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Theranos Founder Declared Worthless, Company Hit With Class Action

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By Casey C. Sullivan, Esq. on June 01, 2016 4:02 PM

It's been a rough day for Theranos, the blood testing start up, and its once-lauded founder, Elizabeth Holmes. A year ago, Theranos was valued at $9 billion, based on claims that its simple, tiny blood tests could revolutionize medical diagnostics. Holmes, who had a 50 percent stake in the company, topped Forbes' list of America's Richest Self-Made Women. Then came the reports that almost all of the company's claims could not be substantiated and that the few tests it was approved for were highly inaccurate.

Holmes and her company may have hit their nadir today, when Forbes removed her from their list of richest women, declaring Holmes's net worth to have dropped from $4.5 billion to nothing. Nothing. The fall came just days after three major class actions were filed against the company, accusing it of faulty and misleading tests.

A Quick Rise, a Quick Fall

Theranos was supposed to revolutionize medical diagnostics with technology that would allow it to perform dozens of tests on blood taken from a single finger prick. Holmes seemed to embody every Silicon Valley cliché: an academic star who dropped out of Stanford to become an entrepreneur; a lauded visionary who quite literally modeled herself after Steve Jobs (black turtleneck and all); a tech unicorn who became a billionaire almost overnight.

But many of Theranos' promises were never thoroughly examined. To date, Theranos has still never submitted peer-reviewed evidence to back up its lofty claims. It has received FDA approval for only one test, for herpes -- and that test, which relied on the company's signature finger-prick technology, was abandoned because of onerous FDA requirements. In May, the Wall Street Journal reported that Theranos had invalidated thousands of blood-test results.

The company currently faces a host of federal inquiries, including investigations by the Department of Justice and the Securities and Exchange Commission. Those falling fortunes have lead Forbes to revalue Theranos at around $800 million, a far drop from its $9 billion high. Holmes stake in what remains is essentially worthless, the publication declared today.

Bring in the Vultures Lawyers

Just days before that Holmes was pushed off the top of the richest women list, news broke that Theranos was facing a trio of class action lawsuits. All three suits have been filed in the Northern District of California within the past week. All allege that Theranos endangered customer health and misrepresented the accuracy of its blood tests.

One complaint accuses Theranos of using "substandard laboratory policies and procedures," failing to honor statements about accuracy and quality, providing inaccurate results to consumers, and misrepresenting its technological advances. The two others rely upon substantially the same grounds.

The suits are seeking a jury trial and unspecified damages, but the question remains: will there by anything left of Theranos by that point?

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