Elizabeth Holmes, a billionaire and CEO, goes on trial

Nearly a decade ago, Elizabeth Holmes was proclaimed the Silicon Valley Golden Girl and briefly crowned America’s youngest female billionaire.

This week he will enter a San Jose federal court with a very different picture: a defendant accused of fraud.

Federal prosecutors in the Northern California district have accused Holmes and Ramesh “Sunny” Balwani, a former president of Theranos and for a time his romantic partner, of defrauding investors and patients. Each of them faces two conspiracy offenses for cable fraud and ten for fraud offenses. Holmes and Balwani, who will be tried separately, pleaded not guilty.

Jury selection at Holmes’ trial will begin on Tuesday and is expected to last at least two days, a process that usually takes less than a day in lower-profile cases. The opening statements are scheduled for Sept. 8 and the trial is expected to last 13 weeks.

If convicted, Holmes could face up to 20 years in prison. Prosecutors say Holmes not only swindled investors for hundreds of millions of dollars, but also put thousands of lives at risk.

The Holmes saga began when he had a vision of doing hundreds of lab tests with just a finger of blood. He left Stanford at age 19 to start Theranos. The idea was to make blood tests cheaper, more convenient, and more affordable for consumers.

The company established alliances with Walgreens and the Safeway grocery chain. Its board of directors included luminaries such as former Secretary of State Henry Kissinger and the late George Shultz and former Secretary of Defense James Mattis.

But Holmes ’vision was reversed in 2015 after Wall Street Journal journalist John Carreyrou published a series of condemnatory reports exposing the shortcomings and inaccuracies in Theranos’ technology.

Patients received inaccurate test results related to conditions such as HIV, cancer, and miscarriages.

“He marketed a medical product that he knew didn’t work, his machine just did a handful of tests that didn’t do them any good,” Carreyrou said in an interview with CNBC last week.

In 2018, Holmes and Balwani were charged with “mass fraud” by the Securities and Exchange Commission. This caused Theranos to dissolve and Holmes to settle for the SEC. He agreed to pay $ 500,000 without admitting or denying the charges. Balwani intends to fight SEC charges.

Holmes once had some of America’s most powerful and wealthy venture capitalists behind his healthcare company Theranos.

Investors such as media mogul Rupert Murdoch, former Secretary of Education Betsy DeVos, the Walton family of Walmart fame, the Cox family, Patriots owner Robert Kraft and Mexican investor Carlos Slim were so enchanted that they poured millions into Theranos.

Some of these investors are expected to testify at the Holmes trial. All of the major investors, who spent $ 700 million over a decade, did not respond to CNBC’s request for comment. Prosecutors allege that the investors were influenced by exaggerations and distortions of blood testing technology.

“When a deal becomes that, you no longer want to be on that list of investors,” said Kevin O’Leary, president of O’Shares ETFs and a judge on CNBC’s “Money Court”.

O’Leary, who said about 20 percent of his investments have failed, was speechless when asked about the consequences for Theranos investors.

“You can understand how embarrassing it is to get a zero like that,” O’Leary said. “It clearly means you haven’t done your due diligence, that all investors know is a mistake. When there is a really hot deal, what you suffer immediately is the due diligence process. You’re just wondering if you can get into the. agreement “.

According to the indictment, prosecutors say there were six bank transfers from unnamed investors alleging they were the result of fraudulent claims about what they got in return.

“It will be heavily examined and investors will again be dragged into the press and embarrassed about it,” O’Leary said. “I can guarantee it. It won’t change anything. When that happens, no matter what happens, it will happen again. I don’t guarantee anything will change when it comes to investing in Silicon Valley.”

Instead of being an example of the best in Silicon Valley, Theranos became a black eye for start-ups.

One of Holmes’ defense strategies may be to blame Silicon Valley’s so-called “Silicon until you do” slogan. Earlier this year, the judge ruled that his defense team can rely on the hype and exaggeration of the founders of the new companies to explain Holmes ’own actions.

“It will be a wake-up call for venture capitalists and young Silicon Valley entrepreneurs,” Carreyrou said. “If you go too far, if you push the envelope and the hype and exaggerate to the point of lying, it becomes a fraud of values.”

However, if he is not guilty, there are those who say he could encourage risk-taking.

“It goes to a guilty verdict, of course, and even a guilty verdict in this case may not be enough,” Carreyrou said.

The unexploded new court documents just days before the jury’s selection shed light on how Holmes’ lawyers could defend mental health. In the files, Holmes claims he was the victim of abuse for “a decade” by Balwani, whom he met when he was 18 years old.

The documents reveal that she plans to claim that he abused her psychologically, emotionally and sexually. According to a record, Holmes accused Balwani of throwing sharp objects at him, controlling what he ate, when he slept, how he dressed, and supervised calls and text messages. Balwani denied the allegations.

Court records also revealed that Holmes plans to take a stand in his own defense, an action that many legal experts say is risky.

“It’s an uphill battle: Balwani may have exerted influence on her, because of her age or her previous successes,” said Danny Cevallos, legal analyst at NBC News. “But will he convince a jury that his influence excused his own conduct?”

Today, with her trial delayed repeatedly, she is now the mother of a newborn. Holmes, who was once a ubiquitous media presence, shuts up and ignores questions from reporters every time he walks in and out of court.

Everything will change if he really positions himself to finally tell his side of the story.