March 14 (UPI) -- Theranos founder Elizabeth Holmes must give up her role as CEO of the health technology company after the Securities and Exchange Commission charged her with "massive fraud" Wednesday.
Holmes, 34, and Theranos President Ramesh "Sunny" Balwani settled the charges against them without admitting guilt. The terms of the settlement, through, say Holmes must pay a $500,000 fine, return 18.9 million shares giving her super-voting equity rights and she is banned from serving as an officer or director of a public company for 10 years.
The SEC said Holmes and Balwani raised more than $700 million from investors through deception, misleading them about the company's technological capabilities and its finances.
They "made numerous false and misleading statements in investor presentations, product demonstrations and media articles by which they deceived investors into believing that [the company's] key product -- a portable blood analyzer -- could conduct comprehensive blood tests from finger drops of blood, revolutionizing the blood-testing industry," a statement from the SEC said. "In truth, according to the SEC's complaint, Theranos' proprietary analyzer could complete only a small number of tests, and the company conducted the vast majority of patient tests on modified and industry-standard commercial analyzers manufactured by others."
The SEC complaint also said Holmes and Balwani told investors their products were being used by the Department of Defense on the battlefield in Afghanistan and on medical helicopters to generate more than $100 million in revenue, but that was not the case. The statement said the Department of Defense use generated about $100,000 and it was never deployed.
"The Theranos story is an important lesson for Silicon Valley," said Jina Choi, director of the SEC's San Francisco Regional Office. "Innovators who seek to revolutionize and disrupt an industry must tell investors the truth about what their technology can do today, not just what they hope it might do someday."
Theranos said the company and Holmes have agreed to comply with federal laws.
"The company is pleased to be bringing this matter to a close and looks forward to advancing its technology," a statement read.