Tyler Shultz and Erika Cheung were whistleblowers who exposed Elizabeth Holmes' illegal, often life-threatening practices. The Wall Street Journal investigative reporting was the first to reveal in 2015 how Theranos technology did not work. From the very beginning, The WSJ was tracing the scandal and delivering the revelations from Holmes’ trial.
Theranos - the Silicon Valley’s darling
Theranos, a biotechnology company, was founded in 2003. It was supposed to solve millions of people's problems related to complex and time-consuming health checks. This new startup was founded by a former student of Stanford University, 19-year-old Elizabeth Holmes.
Elizabeth Holmes - Techcrunch Disrupt
September 8, 2014 in San Francisco / ©Techcrunch (CC BY 2.0)
Holmes announced that she was working on a device that could detect hundreds of diseases from just a few drops of blood taken from a patient’s finger. This solution sounded great. Owing to it, endless waiting lines to doctors were expected to come to an end, and cancer patients hoped for faster and less painful tests. Ultimately, the company wanted every person to have such a device at home and detect diseases on their own before they manage to get to the doctor. Taking a few drops of blood from a finger by yourself. Sounds like a dream.
Unfortunately, the reality turned out to be different. The device called Edison never worked well. Only 12 out of 100 examined patients received correct test results. Theranos’ scientists have not been able to fulfill the project assumptions and overcome many relevant problems.
Elizabeth Holmes refused to admit defeat. This young businesswoman, nicknamed by the media "the successor to Steve Jobs”, has been able to fool the most prominent heads in business and politics over the years, raising hundreds of millions of dollars to fund research and development for the company.
During her years of activity, Holmes repeatedly lied. She kept showing her investors fabricated results of Edison's work while falsifying the results of blood tests of real patients on typical samples’ volume.
No one knows how far her illegal activities could go. One thing is certain - when Erika Cheung and Tyler Shultz (grandson of one of the main investors, former US Secretary George Shultz) joined Theranos, the situation of Elizabeth Holmes completely changed. Cheung and Shultz were young laboratory employees hired right out of college.
Erika Cheung / TEDx
They carried out simple laboratory tests by analyzing blood results. Young people who got to know each other only while working together at Theranos quickly noticed the shortcomings and offenses committed by their co-workers and bosses. From the beginning, they were surprised by the company's strict security rules. Over time, they learned why the founders were so careful about the secret of Edison's operation.
It turned out that Theranos lied not only to investors but also to patients, often making mistakes in the research results. Employees were forced to carry out blood tests on competitor’s machines - Siemens. Of course, all with the highest level of security and secrecy. All employees were forced to sign numerous non-disclosure agreements, which said that if they revealed to an outsider how Theranos operated, they would be subject to multi-million dollar penalties.
“To me it seemed kind of as a final resort to get the truth out about what was happening with these patient samples”
Cheung @ The Wall Street Journal.
Although many people did not like the company's practices, only Cheung and Shultz opposed the unicorn from Silicon Valley. Young laboratory technicians decided to reveal what they knew about illegal, often life-threatening practices in 2015 to John Carreyrou, the “The Wall Street Journal” journalist. His article became the beginning of the end of Elizabeth Holmes‘ career and her business.
Tyler Shultz / Audible
These revelations from the first Theranos whistleblowers attracted the attention of the media and US government units. Theranos engaged its best lawyers to threaten both “The Wall Street Journal” and the whistleblowers, but their actions came to nothing.
“It was clear that there was an open secret within Theranos that this technology simply didn’t exist”
Shultz @ National Public Radio (NPR)
More and more misconduct and illegal activities of the company began to come to light. In April 2016, Elizabeth Holmes and her associate and life partner Sunny Balwani were investigated by federal prosecutors and the U.S. Securities and Exchange Commission (SEC) for allegedly misleading investors and government officials about the technology they were developing. Shortly after, charges were filed against them.
Elizabeth A. Holmes and Ramesh “Sunny” Balwani (...), are charged with wire fraud, in violation of 18 U.S.C. §1343, and conspiracy to commit wire fraud, in violation of 18 U.S.C. §1349. The charges stem from Defendants’ allegedly deceptive representations about their company and its medical testing technology.
United States v. Elizabeth A. Holmes, et al. 18-CR-00258-EJD
Elizabeth Holmes trail
As a result of an ongoing lawsuit, Theranos closed its operations after 15 years of business activity, and Elizabeth Holmes went from millionaire to bankrupt. In addition, both she and Balwani were sentenced to prison: Holmes for over 11 years and Balwani for about 13 years for defrauding investors in this blood testing start-up.
“I am happy that she was found guilty of these crimes and I feel like I got my vindication from that, and I feel good about that.”
Shultz @ CBS News
In 2019, Holmes married in a secret wedding Billy Evans, an heir to the Evans Hotel Group chain of hotels in California. The couple welcomed two children - on July 10, 2021, and on February 24, 2023. That is why Holmes starting to serve her sentence was delayed to April 27, 2023. However, in May 2023, the woman still remained free while the court considers a last-minute appeal.
Sunny Balwani was sentenced to 13 years in prison, and he has already reported to prison.
To this day, many associate the names of Cheung and Shultz as one of the most famous whistleblowers. Due to their courage and determination, Theranos' practices were cut down, and patients were no longer put in lies and danger.
Elizabeth Holmes in jail
Elizabeth Holmes request to remain free on bail was denied by an appellate court. Holmes reported to the Federal Prison Camp in Bryan, Texas, on 30 May 2023, on the day appointed by a judge as the revised prison reporting date. The arrival comes more than a year after she was convicted. In jail, Holmes will be serving out her 11-year and 3-month sentence. She left her family - a husband and two children in their recent house in California. Nevertheless, they will be able to see each other during weekend visiting hours and federal holidays at FPC Bryan.
FPC Bryan is a minimum-security federal prison camp for women with dormitory housing, a relatively low staff number, and without barbed wire. Inmates at FPC Bryan are assigned to a job that includes food service roles and factory employment, with wages ranging from $0.12 to $1.15 per hour. They wear khaki uniforms consisting of pants and a shirt. Jewellery is also forbidden unless it is a wedding band or a religious medallion without stones of value not exceeding $100 per item.
It is presumed that as an educated person, Holmes might start volunteer teaching at the prison.
In a separate ruling from May 2023, Holmes and Balwani were also ordered to pay $452 million in restitution.
The story of Holmes and Theranos was found to be attractive for movie plots.
The 2022 TV series “The Dropout” tells the real-life story of Holmes’ career and the innovative startup she founded. Eight episodes follow the aspirations of Holmes to become an inventor associated with the genius of Steve Jobs. The story ends when Theranos employees reveal the truth of how the revolutionary project was carried out.
In 2019 “The Inventor: Out for Blood in Silicon Valley” was released. The documentary shows how huge attention the company paid to marketing actions and contacts with the media with simultaneous neglect of the R&D aspect and opinions of medical authorities. Elizabeth Holmes and Sunny Balwani seemed to believe in the success of their project and eagerly reached for the investors' money and patients' trust.
What happened to Erika Cheung?
Cheung quit Theranos. Since then, she has given a talk on a TEDxBerkeley about her experience.
In 2014, she went on to work as a Research and Development Associate for Antibody Solutions. She is the co-founder of Ethics in Entrepreneurship, the organization for training for future tech leaders, which she describes as having risen “from the ashes of the Theranos scandal and is driving an expanded and improved approach to entrepreneurship”.
Today, Cheung lives and works between New York and Los Angeles, though she continues to work for Asian-Pacific region companies.
Even having lived through the expereince, the documentary was really insightful and offered a fresh perspective on Theranos case. A cautionary tale any entrepreneur can learn from. https://t.co/XnVGLNTmTN— Erika Cheung (@ErikaMCheung) January 28, 2019
What happened to Tyler Shultz?
After leaving Theranos, Tyler Shultz returned to Stanford to work in the Wang Lab research group, studying giant magnetoresistive (GMR) technology.
Today, Tyler is the co-founder and Head of the Product at The Healthyr Co., which allows consumers to take charge of their health through early identification of issues. The company provides valuable health insight and actionable interventions to its customers.
Besides many other professional activities, Shultz is also an advisory member at The Signal Network, which supports whistleblowers and helps to coordinate international media investigations against corporate misconduct and human rights abuses.
This has been a long chapter of my life. I am happy that justice has been served and that this saga is finally in my rearview mirror. Proud of the impact that Erika and I had. Hope to inspire other young professionals to hold their leaders accountable.— tylershultz (@TylerShultz_) January 4, 2022
The role of the Theranos whistleblower brought damage to Shultz’s personal life. The relationship with his grandfather George Shultz, who strongly believed in Edison and Holmes, was tough and strained.
Did George Shultz apologize to Tyler Shultz?
In a CBS interview on January 4, 2022, Tyler Shultz said he reconciled before George Shultz died in February 2021. Despite never apologizing to him, Tyler said his grandfather did finally acknowledge that he was right.