From being a poster child of the startup community, Theranos founder and CEO Elizabeth Holmes has fallen a long way. The blood-testing company that promised to revolutionize the industry suffered another blow Monday when an early investor sued the company for alleged fraud.
Robert Colman, co-founder of Robertson Stephens & Co., invested in Theranos in late 2013 through venture-capital fund Lucas Venture Group, and in the lawsuit filed in federal court in San Francisco on Monday, he alleged the company made false and misleading claims about its technology and operations to get funding, according to a report in the Wall Street Journal, which added the suit is also seeking class-action status.
In July this year, Holmes was banned from operating blood-testing labs for two years by federal regulators who also fined the company and revoked the regulatory approval for its lab in Newark, California. Theranos also voided two years of its lab results.
Citing the findings of federal regulators, the Monday lawsuit alleges the company misled investors and cites another Journal report to say Theranos employees were uncertain of the technology.
Theranos claimed its Edison testing machine could conduct many blood tests with only a few drops of blood instead of the traditional requirement of vials-full of the red stuff. A report by the Journal in 2015 questioned those claims, starting the controversy the company now finds itself embroiled in.
The company is also being investigated by the U.S. Securities and Exchange Commission. Valued at about $9 billion in 2014, it was valued by Forbes at about $800 million in June this year. It has also been sued by ex-partner Walgreens, as well as another investor, Partner Fund Management.