Elizabeth Holmes’ co-defendant ‘Sunny’ Balwani to face trial this month

·Senior Legal Reporter

March 1, 2022 at 4:02 PM·3 min read

Former Theranos COO Ramesh “Sunny” Balwani is scheduled to face trial on March 9 over allegations he defrauded patients, investors, and customers in the blood-testing startup.

A federal grand jury indicted Balwani, 56, in 2018, along with his 38-year-old former romantic partner and ex-Theranos CEO Elizabeth Holmes. The pair was accused of defrauding patients and bilking investors out of millions before the blood-testing venture imploded under regulatory scrutiny.

In January a federal jury in San Jose found Holmes guilty on four of 11 counts of wire fraud and conspiracy. The former couple was originally slated to face a joint trial, but a judge separated the proceedings after Holmes alleged in pre-trial motions that Balwani abused her. He has denied the claims.

Balwani, a technology entrepreneur who made his fortune during the dot com boom, became friends with Holmes in 2002. The next year, she launched Theranos at the age of 19, with a goal of creating a machine that could process diagnostic tests using mere drops of finger stick blood. Over more than a decade, she sold investors on the idea that her analyzer, the size of a desktop printer, could process the blood drops across a suite of common tests.

REFILE - ADDING COUNTRY Former Theranos President and COO Ramesh "Sunny" Balwani smiles after a hearing at a federal court in San Jose, California, U.S., July 17, 2019. REUTERS/Stephen Lam (Stephen Lam / reuters)

In 2009, Holmes hired Balwani as the company’s president and later as its COO, though the two went to great lengths to keep their romantic relationship a secret.

About five years into building the company, Balwani helped Holmes keep Theranos afloat with a $12 million dollar line of credit. In 2013, the duo struck a $140 million contract with Walgreens to deploy Theranos’ blood-testing device in Walgreens’ Palo Alto and Arizona stores.

Theranos collapsed in the wake of a 2015 Wall Street Journal report that revealed the company was not in fact conducting the array of blood tests from a finger prick of blood as Holmes had promoted.

Like Holmes, Balwani was indicted in 2018 on 11 separate felony counts of wire fraud and conspiracy to commit wire fraud, each carrying a maximum penalty of 20 years in prison. Early on, the judge dropped charges alleging fraud against doctors.

Holmes’ landmark case, one of the most closely watched in Silicon Valley history, established a new bar for the extent to which startup ventures can overhype the capabilities of their products and steer clear of the Justice Department’s scrutiny.

The hype-filled pitches of startup founders like Holmes and Balwani typically don't draw scrutiny from prosecutors. That's partially due to agreements that wealthy investors sign before they make their investments, attesting to their understanding of the highly speculative nature of such wagers.

Among the jury’s four guilty verdicts were three based on investments in 2014: $38.3 million from experienced health care investor Brian Grossman; a roughly $100 million investment by former U.S. Education Secretary Betsy DeVos; and a $6 million investment by prominent estate lawyer Daniel Mosley, who steered wealthy clients to Theranos.

Holmes awaits sentencing scheduled for September and is out on bond.

Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.

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