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The relevant detail, in my mind, is not whether Holmes deserves punishment, or even how much. The relevant detail is how the judge ultimately sentences Holmes,

The relevant detail, in my mind, is not whether Holmes deserves punishment, or even how much. The relevant detail is how the judge ultimately sentences Holmes, and more importantly, on what basis the judge selects the upper or lower range of possible sentencing outcomes. Considering that BS, stretching of capabilities, and so on are commonplace in the startup world, the point isn't whether Holmes crossed the line (she did), but rather, how exactly that line is repositioned by this precedent. There's the easy story: "Young, ambitious wunderkind founder falls from grace." And the hard story: "Here's what might be relevant for future founders."

baby 5y ago
> And the hard story: "Here's what might be relevant for future founders." Honestly, these founders are crap. I met a lot of different types of founders, there are a lot of snake oil sellers out there, and then there are the good ones. I'm willing to bet that nothing good came out of the snake oil sellers.
ethbr0 5y ago
The worst possible outcome of this, and I hope clarification presses this, would be "You can't lie and bend the truth in biology startups, but can everywhere else." Which would effectively siphon money away from an already hard but critical space. The jury found Holmes guilty. But she should have been found just as guilty if she'd been running an adtech startup or a crypto company.
- snek_case 5y ago
  I don't think it's just about biotech startups. I think the obvious distinction here is that her behavior put lives at risk fairly directly. Theranos was administering blood tests to a large number of people in a beta program. These tests were incomplete and inaccurate. Said tests were used to monitor the status/recurrence of cancers and other conditions like diabetes. If you similarly put people's lives or safety in danger with an AI startup somehow (with enough of a lack of ethics, this might be possible), you too could be eligible to win an all expenses paid vacation.
  - dpierce9 5y ago
    “This case was specifically about what Holmes told Theranos investors, although her lies also impacted partners and patients.” This had nothing to do with patients though I am sure the patient angle helped underscore the lies to investors.
    - ineedasername 5y ago
      The actual convictions didn't have anything to do with patients, but if there hadn't been a direct human safety aspect to this then I doubt it would have received as much attention, and maybe not even prosecution. I really don't think much would have happened to her if this had been an AI startup claiming to use ground breaking techniques (black box) to achieve nearly general purpose AI, when in fact they were just using bog standard methods in xgboost or TensorFlow.
  - merpnderp 5y ago
    They weren't also testing these people with approved methods? Who would sign up for that and how is that legal or ethical? Even if she hadn't been lying these people were gambling their lives against the success of her company.
    - fourseventy 5y ago
      Exactly, that is why she is in so much trouble
      - ethbr0 5y ago
        To be fair, a big reason she probably wasn't convicted on the patient fraud charges (she took the investor fraud charges) was because one of the things she lied about was not testing people with Theranos methods. I.e. what Theranos said "We're testing you using our novel testing systems" vs what Theranos was actually doing "We're testing you using a standard test system" So, most people who got Theranos tests were lied to, but in a way with a more positive outcome for them.
    - 5y ago
nathanyz 5y ago
Lying in both startups and even later stage companies has been way too accepted in the recent past. Granted investors should be doing better due diligence in general, but the amount of acceptable deception going on is mind blowing when you get a chance to see behind the curtain. My hope is that a precedent is set that you can boast and talk about the future, but claiming something to be true which is patently false should be fraud. I believe that is already the definition of the word fraud, but would be better for all if the legal system enforces that.
- lbriner 5y ago
  The definition of fraud is to make false representation for "gain". In many cases, lying is not automatically fraud. The burden of proof is also on the prosecution so if you claim, "Salesforce will transform your business" and someone says it doesn't then they have to prove. 1) A reasonable person would understand the statement as fact rather than hyperbole 2) You have objectively not been transformed in your business 3) The problems are caused solely by your understanding of the Salesforce product and not just that you are a bad business owner So that's why some things sit in the grey area.
  - deegles 5y ago
    Also, that statement doesn’t say it will transform it in a good way :)
  - engineeringwoke 5y ago
    It's not a grey area. It's simply not enforced. If you're an investor and you find out that the co-founders gave you bad numbers to juice the next round (this is common to the extent that I have personally seen it multiple times), you have no incentive to get the law involved. You would lose your entire investment, instead of just some of it. And oftentimes, the extra juice gives them enough runway to make things work. Cheaters win, that's the way it is.
    - CRConrad 5y ago
      > If you're an investor and you find out that the co-founders gave you bad numbers to juice the next round [...] you have no incentive to get the law involved. You would lose your entire investment, instead of just some of it. > And oftentimes, the extra juice gives them enough runway to make things work. Above all, it gives you [1] time: To cash out that investment. Sell it to some later bigger sucker who doesn't already know or suspect what you know or suspect, maybe even at some more modest profit -- not making any loss at all! -- in stead of the super-jackpot you'd been hoping for if it were a "unicorn". Early investors who start to smell a rat don't only lack an incentive to raise the alarm, they have a positive incentive to keep the lid on the story. ___ [1]: The editorial "you", the hypothetical early(ish) investor.
vasilipupkin 5y ago
B.S. and fraud are two different things though. BS in the startup world is commonplace, but not fraud.
- acegopher 5y ago
  What's the difference? Aren't both knowingly lying to affect an outcome?
  - vasilipupkin 5y ago
    B.S. is in the eye of the beholder. I can start a company and ask you to invest in it because it will be worth 3 trillion in 20 years. It may be BS in your eyes, but I might believe there is a real chance of success. Fraud is different, fraud is blatantly concealing or misprepresenting certain facts.
  - CapitalistCartr 5y ago
    Fraud is lying to get money. If you lie to stroke your ego, or similar such behavior, it's not fraud, unless you gain wealth by it.
  - deleted 5y ago
    [deleted]
  - ska 5y ago
    > What's the difference? Aren't both knowingly lying to affect an outcome? "This product will revolutionize the industry", "We are going to disrupt X", etc. is usually BS, based on irrational optimism about the future. Of course, in the unlikely case that it comes true, they will say you "had vision" "I have a working prototype, and if you give me $Xmm we'll productize it". If you don't in fact have a working prototype, this is fraud.
  - Manuel_D 5y ago
    There's a difference between optimistically saying "Everyone is going to want our super expensive juice maker!" versus telling investors that you have built 1,000 functional juice makers when in fact the juice makers don't work. The former is an optimistic projection of demand. It's not a lie if it turns out not to be true, since it's a prediction. The latter is a lie: it's telling somebody something that is objectively and unambiguously false.
geophile 5y ago
I think there is a pretty sharp line separating what Holmes tried, and what legitimate startups do. What she claimed had no basis in reality. It's Borat trying to patent a hoverboard, just like in Back to the Future, and telling the VC that he "needs to come up with the science" (https://www.youtube.com/watch?v=OXuDhejxz_c https://www.youtube.com/watch?v=OXuDhejxz_c). Except that Holmes was worse, claiming that she had the science. And she insulated herself from scrutiny by packing the board with old powerful men. So old that their critical thinking skills were on the decline (e.g. George Schultz, as described in Carreyrou's book), and whose expertise was NOT in the relevant subject areas. Holmes was obviously corrupt from the beginning.
- bumby 5y ago
  I haven't read Carreyrou's book, but do you think age and stereotypical gender roles played a part in the swindle? In other words, did the "old powerful men" let their guard down more because she was a young female?
  - schnitzelstoat 5y ago
    Carreyrou's book is really good and I strongly recommend it - it's made clear in the book that a lot of them had family friendship connections to Holmes as well. I imagine this may also have clouded their judgement.
  - geophile 5y ago
    Absolutely. It is hard for me to believe that Holmes didn't intentionally seek out powerful, influential yet clueless men. The fact that she had connections to them certainly made things simpler. I remember first hearing about Theranos in the New Yorker profile of Holmes. The presence of Schultz, Kissinger and other non-scientist powerful old men struck me as extremely odd at the time. And given her youth and appearance, it is impossible not to speculate about her effect on them, intentional or not. Also, the book made it very clear that Schultz's judgement was clouded by personal feelings. He blew up his relationship with his grandson over his defense of Holmes; the grandson saw what was going on.
  - 5y ago
jasode 5y ago
>Considering that BS, stretching of capabilities, and so on are commonplace in the startup world, the point isn't whether Holmes crossed the line (she did), but rather, how exactly that line is repositioned by this precedent. I really don't see the line being repositioned at all because typical founder bs and Holme's fraud have a clear difference: - bs is often overinflated promises of the _future_ that don't come true ; E.g. Musk overpromises fully-self-driving cars next year blah blah blah - fraud is often lying about the _past_ with falsified documents etc. E.g. Holmes deliberately fabricated "military contracts" that didn't exist and forged papers with supposed Pfizer endorsements to trick investors to wire money. Likewise, Madoff faked the so-called fund's audited statements showing profitable trades. Therefore, convictions of wire fraud charges are easier to prosecute. Holme's guilty convictions really have no relevance to the pie-in-the-sky overconfidence of founders. Therefore, unrealistic projections will continue to be made. Is there any credible evidence showing Elon Musk falsified documents and fabricated income to trick investors into SpaceX/Tesla?
- bumby 5y ago
  Maybe someone with a legal background can weigh in more intelligently, but skimming through the US Code that she was actually convicted of doesn't make any distinction between past and future. Most of it is centered around claims of material fact (i.e., not subjective) and intentional and realized damage. I think some of the grey area with Musk is the marketing of the product, like terming it "autopilot" which has a very specific connotation in the public perception. I'm granting that's not fraud in the same sense as the Theranos case, but I think it (probably deliberately) walks into a grey area of ethics. I think the damage claim is readily apparent but the intentional claim may be more difficult, in part because I don’t think there is a standardized definition of “autopilot”, even if it knowingly means something specific to the general public. If I create an EV model named the "ThousandMiler" but put an asterisk in the manual that says it's only capable of 500 miles, maybe that's not fraud but it's skirting the line.
- wiz21c 5y ago
  > pie-in-the-sky overconfidence of founders I always wonder do they really are overconfident, or are they so because somehow they think they would miss opportunities if they are less overconfident than their competitors ? It sounds much like advertising always selling you things using very ambiguous wording in order to make you dream. For me that's just lying.
KaiserPro 5y ago
> There's the easy story: "Young, ambitious wunderkind founder falls from grace." And the hard story: "Here's what might be relevant for future founders." There's the easy story: "Young, ambitious wunderkind founder falls from grace." And the hard story: "Here's what might be relevant for future founders." I don't think thats quite correct. Holmes committed fraud, the part that seemed to sink her was attaching other company's names to literature. However most of us would have assumed the bit that _should_ have nailed her and a lot of the executive committee is the industrial fraud of individual, vulnerable patients. THeranos was only able to commit this fraud because of the breathless, non critical PR pumped out by tech "journalism"

baby 5y ago

> And the hard story: "Here's what might be relevant for future founders." Honestly, these founders are crap. I met a lot of different types of founders, there are a lot of snake oil sellers out there, and then there are the good ones. I'm willing to bet that nothing good came out of the snake oil sellers.

ethbr0 5y ago

The worst possible outcome of this, and I hope clarification presses this, would be "You can't lie and bend the truth in biology startups, but can everywhere else." Which would effectively siphon money away from an already hard but critical space. The jury found Holmes guilty. But she should have been found just as guilty if she'd been running an adtech startup or a crypto company.

snek_case 5y ago
I don't think it's just about biotech startups. I think the obvious distinction here is that her behavior put lives at risk fairly directly. Theranos was administering blood tests to a large number of people in a beta program. These tests were incomplete and inaccurate. Said tests were used to monitor the status/recurrence of cancers and other conditions like diabetes. If you similarly put people's lives or safety in danger with an AI startup somehow (with enough of a lack of ethics, this might be possible), you too could be eligible to win an all expenses paid vacation.
- dpierce9 5y ago
  “This case was specifically about what Holmes told Theranos investors, although her lies also impacted partners and patients.” This had nothing to do with patients though I am sure the patient angle helped underscore the lies to investors.
  - ineedasername 5y ago
    The actual convictions didn't have anything to do with patients, but if there hadn't been a direct human safety aspect to this then I doubt it would have received as much attention, and maybe not even prosecution. I really don't think much would have happened to her if this had been an AI startup claiming to use ground breaking techniques (black box) to achieve nearly general purpose AI, when in fact they were just using bog standard methods in xgboost or TensorFlow.
- merpnderp 5y ago
  They weren't also testing these people with approved methods? Who would sign up for that and how is that legal or ethical? Even if she hadn't been lying these people were gambling their lives against the success of her company.
  - fourseventy 5y ago
    Exactly, that is why she is in so much trouble
    - ethbr0 5y ago
      To be fair, a big reason she probably wasn't convicted on the patient fraud charges (she took the investor fraud charges) was because one of the things she lied about was not testing people with Theranos methods. I.e. what Theranos said "We're testing you using our novel testing systems" vs what Theranos was actually doing "We're testing you using a standard test system" So, most people who got Theranos tests were lied to, but in a way with a more positive outcome for them.
  - 5y ago

nathanyz 5y ago

Lying in both startups and even later stage companies has been way too accepted in the recent past. Granted investors should be doing better due diligence in general, but the amount of acceptable deception going on is mind blowing when you get a chance to see behind the curtain. My hope is that a precedent is set that you can boast and talk about the future, but claiming something to be true which is patently false should be fraud. I believe that is already the definition of the word fraud, but would be better for all if the legal system enforces that.

lbriner 5y ago
The definition of fraud is to make false representation for "gain". In many cases, lying is not automatically fraud. The burden of proof is also on the prosecution so if you claim, "Salesforce will transform your business" and someone says it doesn't then they have to prove. 1) A reasonable person would understand the statement as fact rather than hyperbole 2) You have objectively not been transformed in your business 3) The problems are caused solely by your understanding of the Salesforce product and not just that you are a bad business owner So that's why some things sit in the grey area.
- deegles 5y ago
  Also, that statement doesn’t say it will transform it in a good way :)
- engineeringwoke 5y ago
  It's not a grey area. It's simply not enforced. If you're an investor and you find out that the co-founders gave you bad numbers to juice the next round (this is common to the extent that I have personally seen it multiple times), you have no incentive to get the law involved. You would lose your entire investment, instead of just some of it. And oftentimes, the extra juice gives them enough runway to make things work. Cheaters win, that's the way it is.
  - CRConrad 5y ago
    > If you're an investor and you find out that the co-founders gave you bad numbers to juice the next round [...] you have no incentive to get the law involved. You would lose your entire investment, instead of just some of it. > And oftentimes, the extra juice gives them enough runway to make things work. Above all, it gives you [1] time: To cash out that investment. Sell it to some later bigger sucker who doesn't already know or suspect what you know or suspect, maybe even at some more modest profit -- not making any loss at all! -- in stead of the super-jackpot you'd been hoping for if it were a "unicorn". Early investors who start to smell a rat don't only lack an incentive to raise the alarm, they have a positive incentive to keep the lid on the story. ___ [1]: The editorial "you", the hypothetical early(ish) investor.

vasilipupkin 5y ago

B.S. and fraud are two different things though. BS in the startup world is commonplace, but not fraud.

acegopher 5y ago
What's the difference? Aren't both knowingly lying to affect an outcome?
- vasilipupkin 5y ago
  B.S. is in the eye of the beholder. I can start a company and ask you to invest in it because it will be worth 3 trillion in 20 years. It may be BS in your eyes, but I might believe there is a real chance of success. Fraud is different, fraud is blatantly concealing or misprepresenting certain facts.
- CapitalistCartr 5y ago
  Fraud is lying to get money. If you lie to stroke your ego, or similar such behavior, it's not fraud, unless you gain wealth by it.
- deleted 5y ago
  [deleted]
- ska 5y ago
  > What's the difference? Aren't both knowingly lying to affect an outcome? "This product will revolutionize the industry", "We are going to disrupt X", etc. is usually BS, based on irrational optimism about the future. Of course, in the unlikely case that it comes true, they will say you "had vision" "I have a working prototype, and if you give me $Xmm we'll productize it". If you don't in fact have a working prototype, this is fraud.
- Manuel_D 5y ago
  There's a difference between optimistically saying "Everyone is going to want our super expensive juice maker!" versus telling investors that you have built 1,000 functional juice makers when in fact the juice makers don't work. The former is an optimistic projection of demand. It's not a lie if it turns out not to be true, since it's a prediction. The latter is a lie: it's telling somebody something that is objectively and unambiguously false.

geophile 5y ago

I think there is a pretty sharp line separating what Holmes tried, and what legitimate startups do. What she claimed had no basis in reality. It's Borat trying to patent a hoverboard, just like in Back to the Future, and telling the VC that he "needs to come up with the science" (https://www.youtube.com/watch?v=OXuDhejxz_c https://www.youtube.com/watch?v=OXuDhejxz_c). Except that Holmes was worse, claiming that she had the science. And she insulated herself from scrutiny by packing the board with old powerful men. So old that their critical thinking skills were on the decline (e.g. George Schultz, as described in Carreyrou's book), and whose expertise was NOT in the relevant subject areas. Holmes was obviously corrupt from the beginning.

bumby 5y ago
I haven't read Carreyrou's book, but do you think age and stereotypical gender roles played a part in the swindle? In other words, did the "old powerful men" let their guard down more because she was a young female?
- schnitzelstoat 5y ago
  Carreyrou's book is really good and I strongly recommend it - it's made clear in the book that a lot of them had family friendship connections to Holmes as well. I imagine this may also have clouded their judgement.
- geophile 5y ago
  Absolutely. It is hard for me to believe that Holmes didn't intentionally seek out powerful, influential yet clueless men. The fact that she had connections to them certainly made things simpler. I remember first hearing about Theranos in the New Yorker profile of Holmes. The presence of Schultz, Kissinger and other non-scientist powerful old men struck me as extremely odd at the time. And given her youth and appearance, it is impossible not to speculate about her effect on them, intentional or not. Also, the book made it very clear that Schultz's judgement was clouded by personal feelings. He blew up his relationship with his grandson over his defense of Holmes; the grandson saw what was going on.
- 5y ago

jasode 5y ago

>Considering that BS, stretching of capabilities, and so on are commonplace in the startup world, the point isn't whether Holmes crossed the line (she did), but rather, how exactly that line is repositioned by this precedent. I really don't see the line being repositioned at all because typical founder bs and Holme's fraud have a clear difference: - bs is often overinflated promises of the _future_ that don't come true ; E.g. Musk overpromises fully-self-driving cars next year blah blah blah - fraud is often lying about the _past_ with falsified documents etc. E.g. Holmes deliberately fabricated "military contracts" that didn't exist and forged papers with supposed Pfizer endorsements to trick investors to wire money. Likewise, Madoff faked the so-called fund's audited statements showing profitable trades. Therefore, convictions of wire fraud charges are easier to prosecute. Holme's guilty convictions really have no relevance to the pie-in-the-sky overconfidence of founders. Therefore, unrealistic projections will continue to be made. Is there any credible evidence showing Elon Musk falsified documents and fabricated income to trick investors into SpaceX/Tesla?

bumby 5y ago
Maybe someone with a legal background can weigh in more intelligently, but skimming through the US Code that she was actually convicted of doesn't make any distinction between past and future. Most of it is centered around claims of material fact (i.e., not subjective) and intentional and realized damage. I think some of the grey area with Musk is the marketing of the product, like terming it "autopilot" which has a very specific connotation in the public perception. I'm granting that's not fraud in the same sense as the Theranos case, but I think it (probably deliberately) walks into a grey area of ethics. I think the damage claim is readily apparent but the intentional claim may be more difficult, in part because I don’t think there is a standardized definition of “autopilot”, even if it knowingly means something specific to the general public. If I create an EV model named the "ThousandMiler" but put an asterisk in the manual that says it's only capable of 500 miles, maybe that's not fraud but it's skirting the line.
wiz21c 5y ago
> pie-in-the-sky overconfidence of founders I always wonder do they really are overconfident, or are they so because somehow they think they would miss opportunities if they are less overconfident than their competitors ? It sounds much like advertising always selling you things using very ambiguous wording in order to make you dream. For me that's just lying.

KaiserPro 5y ago

> There's the easy story: "Young, ambitious wunderkind founder falls from grace." And the hard story: "Here's what might be relevant for future founders." There's the easy story: "Young, ambitious wunderkind founder falls from grace." And the hard story: "Here's what might be relevant for future founders." I don't think thats quite correct. Holmes committed fraud, the part that seemed to sink her was attaching other company's names to literature. However most of us would have assumed the bit that _should_ have nailed her and a lot of the executive committee is the industrial fraud of individual, vulnerable patients. THeranos was only able to commit this fraud because of the breathless, non critical PR pumped out by tech "journalism"