Lawsuit Claims Theranos Ran Fake Tests to Impress Investors

Image: AP
Image: AP

The bad news continues to roll in for Theranos. Earlier this week, the embattled blood-testing startup had to issue refunds to anyone in the state of Arizona who had used its services. Today, The Wall Street Journal reports on new allegations made by a Theranos investor in a recently filed lawsuit.


You may recall that Partner Fund Management LP is suing Theranos, accusing Elizabeth Holmes and company of deceiving the fund so that it could score $96.1 million in investment capital.

On Friday, the Journal obtained unsealed court documents in a related lawsuit by the fund that make some pretty damning allegations about the lengths Theranos went to to convince investors that its technology worked:

The Silicon Valley company—which once promised to revolutionize the blood-testing industry using tiny samples from finger pricks—also allegedly ran “fake ‘demonstrations tests’ for prospective investors and business partners” using commercial devices while pretending to showcase its own technology, according to the filings.

Theranos is also accused of using a shell company to buy commercial lab equipment, and of creating financial projections that were not accurate. The allegations in the lawsuit stem from depositions given by 22 former Theranos employees or directors.

One of the parties deposed, retired Navy admiral Gary Roughead, said “it was not until some of the press reporting that I became aware that there was extensive commercial analyzers in use.”


For its part, Theranos insists this is all just fake news, telling the Journal that these allegations are a “one-sided filing by one party to litigation,” and disagreeing “with much of what PFM alleges in its complaint.” We’ve reached out to Theranos for comment and will update if the company wants to respond.

Partner Fund Management originally sued Theranos in October, alleging that the company misled it during its quest for investment capital. According to the Journal, the fund filed another lawsuit against Theranos earlier this month trying to block a deal the startup was trying to make with other investors.


In March, Theranos offered to give investors more stock, so long as they promised not to sue the company. Partner Fund alleges that in addition to more shares, those trusting investors would also be paid back before others in the event that the startup files for bankruptcy. A judge agreed with Partner Fund, and temporarily blocked that deal from taking place last week. A hearing about whether or not Theranos can sign a no-sue agreement with the investors (it still talks to) will be held in early May.

Partner Fund isn’t the only company suing Theranos. In November, Walgreens filed a $140 million lawsuit, after it terminated its partnership with the company in some of its pharmacies and wellness centers.


[The Wall Street Journal]

Christina is a senior writer at Gizmodo.


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