This article originally ran in Term Sheet, Fortune’s newsletter about deals and dealmakers. Sign up here.
More than $700 million: That’s how much capital Theranos CEO Elizabeth Holmes raised from investors for her blood-testing company. And she did it by using language like this:
“We do routine, specialty, and esoteric tests. What we’ve done is take those, and develop the chemistry and analytic systems that made it possible to run them on a microsystem.”
Once questioned about why the company was not performing hundreds of tests using its proprietary technology, it issued statements like this:
“Over time, we’ve been optimizing our clinical lab to bring up tests that are more commonly ordered, and in some cases move resources off the proprietary tests that are less commonly ordered to get to a point where the ordering patterns we are seeing can all be accommodated through our finger-stick technology.”
You follow? Neither did investors, reporters, and the public. Since the very beginning, Holmes has been criticized by industry peers about running an operation shrouded in secrecy, but the opaqueness was easy to defend — Competitors are watching! We must protect trade secrets!
At Theranos, silence was golden. The company reportedly kept departments siloed, preventing employees from discussing projects with one another. It also allegedly demanded all visitors sign a non-disclosure agreement before entering the building.
As I’ve said before, it’s my opinion that when hundreds of millions of dollars are on the line, investors should expect accountability, transparency, and verification. This is becoming harder and harder as private companies actively work to maintain secrecy. Yet the hype builds, the money pours in, and whistleblowers are dismissed as “disgruntled former employees.”
Fortune was the first magazine to dedicate a cover to Holmes, who then went on to grace the covers of virtually every major business publication. When Roger Parloff was reporting the story for Fortune in 2014, he asked questions that the company told him were “getting into the realm of trade secret.”
But after years of secrets, the Securities & Exchange Commission shined a light on the reality of the company’s day-to-day operations. On Wednesday, the SEC charged Holmes and the company’s former president Ramesh “Sunny” Balwani with an “elaborate, years-long fraud in which they exaggerated or made false statements about the company’s technology, business, and financial performance.”
So in one of the most spectacular flameouts in recent years, Theranos went from a $9 billion Silicon Valley unicorn to a Silicon Valley unicorpse. Here’s the biggest lesson the Valley can learn from this: What happens in the dark will always come out in the light.
I’ll leave you with a quote from Tyler Shultz, the employee who blew the whistle on Theranos: “Fraud is not a trade secret. I refuse to allow bullying, intimidation and threat of legal action to take away my First Amendment right to speak out against wrongdoing.”