A San Francisco hedge fund Monday accused Theranos Inc. and founder Elizabeth Holmes of lying to attract $100 million in investment in a lawsuit filed in Delaware.
Partner Fund Management LP sent a letter to investors, accusing Theranos of “a series of lies, material misstatements, and omissions,” the Wall Street Journal reported. The letter said the company “engaged in securities fraud and other violations by fraudulently inducing PFM to invest and maintain its investment in the company.”
Theranos operated blood-testing labs, which it decided to close in August amid questions about the accuracy and viability of its testing technology. The labs shut down last week. Federal criminal and civil investigations are underway.
“Theranos and its principals knowingly and repeatedly lied that they had developed proprietary technologies that worked, were on the cusp of receiving all necessary regulatory clearances and approvals, and concealed the truth about the commercial viability of their technologies and methods," PFM said.
Theranos issued a statement saying the suit is “without merit.”
“The hedge fund is engaging in revisionist history, making claims that are not rooted in facts. The company remains committed to its mission and is appreciative of its strong investor base that understands and continues to support those efforts,” Theranos said.
Bloomberg reported PFM had invested about $96.1 million in Theranos by February 2014. In all, investors poured $800 million into the company.
Theranos, which at one point was valued at $9 billion, had promised to revolutionize blood-testing by reducing the amount of blood needed for various tests. The company now has shifted its focus to a 95-pound miniLab diagnostic tool.
Theranos had partnered with Walgreen’s in the Phoenix area, but after allegations of faulty test results surfaced, the drugstore chain walked away from the deal in June.
Holmes, a Stanford University dropout, founded Theranos in 2003 when she was just 19. The company’s fortunes began to wane a year ago when the Journal published two front-page stories questioning the accuracy of the company’s technology and charging it was used only for a handful of tests.