A who’s who of government, business and international finance lost a total of more than $600 million they had invested in scandal-plagued Theranos Inc., according to previously sealed documents made public in a lawsuit.
High on the list is Education Secretary Betsy DeVos, whose family invested $100 million in the Silicon Valley blood-testing company, the documents show. Mrs. DeVos had previously disclosed that her family was a Theranos investor in a government filing, but the size of the investment wasn’t known.
“The investment was made by many members of the DeVos family,” not just Mrs. DeVos, says Greg McNeilly, chief operating officer of Windquest Group, Mrs. DeVos and her husband’s family holding company. “To say they’re highly disappointed in Theranos as a company and an investment is an understatement.”
President Donald Trump’s education secretary is among a number of prominent figures who poured money into Theranos between 2013 and 2015 before a series of Wall Street Journal articles revealed that the company was encountering problems with its technology and misleading its investors.
These investments now are essentially worthless. In an April 10 email to shareholders reviewed by the Journal, Theranos founder Elizabeth Holmes raised the likelihood that the company would be liquidated by August. Earlier that day, she informed most of Theranos’s remaining 125 employees they would lose their jobs and paychecks on June 12, according to people familiar with the matter.
Other investors facing big losses include the heirs of Walmart Inc. founder Sam Walton, members of Atlanta’s billionaire Cox family, Mexican tycoon Carlos Slim, the scion of a Greek shipping fortune and members of a South African diamond dynasty, according to the documents, which Theranos provided to the lawsuit’s plaintiffs as part of the discovery phase of the case. Rarely have so many high-profile figures been known to have lost so much money on a single investment.
Ms. Holmes claimed she had invented groundbreaking technology that could perform the full range of laboratory tests from just a drop or two of blood pricked from a finger. In civil-fraud charges filed in March against Ms. Holmes, the Securities and Exchange Commission alleged that claim was a lie and that Theranos used commercial machines made by other companies for the vast majority of its blood tests.
Ms. Holmes settled the charges without admitting or denying wrongdoing by giving back a big chunk of her Theranos stock, relinquishing voting control of the company and paying a $500,000 penalty. She also agreed to be barred from being an officer or director in a public company for 10 years.
The SEC filed separate civil-fraud charges against Theranos’s former president and chief operating officer, Ramesh “Sunny” Balwani, who jointly ran the company with Ms. Holmes for seven years before he retired in May 2016. Mr. Balwani has denied the agency’s allegations and is fighting them in a San Jose federal court. His lawyer previously said in a statement that Mr. Balwani “accurately represented Theranos to investors to the best of his ability.”
Theranos also remains under criminal investigation by the U.S. attorney’s office in San Francisco, according to people with knowledge of that probe. Theranos has said it is cooperating with the investigation.
The investors facing the biggest losses are the Walton family, who invested $150 million in Theranos through two separate firms, the documents show. The Journal had previously reported that the Waltons were investors but not the amount they invested.
Other Theranos investors facing big losses include Mr. Slim, Greek shipping heir Andreas Dracopoulos and members of South Africa’s Oppenheimer family, which controlled the diamond company De Beers until it was sold to Anglo American PLC in 2011. Mr. Slim invested $30 million, while Mr. Dracopoulos and the Oppenheimers invested $25 million and $20 million, respectively, according to the documents.
Among U.S. investors, the Coxes invested $100 million, the documents show. Riley Bechtel, the former chairman of construction giant Bechtel Corp., invested $6.2 million. New England Patriots owner Robert Kraft invested about $1 million.
Representatives for Mr. Slim, the Oppenheimers, the Waltons, the Coxes, Mr. Bechtel and Mr. Kraft didn’t immediately respond to requests for comment. Mr. Dracopoulos declined to comment.
The documents revealing the identities of Theranos investors and the size of their shareholdings were unsealed Thursday in a lawsuit brought against Theranos by former Robertson Stephens & Co. co-founder Robert Colman in a San Francisco federal court. In the lawsuit, Mr. Colman alleges that the company made false and misleading claims about its operations and technology while soliciting money from investors.
Theranos has denied the suit’s allegations and is fighting them.
Mr. Colman invested in Theranos through the Lucas Venture Group, a venture-capital firm. Indirect shareholders like him who invested through venture funds collectively put about $70 million into Theranos, according to the documents. Mr. Colman declined to comment through his lawyer.
The largest individual investor in Theranos was Rupert Murdoch, who invested $125 million in March 2015, only to sell back his shares to the company for one dollar in early 2017, according to people familiar with the matter.
Under the terms of that buyback deal, Mr. Murdoch, who is executive chairman of 21st Century Fox Inc. and News Corp, the Journal’s parent company, received an additional $4 million from Theranos when the firm reached a separate legal settlement with a hedge-fund investor, the people familiar with the matter say.
The hedge fund, San Francisco-based Partner Fund Management, invested $96 million in Theranos in early 2014. After it sued the company for fraud in October 2016, Theranos agreed in a settlement to pay it $43 million in the spring of 2017 without admitting or denying wrongdoing, according to people with knowledge of the settlement’s terms. The Partner Fund settlement triggered the additional payment to Mr. Murdoch, these people say.
Mr. Murdoch and his shareholdings don’t appear in the documents unsealed Thursday because he had sold back his stock when the Colman suit’s discovery phase began.
Also absent from the documents are the identities and shareholdings of earlier investors who invested another nearly $100 million in Theranos before 2013.
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