Elizabeth Holmes' no good, very bad day: Bail denied and a bill for $452 million

Convicted fraudster Elizabeth Holmes had a rough Tuesday.

The judge in her fraud case, US District Judge Edward Davila, ordered her and her ex-boyfriend, Ramesh "Sunny" Balwani, to pay $452 million in restitution to defrauded investors of their infamous and now defunct blood-testing company, Theranos. Holmes, the company's founder and former CEO, and Balwani, the former president, are jointly responsible for paying back the entirety of the hefty sum.

Meanwhile, a three-judge panel for the US Court of Appeals for the 9th Circuit denied Holmes' last-ditch effort to stay out of prison while she appeals her conviction. Last month, Holmes' challenged Davila's previous denial of bail, asking the 9th Circuit appeals court to weigh in. The move triggered an automatic delay to the start of her 11-year-and-three-month prison term while the appeals court reviewed her argument. Davila had previously ordered her to report to prison on April 27.

While her latest effort bought her a few extra weeks of freedom, the appeals court unsurprisingly denied her bail. In a one-page order Tuesday, the judges concluded that Holmes' appeal didn't raise a "substantial question" of law or fact in her case, nor would it reverse her conviction or warrant a new trial if the court sided with her. The appeal of her conviction will proceed as previously scheduled, and it was up to Davila to set a new date for Holmes to report to prison.

In filings Wednesday, Holmes requested her new prison start date be May 30, giving her time to get her affairs in order, including setting up childcare arrangements for her two young children. Davila agreed.

Balwani, who was convicted on all 12 counts of defrauding Theranos investors and patients, already began his nearly 13-year prison term last month. Balwani is also appealing his conviction and had attempted to remain out on bail during the process.

Rise and fall

While at the helm of Theranos, Holmes and Balwani claimed their proprietary blood testing device could accurately perform hundreds of medical tests using just a tiny drop of blood from a finger prick. Holmes became a Silicon Valley superstar, receiving glowing publicity while wooing high-stakes investors. In 2015, the company was valued at $9 billion, and Forbes listed Holmes as the richest self-made woman, with an estimated net worth of $4.5 billion.

But in 2018, federal prosecutors charged the duo with scheming to dupe investors into funding their startup technology, which never actually worked. As Davila summarized it, the government alleged that between 2010 and 2015, the two made "false statements regarding the capabilities of Theranos's proprietary analyzer, its financial revenue streams, and device demonstrations, as well as misrepresenting Theranos's relationships and interactions with Walgreens, the US Department of Defense, the Food and Drug Administration, pharmaceutical companies, and research institutions."

Once the company was going, federal prosecutors allege the pair moved on to defrauding doctors and patients between 2013 and 2016. This allegedly involved "delivering marketing materials to doctors and patients regarding Theranos's blood tests, posting misrepresentations on Theranos's websites, and transmitting blood tests results with inaccuracies and modifications."

In January 2022, Holmes was convicted on four counts related to defrauding investors, and Balwani was convicted last July of defrauding investors, doctors, and patients.

In Davila's order Tuesday, he calculated that Balwani and Holmes owe restitution of $452 million. That includes paying back $397,547,268 to individual investors, including Rupert Murdoch, who invested the largest sum of $124,999,997. It also includes paying $14.5 million back to Safeway and $40 million to Walgreens, which partnered with Theranos to offer blood testing in the drugstore giant's neighborhood stores. Davila noted that when Walgreens asked for due diligence documents about the technology, Holmes sent the pharmacy chain doctored validation documents that carried Pfizer's logo--even though Pfizer never endorsed the Theranos' tech and was skeptical of it and backed out of investing in the company.

It's unclear how Balwani and Holmes will split the bill. According to court filings, Holmes only has modest assets outweighed by a $450,000 loan to pay a settlement with the Securities and Exchange Commission. She has also accrued over $30 million in legal fees.