The end is nigh for Theranos, the allegedly fraudulent blood testing firm, according to a new report.
In a new Wall Street Journal piece, John Carreyrou—the journalist who exposed Theranos’ misleading claims about the efficacy of its tests—reported that the company will next week begin to formally dissolve.
David Taylor, the Theranos general counsel who took over as CEO after the disgraced Elizabeth Holmes finally resigned in June, wrote to the company’s stockholders to say all efforts to sell the operation had failed. “We are now out of time,” Taylor wrote. “Despite our careful cash management, we are in default under the Fortress credit facility.”
The Fortress Investment Group loaned $65 million to Theranos last year, with one condition being that Theranos maintain a cash level that has now been breached—hence the dissolution process that will play out over the coming months.
Theranos’s other, unsecured creditors are owed at least $60 million, and the company is trying to negotiate a deal with Fortress that would see those creditors get the $5 million in cash that Theranos still holds. In exchange, Fortress would get Theranos’s patents.
Federal prosecutors have charged Holmes and her deputy, Ramesh Balwani, with fraud against investors, doctors and patients. As Carreyrou’s reportage showed, Theranos’s supposedly revolutionary blood-testing processes—which involved mere drops of blood rather than the traditional vials—were slow, inaccurate and unreliable.
Holmes and Balwani are accused of faking demonstrations of the technology, lying to investors about the anticipated returns, lying to the media, lying about the deployment of the technology on the battlefield, using third-party equipment to conduct tests while claiming to use Theranos’s own gear, and misrepresenting the progress of a partnership with Walgreens (wba).