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Major Investor Sues Theranos
- dsacco 10y agoThis is the first article on this news, so I couldn't find a non-paywalled source. For those who don't subscribe to WSJ, the tl;dr is as follows: • SF-based hedge fund, Partner Fund Management LP, is suing "Theranos and its founder", alleging they lied to attract nearly $100M in funding. • Sources are an internal "fund document" and "people familiar with the matter." • The fund document was reviewed by WSJ and states: "Through a series of lies, material misstatements, and omissions, the defendants engaged in securities fraud and other violations by fraudulently inducing PFM to invest and maintain its investment in the company" • Suit was filed in Delaware Court of Chancery this afternoon. • A Theranos spokesperson responded: "The suit is without merit and Theranos will fight it vigorously. The company is very appreciative of its strong investor base that understands and continues to support the company¹s mission." The rest of the article is catch-up background on Theranos' controversy.
- ThrustVectoring 10y agoFYI, the "web" link is exactly for this. Paywalled sources get penalized in Google's search results, so most of the time searching for the article's title and clicking the Google search results link gets you the full article.
- dreamcompiler 10y agoThat used to work for me; it doesn't any more.
- xanderstrike 10y agoIt won't work if you're signed into the WSJ.
- PKop 10y agoIncognito / private tab
- itestingstuff 10y agoI use this Chrome Extension to bypass the WSJ paywall: https://chrome.google.com/webstore/detail/bypass-wsj-other-sites/gfbabigadapckiaabchaolgjfbgickop https://chrome.google.com/webstore/detail/bypass-wsj-other-s...
- nerfhammer 10y agoThey've upgraded their paywall game, having a google referer doesn't help anymore.
- jfim 10y agoIt does, though once you've seen the paywall, no matter what the referrer is you'll get the paywall again. You need to open the "web" link in an incognito/private mode then click the WSJ link.
- nerfhammer 10y agoOk, can confirm that works
- MisterBastahrd 10y agoOf course it does. You just have to block the cookie too.
- FuckOffNeemo 10y agoDuckDuckGo returns a non-paywalled link to this article @ NASDAQ.com. See below: http://www.nasdaq.com/article/major-investor-sues-theranos-20161010-00643 http://www.nasdaq.com/article/major-investor-sues-theranos-2...
- NicoJuicy 10y agoThen why should this link be added on the front page? Do they deserve this? :)
- eykanal 10y agoTip for getting around paywalls (WSJ and NYTimes, prob others): Simply google the URL without any query terms* and click the first link. * e.g., exclude anything after the "?"... if link is example.com/site/page.htm?foo=bar, google example.com/site/page.htm
- matt-attack 10y agoFunny you advise clicking the first link, but didn't advise simply using the "I'm feeling lucky" button!
- deleted 10y ago[deleted]
- itestingstuff 10y agoI use this Chrome Extension to bypass the WSJ paywall: https://chrome.google.com/webstore/detail/bypass-wsj-other-sites/gfbabigadapckiaabchaolgjfbgickop https://chrome.google.com/webstore/detail/bypass-wsj-other-s...
- NicoJuicy 10y agoLet's discuss paywalled articles? https://news.ycombinator.com/item?id=12683017 https://news.ycombinator.com/item?id=12683017
- tschellenbach 10y agoDoes anybody know if investors sometimes win these cases? I imagine they must have done some serious due diligence before investing 100m.
- elsewhen 10y agothere is a chance that the primary purpose of this lawsuit is for the fund to be able to address the concerns of their LPs. in other words, it could be more about optics and less about actually recouping losses.
- breatheoften 10y agoAs in -- "trust us investors, look we are going after a failed company to try to recoup the investment we convinced you to make in us and them" -- that doesn't seem like great optics unless they have some possible chance of recouping cash ...
- kevinpet 10y agoI think it's about being able to say "we weren't idiots who couldn't figure out if it was a good investment, we were straight up lied to".
- matt-attack 10y agoUnfortunately the key skill in being an investor like this is to be able to make the right decisions in the face of being lied to. In other words, being lied to simply isn't an excuse.
- balls187 10y agoIf anything, I believe that the outcome is a private out of court settlement agreement, terms of which are not disclosed.
- garrincha 10y agoI have a feeling that this level of lying is much more pervasive in startups than people realize.
- deleted 10y ago[deleted]
- luckydata 10y agoyep
- oldmanjay 10y agoBy "this level" do you mean lying in order to obtain comparable funding?
- Fricken 10y agoThe managers of this hedge fund handed over $100 million dollars in other people's money without so much as a whiff of due diligence. There are 13 major life sciences venture capital firms and not one of then would touch Theranos with a ten foot pole. You'd think, in theory, that whomever it was at Partner Management LP who makes the big investment decisions would make a few phone calls first before deciding to pull the trigger. Startups making bold promises about unproven technology are a dime a dozen.
- pcurve 10y agoExactly. parking 2.5% of its total capital in Theranos deserves suits from its own investors.
- seizethecheese 10y agoWhich might explain the motive behind this suit...
- jondubois 10y agoI think humanity is literally evolving to lie and cheat at a biological level. Soon, universities will have courses in 'Mastering the art of cheating and lying'.
- julianpye 10y agoOne thing I find really weird is the choice of CEO photos in media reporting. If there is good news, they chose 'nice', attractive photos. If there is bad news, they look for worse ones. This is true for male and female founders. In this case, everything about this photo is an 'outtake', from hands, choice of framing, facial expression, eyes - it's a photo a photographer would not keep in their image selection.
- hkmurakami 10y agoWhy is that weird? The photo choice manipulates the reader impression just as they intend. Perhaps what you might mean is something like "disingenuous" or "biased" or "unethical"
- smegel 10y ago> "disingenuous" or "biased" or "unethical" Mainstream journalism will also do just fine.
- M_Grey 10y agoImplying that once outside of the "mainstream" journalistic integrity suddenly improves? Nonsense.
- harry8 10y agoImplying that staying inside the "mainstream" journalistic integrity suddenly improving is a false assumption. I don't know that I agree with it, but it's a valid opinion to have that mainstream is no better than elsewhere.
- M_Grey 10y agoI addressed someone's implication, I didn't offer one of my own.
- 10y ago
- alee788 10y agohttp://www.wsj.com/articles/major-investor-sues-theranos-1476139613 http://www.wsj.com/articles/major-investor-sues-theranos-147...
- mikeryan 10y agoNot that I'm surprised that the firm sued but I wonder what their end goal is and how they're planning on getting any sort of meaningful settlement from a company that's currently on fire. This seems mostly a face-saving measure.
- sytse 10y agoTheranos raised $348.5M Private Equity on March 1, 2015. There is probably still cash on the balance sheet. Maybe by filing a suit they hope that the company will be liquidated and to be at the front of the line when the proceeds get split.
- davidw 10y agoHonest question: how does this not trigger a "stampede for the exit" including lawsuits for everyone else who wants to get their money back?
- oneloop 10y agoProbably. I'd imagine that's why Theranos will insist part of the deal is that the exact terms will never be disclosed.
- FireBeyond 10y agoTheir other investors will be entitled to the balance sheets as is. They can't just say "and an undisclosed sum to [prior investor]" and redact their balance and liabilities. To the public, yes.
- oneloop 10y agoHah good point. So Theranos is literally fighting for their lives, because if one investor gets 25% of their money back, all the other investors will want the same.
- edoceo 10y ago
- balls187 10y agoAm I wrong if feeling no sympathy for a Hedge fund getting bilked? Like it's nice that for once it's not the "little guy" getting screwed over.
- rpedroso 10y agoWell, notwithstanding all the ordinary people who got blood tests done by Theranos that were later invalidated.
- dsacco 10y agoHedge funds frequently have charitable foundations and pension funds as limited partners. Unless the hedge fund is just a family office, there's a high probability that the "little guy" will be impacted, somewhere. I can't tell you if your schadenfreude over hedge funds losing money is right or wrong, because that's based on normative values. But I'd encourage you to adjust your understanding of the financial dynamics involved.
- balls187 10y agoBut if the Theranos deal panned out, who would have benefited from the investment by the hedgefund? Would it be the "little guy?" Or would it be the fund managers, and all the "insiders." It goes hand and hand with the notion that the system is rigged.
- saryant 10y agoDo you know how a hedge fund works? Investors (the pensions and charities and so forth) bear all losses and gains, minus the fund's fee.
- Pyxl101 10y ago> But if the Theranos deal panned out, who would have benefited from the investment by the hedgefund? A hedge fund is an investment fund that pools money from investors and then invests it according to the hedge fund's strategy. So, the primary people who will benefit or lose are the people who invested their money with the hedge fund. Hedge funds also tend to take a percentage of profits as part of their compensation. I don't see what connection there is to the notion that the system is rigged. No one is obligated to invest in hedge funds and the people who do are aware of the hedge fund's compensation structure. Anyone who invests money is aware that investments have risk and can fail. The purpose of a hedge fund is to invest money to generate (better-than-market) returns, and so the hedge fund will be compensated if that happens. The fact that they're compensated from profits acts as an incentive for them to actually generate profits.
- samgranieri 10y agoDiscovery on this will be interesting to say the least
- bertiewhykovich 10y agoGood.
- breadtk 10y agoMirror: https://archive.is/v3sNR https://archive.is/v3sNR
- fizixer 10y agoOdd coincidence (or maybe not) that the father of the founder, Elizabeth Holmes, worked at Enron (per wikipedia).
- carterehsmith 10y agoHeh, I imagine a Bring Your Child To Work Day @ Enron. PR: "And this, kids, is our Fraud, Swindle & Embezzlement Department" Kids: "the fuck does that mean" PR: "Well, this is the magical place where we figure out how to steal other people's money. " Kids: "Oooooooh, magical? But wait... isn't that bad?" PR: "Free pizza & pop for everyone!!" Kids: "Yaaaaaay!"
- thinkcomp 10y agoIt costs $21.60 to "search" for this case at the Delaware Court of Chancery, even if you know the case number. And another $40.00 to download a single document. The complaint is marked as confidential and is not available. Lexis-Nexis owns the site that maintains the court's entire docket.
- astaroth360 10y agoIsn't her activity like the textbook definition of fraud? Not to mention the dude who she basically pushed into committing suicide. I hope she gets at least as much time as Madoff.
- M_Grey 10y agoYes, but she's incredibly well connected, so expect no criminal charges.
- saretired 10y agoOn the other hand, so are some of her investors. And there I think it comes down to protecting their reputations; if they can point to criminal fraud, they can paint themselves as victims rather than fools. We'll see how it plays out.
- M_Grey 10y agoI think they come off as fools either way; people aren't any prouder to have been conned by a criminal, than having made a stupid investment. If they're concerned about saving face, they'll lay low for a while.
- rayiner 10y agoThere is civil fraud and criminal fraud, which require proving the same things. But generally, the government will only pursue criminal fraud prosecutions when there is a public interest component. Madoff defrauded a large number of people, and his fraud affected little old ladies' pensions. The government will generally stay out of fraud directed at a handful of sophisticated investors.
- enjo 10y agoIt seems like clear fraud was directed at the general public and their health outcomes. I don't care much about the investors, they can take it. It was something like 6% of tests were fraudulently performed by their "technology", with potentially dangerous results.
- pcsanwald 10y agoHonest question: Why is Holmes still CEO?
- kovrik 10y agoI would say: why is she still not in jail?
- gvb 10y agoThe wheels of justice turn slowly, but grind exceedingly fine. - https://en.wikiquote.org/wiki/Justice#F https://en.wikiquote.org/wiki/Justice#F
- bertiewhykovich 10y agoIIRC Holmes designed the Theranos bylaws such that only she herself can elect to replace the CEO.
- jupiter90000 10y agoIf one assumes Holmes didn't realize their product didn't work (questionable at best), imagine how it must be to work 7 days a week, forego friendships and intimate relationships, and not even watch TV, then after 12 years of that discover what you tried to make didn't/won't work. In too deep or something to just admit it's over and move on. Sounds like a very undesirable number of years with little positive to show, although maybe there were some lessons in there. Maybe time for a workaholic recovery program for her, who knows. Sad to hear the prime of a life spent like this... though perhaps not any worse than other destructive paths one could travel.
- ben_jones 10y agoExcept the boatloads of money she's already extracted from the company. What about the hundreds of people who propped up her vision and fueled the hundreds of puff pieces by A-level publications that walk away with absolutely nothing? What will it mean to have been a lab tech at Theranos?
- jupiter90000 10y agoHopefully those people weren't giving up everything in their life for a job... but I guess that's anyone's choice. Money is nice to have, though I've enjoyed time with friends, loved ones, and leisure more personally.
- kbart 10y ago"Sounds like a very undesirable number of years with little positive to show" Hm, I wouldn't call 4.5$ billion "little". I would gladly work 7 days a week for 12 years for even much lesser amount.
- poshli 10y agoForbes recently decided the company had a value of near zero.
- draw_down 10y agoImagine how it must feel to wake up every day missing your spouse because he killed himself.
- flylib 10y agoif they can't do the proper due diligence then they shouldn't be investing other people's money
- chx 10y agoDon't forget people have invested in uBeam which was known to be peddling something scientifically impossible. The only possible explanation for that, and truth be told Theranos too is the investors are playing a Ponzi scheme where later rounds are the ones holding the bag. It's an excellent question who should be suing who.
- nickfromseattle 10y agoCheck out Energous (ticker: WATT). Like uBeam the company is focused on wireless charging, unlike uBeam it's a publicly traded company so you can short it for profit. The market does not seem to have caught on yet.
- Ayraa 10y agoIf you read the interviews of a lot of investors, many of them mention they invested because they believed so strongly in the founder. Afterwards, when their crazy concept works (example: Musk with SpaceX), these founders are lauded a visionary. When their concept fails (as is the case with Homles and Theranos), these founders are branded a fraudster.
- taeric 10y agoTo be fair... It isn't that the idea failed. It is that the failures were misrepresented. Badly.
- deleted 10y ago[deleted]
- bcjordan 10y agoOfficial response posted: https://news.theranos.com/2016/10/11/company-statement-regarding-investor-lawsuit/ https://news.theranos.com/2016/10/11/company-statement-regar...
- shawn-butler 10y ago>> Posted by Staff Writer lol. no one even wants to put their name to this nonsense
- jacquesm 10y agoTheranos will have a hard time proving that they did not make the same or similar statements to the investors prior to making those claims elsewhere. They've now directly confessed they actually did make the claims at least once, which will make it more believable - not less - that they made those claims at different points in time as well. 'Staff writer' will have a busy time in the next coming weeks.
- jacquesm 10y agoI'm definitely not a friend of Theranos, but: they failed to do due diligence before investing, the error is theirs. I wonder if they would sue as well if Theranos had scored big time. If you treat investing as gambling don't sue if you lose a hundred million dollars of your customers money.
- cmadan 10y agoWhen I walk into the casinos, I know the odds of each game and know there is a possibility of losing my money. However if the casino rigs the machines to reduce my odds, then it isn't a fair game anymore and now goes into the realm of cheating.
- jacquesm 10y agoWhen you're about to wire cash at this level to a company you have a real responsibility to make sure that the technology is real and you shouldn't by default believe everything they tell you. Independent verification is something no reputable/honest company would have a problem with, at least, I've never encountered it and if a company did have a problem with it then I'd see that as a huge red flag. The whole Theranos affair interests me very much from a professional point of view, I could not imagine that none of those high flying investors and funds had not done actual due diligence, it is the biggest example of the herd mentality at work that I'm aware of involving only one company. The really big question - and it is one that will inevitably be asked - is at what point in time did Theranos/Holmes realize that their tech wasn't going to work? If that is hard to establish (and they're probably trying very hard to make that even harder) then she may get away with the whole thing. If it can be established beyond doubt that they knew prior to accepting investment then it definitely is a case of fraud and the investors may be able to recoup some of their investment but it still isn't enough to get them off the hook completely for their own role in this.
- onion2k 10y agoThe investor's argument is that Theranos lied. The investor believes Theranos fraudulently produced evidence that their product worked in order to fake the responses to the investor's due diligence. If that's true, and the investor can prove it, then that's not simply part of the typical risk of investing, that makes the investor the victim of a serious crime.
- calinet6 10y agoKids, you should start companies. Really. But maybe get some experience first before taking major investments.
- kristofferR 10y agoThis recent article explains the whole Theranos mess well: http://www.vanityfair.com/news/2016/09/elizabeth-holmes-theranos-exclusive http://www.vanityfair.com/news/2016/09/elizabeth-holmes-ther...
- socrates1998 10y agoWho pivots AFTER a $billion+ valuation? This chick is crazy and delusion. The sad part is that she will find someone dumb enough to be bullied by her and will keep founding companies with other people's money.