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The People v. Elizabeth Holmes

Buried behind the headlines of high-profile criminal cases involving pedophile islands, modern lynchings, and public shootings, is another high-profile trial with incredibly high stakes coming out of California. However, because Elizabeth Holmes did not shoot three people, lynch a Black man, or organize the largest sex crime racket in human history, her trial is not nearly as famous as the other three. Luckily for Holmes, her trial just is not as interesting. Yet the stakes are incredibly high for the founder of Theranos who is accused of defrauding investors by overstating the functionality of a blood-testing device.

The device was believed to be a revolutionary step forward in the medical industry, but Holmes is accused of failing to disclose major shortcomings in the device to investors. For the prosecution to successfully convict Holmes, they must prove that Holmes knew the device was defective and still overstated what it could do. If true, they could convict Holmes on charges of wire fraud which carries a potential sentence of 20 years. Holmes would also be required to make restitution to investors. There is a lot of money in play, and stakeholders will be closely watching the criminal case to see how strong their civil cases are.

Understanding the Charges

Basically, fraud is when you lie to someone to get them to give you their money. In this case, what Holmes knew and when is the most important question that the jury will have to answer. The prosecution, for its part, has a strong case. They will parade a procession of witnesses before the jury who worked in the labs that designed the medical device. They will further testify that they informed Holmes as to the serious quality issues in their device. This will allow the prosecution to establish a timeline of knowledge. Anything that occurs after that point in time is criminally actionable. Instead of informing investors and the board about delays in the device’s engineering, she simply lied and hid that information while investors continued to give her company more money. The now-defunct company is accused of cheating investors out of millions by omitting material information concerning their investment. Hence, she is guilty of fraud. At least, that is what the prosecutors say.

What Possible Defense Can Holmes Raise?

Holmes can and will plead ignorance. She will testify that she truly believed that her company’s device was ready for market, and her belief in the device led her to make claims that later turned out to be misleading. Since fraud is a crime of intent, you cannot accidentally commit fraud. You can, however, place yourself in a bubble of ignorance where the light of reality just never reaches you. The law then has the ability to say that you would have known about the fraud or should have known about the fraud had you exercised reasonable care. In other words, the government will counterclaim that Holmes kept herself intentionally ignorant even though she had ample reason to believe the device was a failure.

Talk to a Chicago Criminal Defense Attorney

If you are facing charges related to wire fraud, white-collar crimes, or SEC violations, call the white-collar defense attorney, David Freidberg, today at (312) 560-7100 to schedule an appointment and discuss possible defense strategies moving forward.

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