SAN FRANCISCO--(BUSINESS WIRE)--Theranos Inc. investors today filed the first securities class-action lawsuit against Theranos, Elizabeth Holmes and Ramesh “Sunny” Balwani, after investigation showed that, in announcing a partnership and rollout of its proprietary finger-prick blood tests, with Walgreens in 2013, Theranos misrepresented the state of development of its proprietary technology, according to Hagens Berman.
Rather than being ready for commercial use, the finger-prick technology had not passed regulatory or other third-party scrutiny, was inaccurate and could only be run on a few of the hundreds of promised tests, the suit states. Theranos has now shut down all of its laboratories, and Walgreens has severed its ties to the company. As a result, investments of more than half a billion dollars raised since 2013 appear to have been lost, according to the firm.
If you purchased Theranos securities, directly or through a third-party, from July 29, 2013 through Oct. 5, 2016, contact Hagens Berman Sobol Shapiro LLP. For more information visit:
or contact Reed Kathrein, one of the firm’s attorneys on the case, by calling 510-725-3000 or emailing Theranos@hbsslaw.com.
The complaint filed Nov. 28, 2016, in the U.S. District Court for the Northern District of California, states that Theranos and its officers set in motion a publicity campaign to raise billions of dollars for Theranos and themselves, and to induce investors to invest in Theranos, all the while knowing that its “revolutionary” blood test technology was essentially a hoax.
“Thousands of Theranos investors, including those who bring this class action, were spoon-fed continuous lies from the company’s CEO who touted the company’s ‘world-changing’ technology that would ‘revolutionize’ the industry,” said Steve Berman, managing partner of Hagens Berman. “After months of wooing investors to the tune of its CEO’s $9 billion net worth, Theranos’ bubble has burst, and we now see the truth – that Theranos’ promises were built on false statements and omissions.”
The suit seeks recovery for a proposed class of investors and accuses defendants of violating California securities laws as luring investors through fraud, deceit and negligent misrepresentation, among other counts.
“Companies owe a duty to potential investors to be open and honest,” the complaint states. “…Plaintiffs bring this action because Theranos… flaunted these simple rules. To them, being honest and forthright was an obstacle to their goals.”
The suit alleges Theranos and other defendants told the public, knowing and intending that their statements would reach potential investors, that they had perfected “a proprietary” and “revolutionary technology” over the past 10 years that would change the world of laboratory testing.
Defendants claimed, through a well-honed narrative, that Theranos’ proprietary technology could take a pinprick’s worth of blood, extracted from the tip of a finger instead of intravenously, and test for hundreds of diseases – a remarkable innovation that was going to save millions of lives and, in a phrase that Holmes often repeated, “change the world.”
Based on this story, defendants also claimed that clinics, pharmaceutical companies, experts, regulators and an all-star board of directors had vetted or vouched for its technology. In 2013, defendants announced the technology was commercially ready and immediately being rolled-out by Walgreens, one of the nation’s largest drug store chains.
After raising more than half a billion dollars in new funds, Theranos’ story began to unravel when the Wall Street Journal questioned defendants’ claims. Despite vigorously attacking all critics, Walgreens recently sued Theranos for making representations and commitments it could not and did not meet. Federal regulators have shut down Theranos labs and have banned defendants from running labs. According to the firm, defendants have also all but admitted that almost all the tests it has run for the past three years have been on conventional equipment.
“While Theranos is not traded on a stock exchange, investors who were solicited by venture capital and other funds, or who purchased indirect interests in Theranos securities through third-parties like SharePost, have all been damaged by these public representations,” said Reed Kathrein, partner at Hagens Berman. “Fund managers are loathe to sue and forfeit access to start-ups which are their lifeblood. But California law gives us the ability represent the ultimate investor who has suffered losses as a result of defendants’ publicity campaign. As our investigation continues, we will not be surprised to find others who were knowingly at fault.”
If you purchased Theranos securities, contact Hagens Berman now to find out more about your investor rights. We also welcome inquiries by those who have information that would assist in our continued investigation.
Learn more about the investor lawsuit against Theranos.
Hagens Berman Sobol Shapiro LLP is a consumer-rights class-action law firm with offices in 10 cities. The firm has been named to the National Law Journal’s Plaintiffs’ Hot List eight times. More about the law firm and its successes can be found at www.hbsslaw.com. Follow the firm for updates and news at @ClassActionLaw.