Scandal-ridden blood-testing company Theranos will be shutting its doors soon. Wall Street Journal reported on Tuesday that the company will soon dissolve and is seeking to pay back its creditors with its remaining assets.
Deal With Fortress Investment Group
Theranos acting chief and general counsel David Taylor emailed investors to explain that the company has to shut its doors because of a deal with Fortress Investment Group.
Fortress gave the embattled Silicon Valley company a loan in 2017, helping Theranos avoid bankruptcy. This, however, came with a condition that Fortress will have the legal right to foreclose, sell, or take the ownership of Theranos' assets if cash falls beneath a threshold.
Taylor said that the company tried to get other investors onboard to prevent this from happening, but there was not enough time to finalize the deals.
Theranos is now negotiating with Fortress to keep part of its remaining cash to pay off other investors. It may take up to a year to have everything settled, but the company's employees worked for the last time on Aug. 31.
Theranos Founder Charged For Perpetrating Fraud
The report about the company's dissolution came three months after Theranos founder Elizabeth Holmes was charged for perpetrating a multimillion-dollar fraud.
Theranos claimed to have invented a line of blood-testing machines that can run complicated tests using just a single finger prick of blood. It raised about $900 million and achieved almost $10 billion valuation, anointing Holmes as "the next Steve Jobs." The technology later on turned out to be a fraud. It did not work as Theranos claimed.
Holmes and Theranos former president Ramesh Balwani were indicted in June on charges of engaging in schemes that defraud investors, patients, and doctors. Prosecutors said that Holmes and Balwani used solicitations and advertising to encourage use of the company' blood testing laboratory services despite being aware that these could not provide accurate and reliable results.
"The defendants also represented to investors that Theranos would generate over $100 million in revenues and break even in 2014 and that Theranos expected to generate approximately $1 billion in revenues in 2015 when, in truth, the defendants knew Theranos would generate only negligible or modest revenues in 2014 and 2015," the U.S. Attorney's Office said.
The two were charged of two counts of conspiracy to commit wire fraud and nine counts of wire fraud. If convicted, they will face up to 20 years jail time and a fine of $250,000 per count.