Wow. What a story.

https://www.google.com/amp/s/www.wsj.com/amp/articles/sec-charges-theranos-and-founder-elizabeth-holmes-with-fraud-1521045648

I can’t even imagine the stress that the younger Schultz and his parents must have dealt with—elder statesman grandpa sitting on the board of this miracle tech company, probably pulled some strings to get his grandson a job, and then said grandson finds out it is all a multi-million dollar sham. Grandpa doesn’t want to hear it and turns on the grandson. Man, talk about a Shakespearean tragedy...

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The facts per the SEC:

https://www.sec.gov/news/press-release/2018-41

company culture:

http://money.cnn.com/2018/05/21/technology/theranos-bad-blood/index.html

the players:

https://www.usatoday.com/story/tech/news/2018/03/15/behind-theranos-rise-and-dramatic-fall-powerful-backers-money-tech-and-politics/426364002/

I followed this story as it unfolded and haven't been able to understand how otherwise smart people, like Tim Draper, the venture capitalist I respect, hasn't been able to bring himself to see the fraud. To this day he's still appearing on CNBC to defend it. Maybe it's just too hard to believe when you put so much of yourself and your reputation into it.

Anyway, two years ago I listened to this interview with the Wall Street Journal reporter who by that time had spent a year investigating. It seemed to me he already had damning evidence.

https://youtu.be/zSgwJA-GOlg

So... hmmm. Big blockbuster Hollywood movie starring Jennifer Lawrence and directed by the guy who did “The Big Short” is apparently in the works...

https://youtu.be/WOi8-tM1gvQ

I thought you were kidding! That was a great clip.

Channing Robertson, my old chemical engineering professor, was one of the earliest investors in Theranos. When I learned Channing was with Theranos, I automatically dismissed the rumors. It gets worse. One of my co-founders knows almost the entire board and he vouches for their reputation. I guess nobody is immune to deception. Perhaps it was the generational gap. Channing is very charismatic and perhaps in his old age his romanticism blinded him.

Kiko, honestly I wondered the same thing. It seemed like the board was filled with older, mostly non-technical, idealistic and busy people. The story made a lot of sense and sounded revolutionary. You had to spend a lot of time digging in like the reporter did to understand what was really going on.

I said board, I meant scientific advisory board.

I wonder how many biotech startups with hokey science get funded just because VC's are enamored with their "investment thesis" and founders put up a good show. The vast majority try to turn bad ideas into good ones. Only rarely do we see a bad idea turning into massive fraud.

I forgot about this conversation! I listened to Kara Swisher's interview of John Carreyrou, the Author of Bad Blood, which has become a New York Times best seller. One of the storylines is that George Schultz, former Secretary of State, got his grandson Tyler Schultz a job there. He figured out that they were faking the tests and he got disillusioned and left. He didn't seem to be able to talk to his grandfather about it because George was in denial.

John got a tip to talk to Tyler, so he connected over LinkedIn. Unfortunately, the company's counsel was watching and threatened Tyler, so he backed off for an agonizing while. But eventually, his conscience won out. He had anonymously filed a complaint with the government. Here's what he said in an interview:

"Companies and the government ultimately respond to the collective consciousness of the people, aent. Here's what he said in an interview:

"Companies and the government ultimately respond to the collective consciousness of the people, and the best way to communicate with people is through the press," Shultz said he learned. "Talking to the Wall Street Journal was way more effective than talking to [government regulators] or the company itself."nd the best way to communicate with people is through the press," Shultz said he learned. "Talking to the Wall Street Journal was way more effective than talking to [government regulators] or the company itself."

Damn. No wonder they're making a major feature film.