bumble, ipsy, etc... and hopefully we are past the fawning phase and can apply critical thinking.

Exactly. In an industry as sensitive as ours, criticizing Holmes could easily get you labeled as a sexist. Especially on mediums where nuance is hardly achievable, such as Twitter. People's confirmation bias is a real problem in these scenarios.

I can think of a political example, too.

I had a similar thought when this story appeared this morning.


As snapshotted by archive.is http://archive.is/wO4B0

Theranos and Holmes have agreed to settle the fraud charges levied against them. Holmes agreed to pay a $500,000 penalty, be barred from serving as an officer or director of a public company for 10 years, return the remaining 18.9 million shares that she obtained during the fraud, and relinquish her voting control of Theranos by converting her super-majority Theranos Class B Common shares to Class A Common shares. 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. The settlements with Theranos and Holmes are subject to court approval.

Someone help me out: Does this settlement really make the affected parties feel the pain? Does it discourage other companies from attempting the same thing? Given the scale of the fraud, shouldn't these two simply be in prison right now?

SEC doesn't put people in prison, it can refer to Justice Department for prosecution. Whether it does or not, depends on the circumstances of the case. They prefer quick resolution rather than years of litigation.

Many people are in jail today because they can't post bail. You can discourage ever facing incarceration by being able to afford a good legal defense. You can be forced to accept incarceration without conviction because you are poor.

"In its majestic equality, the law forbids rich and poor alike to sleep under bridges, beg in the streets and steal loaves of bread" - Anatole France

My mom was a judge, and I learned that saying because she had it posted in her chambers.

I doubt Holmes can afford much of anything anymore.

I'm pretty sure that I won't find her living in a tent any time soon.

Surely her family will pay for a lawyer to keep her out of prison.

Yeah, it's easy for the government to threaten plebs with prison for misreporting a few thousands in taxes...because they can't defend themselves like Holmes does.

let's dispense with political bullshit. A protracted lawsuit would cost the government millions of dollars with an uncertain outcome. Instead, Holmes is paying the government 500K and returning shares. The SEC is going to court against Balwani, where the case is presumably stronger. the plebs is strictly better off and not everything the government does is bad.

Saying that people are better off with a quick resolution rather than a court case is also a political statement, as it's an opinion on what we as a society should value.

no. people are better off with a quick resolution because professional attorneys at the SEC decided that the legal case against Holmes is not strong enough to waste taxpayer money trying to PROVE she committed a crime. Calling their decision into question without a shred of evidence that they did something suboptimal, based on your political beliefs alone, is what I am advocating against.

EDIT: Which part of this statement are the downvoters disagreeing with ?

I am not saying you are wrong, only that you're making a political statement. Determining when to bet on a court case and when not to is a political decision -- do you draw the line at 85% chance of conviction? 60? 30? It can certainly be pragmatic with respect to certain metrics, but choosing those metrics, e.g. deciding that the aim should be the minimization of public expense and risk of failure is very much political. The metrics we need to optimize aren't chosen for us by the laws of nature, but by our political values.

no, I am not. Attorneys at the SEC made this determination based on everything they had on Holmes. Calling their decision biased against poor people vs rich people, etc, political rather than legal, etc. without any evidence is bullshit.

> based on everything they had on Holmes

... and a decision on when it is worth it to pursue a case. Unless the chance at conviction is zero, there is some politically determined risk threshold involved. Not only is the decision on the threshold political, but the risk itself is determined by the resources at the defendant's disposal. I am not saying that their decision is necessarily biased against poor people, but I am pointing out that there is a political stance involved no matter which way you come down on this issue.

Nah, the SEC rarely actually prosecutes someone (or more correctly works with DOJ to indict them and try them.) It is just how the SEC typically does business. They, (and other regulators, CTFC, SROs) take these little actions all the time in the financial industry. I think when see a case where they really try and nail someone then you look for the politics.

"and a decision on when it is worth it to pursue a case. Unless the chance at conviction is zero, there is some politically determined risk threshold involved" - you are alleging that in this specific case there was politically determined something - without any evidence whatsoever.

You two are using different meanings of "political".

There is no allegation of pulling strings and getting SEC lawyers to decide something based on her name, her connections. They act according to policy, based only on objective measures of the case.

But, it can be the policy of the SEC to objectively consider chances of winning (or getting a fraud conviction) and proceed to trial only if the chances are better than 90%, and it can be the policy of the SEC to go to trial on even 10% chances of winning, to generate as many fraud convictions as possible (at great expense to the tax payer).

Both policies are valid (I think), and the choice is political (subjective). A presidential candidate might get elected on a platform that includes going harder after well connected rich people doing white collar crimes, and then appoint a new head of the SEC to enact this new policy of being willing to spend more money to try to get people in jail for fraud.

"might". But we are talking about a specific case here. Does anyone have any evidence that SEC attorneys used considerations other than legal strategies in their decision to settle with Holmes? No? I rest my case.

I don't mean political in the same sense that you do. I don't mean back-room deals, but decisions that are based on prioritization of values and resources in society.

Deciding what constitutes "wast[ing] taxpayer money" IS a political decision. Clearly there is a difference between easily and well proven cases and cases with scant evidence, but determining precisely where the line lies is a political decision. Do you investigate weak cases to send the message that things won't be overlooked, or do you pass over them to minimise public expenditure, for example.

Actually I'm relying on the SEC's statement that she was an active participant in a large multi-year fraud. True, I've always thought Theranos was Too Good To Be True and had doubt about la Holmes' probity.

But I think you're getting downvoted because you're arguing that white collar crime, even at scale, isn't worth prosecuting, and ignoring the perverse incentives that result from such decision-making.

It isn't just white-collar crime. The justice system isn't equipped to prosecute any crimes at scale. That's why prosecutors rely on plea bargains (and their over-broad, under-scrutinized powers in negotiating same) for the vast majority of cases. The courtroom is for the small minority who can afford representation and are willing to risk a very bad outcome.

that's a bizarre reading of what I said, given that I am talking only about her specific case.

So if it’s too expensive, we should let criminals walk? Fraud is a crime you know.

She should be in jail. Kids have gone to prison for marijuana possession and this lady walks? Martha Stewart and that Martin guy went to prison for less.

Well, according to Forbes, Holmes is worth _nothing_[0], so $500,000 is probably fairly painful. Plus, relinquishing ~19 million shares regardless of their value has to hurt. Also she no longer has the majority of votes in her own company. And as a CEO who can't be an officer of a public company for 10 years, yeah that probably really hurts too. Not to mention her name is effectively toxic pretty much forever now. So she's not going to jail, but those penalties certainly look painful to me.

[0] https://www.forbes.com/sites/matthewherper/2016/06/01/from-4...

It seems like a much larger fraud than Shkreli's, who got 7 years. Also, as someone pointed out, they didn't just deceive investors, they deceived the people who were getting blood tests and that seems much worse. So one might suspect there's some sort of privilege going on. Or maybe the story just isn't complete yet.

Politicians needed the prosecutors to make an example of Shkrelli because they needed to distract people from the fact that cornering a drug market and hiking the prices is still perfectly legal and practiced by much larger companies.

Her family is rich and connected. I don't see the punishment is too harsh without her going to jail.

19 million shares of a company worth nothing?

This will wipe her out, and likely kill her career. Remember, this is just the SEC. The pain they inflict is commensurate to investor pain.

The government still should go after them for endangering people’s lives. There should be long jail terms for that.

>This will wipe her out

Will it though? Surely Holmes still has a few million stashed away somewhere that she can live comfortably off of? This settlement isn't going to leave her destitute.

Either that or I'm sure she set up some clever offshore accounting structure that has $10M stashed in the cook islands or some shit. As soon as you get some cash, I think "rich person 101" is you set up some complicated structure to hide rainy day money for this very reason. I would venture to guess she took home at least $50MM in all those rounds of investment (maybe more? i have no idea how that works.), I doubt she blew it all or was stupid enough to leave it in plain sight.

Matt Levine at Bloomberg says she never sold any shares and was paid a fairly modest salary for her role.


It's right there in the civil complaint. Dunno if there were any other forms of compensation, but at first glance it does sound like she lost everything:

> Holmes was paid a salary of approximately $200,000 to $390,000 per year between 2013 and 2015. During the same period, she also exercised approximately 53.7 million stock options and received super-majority voting, Class B common shares, which granted her almost complete voting control over the company. Holmes has never sold any of her Theranos stock.


I should be more precise... This wipes out her Theranos stock. Who knows what she paid herself. Her VC was a family friend, so I suspect she has family money, and may stand to inherit Palo Alto real estate.

The big difference is for all the time invested, her current stock is worth zero.

She lied, and doing so stole people's money, and maybe hurt some people's health. Who cares she got nothing from what she did. That's how it usually works for startups anyways, you risk having wasted your time. That's why we need making it worse, a stronger deterrent then her company dying, otherwise lying can be seen as acceptable to prevent a compagnie's death, as the only negative side effect is the company dying

She’s lost every chance to get a good exec position. The SEC doesn’t send people to jail, that’s out of their jurisdiction. The government will be the ones to do that.

Did she take money off the table? Not everyone does/can, even when they raise a lot.

I often wonder about this. I know founders that have instantly taken $100k off the table on a $1M angel investment. but such is silicon valley life i suppose?

Per other posts in the thread it looks like she didn’t beyond a 6 figure salary.

> The government still should go after them for endangering people’s lives. There should be long jail terms for that.

But the SEC won't, because that's not what they do. And this is, I think, as it should be.

Exactly - separate group.

Settlement is probably best for investors because they immediately get control of the company and Holmes basically gets nothing.

The job of the SEC is to protect investors so they are probably doing the right thing here.

True, and besides having lost money, their investors also continue to lose credibility, considering the poor if not complete lack of due diligence on their part, as long as this fiasco is in the spotlights.

Yeah, I don't think she gets nothing. She was paid a salary for many years, I would't be surprised if it was a pretty hefty one. There were probably other perks, too (wasn't she known to fly private for business trips?). It looks like she simply relinquished some equity that probably wasn't worth very much anyway. This settlement doesn't look like much of a deterrent to future would-be fraudsters.

I wish we could do this to politicians, once caught in lie and fraud, bar them from taking any public office for 10 yrs :).

I agree she got away lightly.

Funny fact, in 2013, Italy actually banned Silvio Berlusconi from holding public office for 6 years. But, that doesn't stop him from participating and trying to win elections anyways...

He's not participating personally: he can't be elected. But his party wasn't barred.

Right, they find someone else to sign the paperwork.

Impeachment provides for this. At the federal level, you are bared from public office for life upon conviction. And it doesn't apply only to elected officials, but all public officials. Even some low person on the totem pole could be impeached, removed from their office, and bared from holding any public office ever again. Pardons do not apply to impeachment convictions.

States vary in their impeachment proceedings and what burdens must be met.

Most likely she also has Directors and Officer's Liability Insurance:


As part of the settlement, there was no actual admission of wrongdoing or fraud, so it's quite possible that the insurance would pay the fine.

Maybe, maybe, if the insurer had the option to direct any defense, but it's still mighty hard to insure against willful acts.

If you are convicted for drug trafficking or plead guilty to it, any asset that you can't prove you received through other legal means is likely to be subject to seizure.

Isn't that also true without your if-clause?

The "is likely to be" part is not true in general.

Changing that "likely to be" into a "may be" would make the statement true(r) without the if-clause.

Also if the if-clause stated "suspected of" rather than "convicted of", then the "is likely to be" part would be true in general.

Let me show why I believe what I said. I'm no expert, and I would like it if you could clarify my understanding of why you think seizure of assets is not likely.


Yes, I know exactly what you were referring to.

I think this sentence is accurate: If you are suspected of drug dealing, any asset that you can't prove you received through other legal means is likely to be subject to seizure.

I think this sentence is accurate: any asset that you can't prove you received through other legal means MAY be subject to seizure.

I think this one isn't accurate, though: any asset that you can't prove you received through other legal means is likely to be subject to seizure.

Maybe I'm just surrounded by extremely lucky people, but none of the people around me (all of whom aren't partaking in illegal behavior / have never been suspected of illegal behavior) have had the police show up and randomly take their stuff.

> Maybe I'm just surrounded by extremely lucky people

I'm going to hazard that location, socio-economic status and skin color each could have more to do with it than luck.

The civil forfeiture epidemic is more localized.

It's a slap on the wrist compared to the crime.

So she can’t be a director of a public company? Other than Yahoo, who would even consider hiring her?

This “punishment” doesn’t seem like one. She should be in jail.

I don't know if I agree with you. Personally, I can't imagine the humiliation of carrying this around with me...

Everyone loves a comeback story, though. In a few years she'll take the circuit of podcasts / news outlets.

"I thought we could do it. It started with a single, tiny lie and then it snowballed. I get out of control. I took some time off and now I'm starting my own company. We will be the most transparent company in the world and we're innovating X!"

Something along those lines. It's not a life or career ender IMO.

Even Tonya Harding is the subject of a flattering movie now

Lots of people currently in prison would happily choose "carrying around humiliation" as an alternative, I expect.

She got to live a few years as a billionaire. She could easily get a normal, non-executive job like 99% of Americans after this.

I think most people would take a lifetime of "humiliation" if they got to live an unreasonably extravagant life for a while then return to an upper middle class lifestyle, occasionally having news articles written about them until it all fades away completely after 5-10 years. A sentence of "humiliation" would only make scams like Theranos a more appealing idea to many people. And frankly, if someone could go so deep with a scam like Theranos, I don't think they/Holmes have much of a sense of shame to begin with. They'll justify their fraud to the very end.

I assume she took plenty of money from the table, too.

> shouldn't these two simply be in prison right now?

Compare and contrast with Shkreli sentencing. Some animals are more equal than others.

I'm not really sure that's fair. In fact, IANAL and have zero knowledge of law, but the two had seemingly nearly opposite intent of their crimes. Who knows what was going on in the girl's head, but it sounds more like a bunch of idiot investors gave a lot of money to a dreamer who wanted to make an impact and didn't know when to quit and fold her hand rather than an elaborate con. That gets taken into consideration before pitchforks come out.

At a certain point you have to wonder why did a 21 year old get paid 700 million dollars on good faith to start a pharmaceutical company with little oversight? I remember reading about the board a few years ago and just looked it up again. Several generals, Henry Kissinger...huh?

This is all seems pretty obvious in hindsight.

> sounds more like a bunch of idiot investors gave a lot of money to a dreamer who wanted to make an impact and didn't know when to quit and fold her hand rather than an elaborate con

Until you said 'her', I actually thought you were referring to Shkreli. He ran a hedge fund starting at 23, and when he lost a lot of the money, he made bigger bets and tried to earn the money back rather than admitting his losses.

> I remember reading about the board a few years ago and just looked it up again. Several generals, Henry Kissinger...huh?

Shkreli raised money from Steven Cohen's SAC Capital, the family of Fred Hassan (former CEO of Schering-Plough), and Brent Saunders, the current CEO of Allergan.

Their stories, though they differ in industry, seem quite similar when compared in detail.

While I don't know either of them so it is an unfair judgment to make, I would guess there's a big difference in thoughts in the back of their head:

"These idiots aren't getting their money back, wait for my next play..."

"If I can hold them off for another year, we'll have a big breakthrough..."

Making larger bets to cover for an hide losses is a very common story for traders on wall street. Buying an AIDS drug to price gouge is not. In contrast, it seems like Holmes had an earnest desire to improve medical tech.

Again, I'm speculating, we'll see if this unfolds any further. Fun story to follow.

Well, Holmes and Balwani didn't actively and loudly antagonize most of the country.

Most rich criminals know that when you scoff at the law, you should do it quietly.

It also helps to have lots of family and friends who have given lots of money to lots of politicians. For nonviolent crime like this, the law really is different for different people.

Most poor criminals know that, too. Shkreli openly taunted the criminal justice system, and that doesn't end well for anyone.

Some animals at least are likeable as people. Others are not.

Remember who was on the Board of Theranos. These upstanding Americans will never serve a day in Prison including Holmes and Balwani. Shkreli on the other hand was thrown in prison for raising the price of a drug, making money for his investors and offering a reward for one hair.

Justice has been served.

Junk away....

Shkreli was actually thrown in jail for comprehensively defrauding investors.


Fined $500k AND she returns 19M shares. Unclear if that's "effectively all of it" without doing more homework.

I remember seeing one of her public appearances for the first time (when they were flying high and before there was any doubt), and she seemed incredibly fake to me.

Pharma Bro was just sentenced to 7 years in jail for misrepresenting facts to investors, despite said investors did not lose any money but actually made some [1]

Here Holmes not only doctored power point presentations to baloon numbers to investors, but put thousands of lives in danger (if some were lost, we will eventually find out) by providing wrong results for tests to many patients that lives relied on it, and she gets jail-free card and slap on the wrist.

[1] https://www.cnbc.com/2018/03/09/pharma-bro-martin-shkreli-se...

Shkreli received 7 years in prison because he was found guilty by a jury for securities fraud. What you refer to as "Here Holmes..." was were SEC civil charges. A criminal investigation was opened in mid-2016 and, as far as we all know, is still underway:


Yeah, he was kind of a douche, but it's pretty obvious he only got slammed with that kind of time because he didn't play the game right.

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