 Mother Frick this winter. I am so overwinter. It is snowing up here in northern New York and I am done. I am finished with it. I'm ready for summer. I am not about this life guys. Would you guys think it would be weird if I wore this the whole video? I'm cold okay? There's a blizzard outside but I have to turn the heater off because if I keep it on while I'm filming it'll make this loud like whirring noise. I just want to wear like a warm coat and be warm but I'm gonna fight through it so that I can I don't know not look ridiculous in this video. Hi friends it's Madison Harnish back in my blue kitchen for another video and this one is a crazy insane topic that I'm so fascinated with so I'm so excited for today's video. This is a story about one of the most valuable tech startups to ever exist. Worth about nine billion at its highest and how it all collapsed to be now worth zero. Today I'll be talking about Theranos, pretty much one of the greatest scams to ever exist. As usual all my resources for my research will be provided in the description down below so if you'd like to read more about it definitely check the description after watching this video and before we jump into this story please don't forget to subscribe and give this video a like if you want more crazy stories of different business practices and scams and well let's get into the video. This all starts with Theranos' founder Elizabeth Holmes. The story of Theranos is the story of Elizabeth Holmes and vice versa. The two are one and the same. Today I'll be talking about what Theranos was, who Elizabeth Holmes is, and how Theranos rose, what and how Theranos rose meteorically only to fall just as drastically. So what is Theranos? Theranos was a health technology company that claimed that it could do blood tests with only a very tiny drop of blood. In fact the company claimed that its test only needed one one hundredth to one one thousandth of the normal blood amount taken for blood tests. That's crazy and definitely would be life changing and change the whole industry of blood testing. Theranos was founded by Elizabeth Holmes, a Stanford dropout who has got to be one of the most intriguing and puzzling humans to ever exist and I'll explain why. Elizabeth Holmes was only 19 years old when she founded Theranos which is this giant biomed tech company and that's a pretty young age to start such an intelligent and you know complex company. It's not like a messaging app like you know Snapchat, no offense to Snapchat but it's some serious engineering and technological and medical advancements that are needed for this company so that's a pretty big feat. Throughout her life Holmes was Holmes. Throughout her life Holmes was always an excellent student. She studied Mandarin and attended Stanford University's summer Mandarin program. In 2001 Holmes was accepted into Stanford to study chemical engineering. Holmes had this obsession with being an adventurer of sorts. She loved reading books about leaders who changed the world and was very fascinated with Thomas and what what the heck and it was very fascinated with Thomas Edison one of the world's most renowned inventors although a fun fact about Thomas Edison. He was a little bit of a fraud himself. He claimed he invented the light bulb but really it was kind of smoke and mirrors and he didn't have the invention ready yet. It was only a stroke of luck that he was able to create the light bulb and actually create a long lasting light bulb at the very last minute but since Holmes has always had a passion for inventing Theranos wasn't Holmes first idea. At first inspired by Holmes's travels to Singapore she came up with this idea for a patch that would release antibiotics. How she proposed that it would work was basically that like the patch had these tiny like needles in it and the patch would sense whether your body had an infection and then automatically released antibiotics into your system. It sounds like some sort of like science fiction movie creation. It's like really out there for sure. She talked to Dr. Phyllis Gardner a Stanford medical school professor about her idea and Dr. Gardner explained how this would literally be impossible to do. It's physically impossible to create this sort of antibiotic patch. Nevertheless Elizabeth Holmes refused to give up and she continued to work on the patch even going as far as to create a patent on it even though it was a physically impossible thing to do. She just was really the type of person that would not give up on her dreams and that definitely plays a huge role in her later life as well. Ultimately her refusal to give up is also what kind of led to her downfall. So once Holmes kind of came to the realization that these antibiotic patches that she had in mind were actually impossible to make Holmes soon moved on to the idea of theranos. The right to protect the health and well-being of every person of those we love is a basic human right. We see a world in which every person has access to actionable health information at the time it matters and we've made it possible to eliminate the tubes and tubes of blood that traditionally have to be drawn from an arm and replaced it with the nanotainer. Elizabeth Holmes herself had a fear of needles something I personally and I'm sure many others can relate to. Her vision of theranos was to completely remove the need for any intravenous needles poking around on your skin and drawing out tubes and tubes of blood which is a noble idea. It just kind of makes sense that like most people would rather have a tiny finger prick for blood testing than to get blood drawn and tubes of tubes of blood taken from their body like obviously that's something that a lot of people can agree with and get behind and actually if you look into it blood testing and the processes that we have for are extremely outdated the processes haven't been changed since the 1950s like that's crazy. We literally have virtually the same blood testing technology that we did in the 1950s when there's been so many advancements in cars and computers and technology and yet blood testing has fallen so far behind. It's pretty well known that there's a few blood testing companies that virtually have a monopoly on the whole system and it's within their prerogative not to change a single thing because they have a monopoly on that system and so theranos itself believed that these blood companies blood companies blood testing companies didn't like that theranos was kind of trying to change the game but back to the video most people absolutely loved the idea of theranos and everyone got behind it there's so many clips of like Bill Clinton and other people talking to Elizabeth Holmes and supporting her idea and her vision. And when you bring that type of basic access in our case we're focused on health and access to health information it's the first step in being able to get people well enough to go to school and to be able to pursue economic development. Buried in that very eloquent statement is an assumption that the market can be made to work for social good given the right incentives but first tell them just in two sentences what you're doing because Jack and I know and we haven't been clear enough. Our work is in the belief that access to health information is a basic human right. What this could mean for rural china for rural india for native american reservations. And over time some very notable and very notorious very notorious and powerful people got behind Elizabeth Holmes and theranos. So let's rewind a little bit back to when Elizabeth Holmes was only 19 years old she had the idea of theranos but didn't know how to go about the process of creating a company. This is where Channing Robertson comes in. Channing Robertson was one of the very first people to join Elizabeth Holmes Channing Robertson was the dean of the stanford school of engineering that is a huge position to have and he was really well known in the engineering community. Robertson became a board member of theranos and went on to help Elizabeth Holmes be introduced to various investors. I mean imagine that imagine you go to the dean of your own school like literally and your school's as big as stanford is. I mean stanford is one of the top schools. She went to the dean of the school of engineering within stanford and he left his position to join her company. Imagine how much of an influential person you have to be to literally sway the dean of your school when you are only 19 years old to join your company. That is mind blowing and crazy. Alongside this one of the very first investors she ever had was Tim Draper and Tim Draper is a really notorious well-known investor. I believe he invested like two million into her company before they even had a product and he's known for investing really early on in companies and he's really successful at it and really well known. A lot of investors look to him to know where to invest if that makes sense and he's invested in companies such as Skype, Tesla, DocuSign, Robinhood, Twitch and the list goes on. But this is where it gets interesting. Apparently Holmes was Tim Draper's daughter's childhood friend so she had known the Draper family her whole life and was his child's friend so obviously that's a really easy in. So it was really easy or at least way easier for her to get in contact with him and that's really interesting to think about. Eventually there were investors of Theranos that were putting in almost a hundred million dollars each. Yeah. Without even needing to see proof of the product or that the blood testing actually worked. You know, if there's a bunch of people jumping in on one opportunity, other investors are going to join as well until it creates like this bubble where no one's really doing due diligence or actually examining the company itself. Instead, everyone's just jumping into what they see as this like business opportunity and just kind of blindly trusting others. But some really powerful people put money into Theranos including the Walton's, which were irons to the Walmart founders, Sam Walton. So the Walton's were connected to the Walmart fortune. The DeVos family, which as you know, if you've seen my Amway video, the DeVos family is the founders of Amway, one of the very first MLMs and one of the most successful MLMs to ever exist. So like that's crazy that they were connected to Theranos. Like that's so interesting. Rupert Murdoch, executive chairman of 21st Century Fox and of News Core. Larry Ellison, founder of Oracle, one of the most successful tech companies and many, many other famous investors. But this is where things get even more freaky. When Elizabeth Holmes started gaining success in her company, it came time to choose people to serve on the board of her company. Basically, what a board does is it's like people at the top of the company who aren't always necessarily working in the company, but more so people that are very smart, that can help kind of advance the success of a company. So a lot of times when you choose people for your board, you choose like really great investors to your company, you're usually on your board as well as as well as other influential advisors that can help you with where you want to go. So here's who Elizabeth chose to be on the board of Theranos. Elizabeth chose extremely powerful people in government and military to be on the board of Theranos, which is very, very unusual for a medical technology company. Here are the people that were on her board. George Schultz, the former director of the United States Office of Management and Budget, who is a very renowned government official, William Perry, former US Secretary of Defense, Gary Ruffhead, a retired US Navy admiral, Henry Kissinger, former US Secretary of State, and James Mattis, a retired Marine Corps general who went on to serve as Trump's Secretary of Defense. Like, what is she building? A medical technology company board or a board to take over the world? Like, so why did Elizabeth Holmes need so many powerful people on her team? What was she trying to do? If you look at Elizabeth Holmes herself, she kind of looks like an evil villain. So I honestly, if I just heard about this not knowing anything about Theranos, I wouldn't be surprised if Theranos was some sort of like evil villain take over the world type of company. Something interesting about Theranos is Theranos refused to let anyone see the little black boxes that were doing the blood testing. The technology that Theranos created was basically this little tiny black box that they called the Edison modeled after Thomas Edison, the shady inventor I was talking about earlier. And they claimed that these tiny black boxes would basically take those very tiny finger prick samples and be able to run numerous different blood testing on it with 100% accuracy or at least near 100%. But they wouldn't let anyone see these black boxes or tell anyone how these black boxes worked in the blood testing. They wouldn't explain what these black boxes did or how they worked and claim that those were all trade secrets. They were very secretive about these little black boxes. They were so secretive in fact that the black boxes were kept down in the basement of the Theranos building where no one was allowed access to them. And it was guarded by high security. But before we get into more about these black boxes, let's talk a little bit more about Elizabeth Holmes, very deep baritone voice. Now I've been told throughout my life that I have a little bit of a deeper voice. But oh my goodness, nothing matches the deep voice of Elizabeth Holmes. Some speculated that the voice was fake and that she talked that way to sound more masculine and be more of a commanding figure. Employees and reporters claim that they've caught her kind of falling out of that deep voice and slipping up a little bit on numerous occasions. According to my sources, it was an employee who joined the company in 2011, had a meeting with her shortly after he joined and it was late in the day and they were finishing up the meeting and she sort of expressed her excitement that he had recently joined. And as she got up, she forgot to put on the baritone and slipped back into a more natural sounding young woman's voice. No, it hasn't. Well, if I use traditional words to describe what we're doing, it's hard because people then associate it with conventional processes. I just think that the personality and persona of Elizabeth Holmes is just so odd and puzzling. And I can't help but wonder why she acted and put on the persona that she did. I do believe that in a sense, Elizabeth Holmes felt like she had to become this kind of person in order to be successful at their nose. I mean, she started so young. She was a female. There weren't a lot of female corporate leaders or female startup leaders for that matter, especially in the medical and technology field. So it makes sense that she felt the need to kind of look a certain way and act a certain way so that people would take her seriously. I'm sure that was a very big conflict in her mind as that would be for me too. So anyways, back to the black boxes. In 2013, Theranos announced partnership with Walgreens to launch in-store blood sample collection centers. That means that real people with real issues that they want to get looked at would start to use Theranos to get their blood testing. In 2014, Forbes recognized Holmes as the youngest self-made female billionaire. Theranos was valued at $9 billion and had received over $400 million in investments. Imagine that. $400 million for this company and investments until one day it all came crashing down. A reporter received an anonymous tip from a medical professional that the Theranos blood testing device seemed suspicious. And I'm like, you're telling me it's a tiny box that somehow can test blood from a fingerprint that's never been done before. There's all these scary military officials on the board and they won't let anyone see the technology or know how it works. Like yeah, that's a little bit sketchy. What I'm wondering is why no one else thought it was sketchy before that. This reporter was John Kerrio of the Wall Street Journal. Kerrio or Keriu? I forget exactly how it's pronounced so forgive me on that one. John initiated a secret six month investigation into Theranos and the blood testing devices. Kerrio spoke to various ex-employee whistleblowers and obtained company documents as well. When Elizabeth Holmes found out about this, she started freaking out and was on red alert. She even got an extremely expensive well-known lawyer to go after both the reporter and the employees who were sharing information about Theranos. She threatened the Wall Street Journal not to publish the story and went after the employees legally so that they became so overwhelmed with legal fees and could barely afford anything. Nevertheless, the story was too big and too important to not be published. So it was published. I found a way to keep myself warm and it's with the kitty cat. This is Meetsy. She's a little bit chubbier. The article described how basically the blood testing device did not work at all and that everything was a lie. Everything about Theranos was completely a lie. There was no revolutionary technology, nothing at all. What Theranos would do is they would take these tiny blood samples and dilute them in a bunch of water and put them through regular semen machines which are those 1950s like 70 year old machines that we talked about in the beginning that everyone uses. And so there was nothing new about the technology and because it was such a tiny amount of blood diluted in so much water, the test results were so inconsistent and the people that actually took Theranos tests had a bunch of inconsistencies. It's still unknown today how many people got false blood results from Theranos that ended up putting their health in danger. Later in 2016, the Food and Drug Administration and the Center for Medicare and Medicaid Services looked into Theranos a little bit more from this story. Obviously it was huge when the story came out and everyone started to question Theranos which made the FDA kind of start to give a side eye at Theranos. You know the FDA I believe had come over and examined stuff a few times before but Theranos was able to literally trick them and scam them into thinking that it worked. But this time the FDA was like no more joking around, we're really taking a look at what's going on here. They uncovered all the lives of Theranos and began to crack down on them hard. Arizona filed a lawsuit against Theranos. In 2017, alleging the company sold 1.5 million blood tests to Arizonians while concealing or misrepresenting how much those tests actually work. Theranos paid Arizona $4.5 million for this lawsuit. Holmes was also sued by the U.S. Securities and Exchange Commission in 2018 for fraud. She claimed that her blood tests were being used by the U.S. Department of Defense and also claimed that she was bringing in $100 million in revenue when none of those were true or accurate and they were also lies. She's finally forced to answer to the Securities and Exchange Commission as she's investigated for an alleged elaborate years-long fraud. I don't know specifically. I'm not sure. I don't know exactly. I just don't know. Like those dramatic claims, she pedaled to board members like George Schultz, the former Secretary of State. Was Theranos' technology deployed in emergency rooms, hospitals, and provider offices? No. Was a Theranos manufacturer device ever deployed in the battlefield? No. Was it ever deployed in a Medibac helicopter? No. She was challenged sentence by sentence on what she told Fortune in that star-making cover story. There's a statement that Theranos currently offers more than 200 and is ramping up to offer more than 1,000 of the most commonly ordered blood diagnostic tests all without the need for syringes. Was that statement correct? Reading it now. I don't think it is. On June 2018, following an investigation by the U.S. Attorney's Office in San Francisco, a federal grand jury indicted Holmes on nine counts of wire fraud and two counts of conspiracy to commit wire fraud. Prosecutors allege after a two-year investigation, they believe that Holmes and Theranos' president, Sonny Balwani, engaged in two criminal schemes. The first was to defraud investors out of their money, and the second was to defraud doctors and patients who believed that the blood tests they were taking really worked. There is still an ongoing case by the U.S. District Court for the Northern District of California where Holmes and Balwani faced up to 20 years in prison. After all this, Holmes lost absolutely everything, so much so that her own legal counsel now refuses to represent her because she was unable to pay them for a year. Imagine within the course of a year going from the youngest female billionaire to ever exist with billions in your net worth, to your name, to being worth absolutely nothing. It's one of the saddest downfalls of all time, but definitely well deserving, considering how many people she lied to and completely frauded. She was even on the cover of Forbes, and just so many people believed in her and looked up to her. I mean a female scientist and leader, you know, like I think that we needed that in the world, and it's really disappointing that she couldn't be that person. So what is Elizabeth Holmes up to nowadays? Well, since Theranos' downfall, Elizabeth Holmes has gotten married in 2019. Holmes married William Evans, heir to the Evans Hotel Group Fortune. There's so many photos of her smiling with her new husband, laughing, having a good time, and she really does not look like someone who's facing up to 20 years in prison for defrauding so many people and scamming investors out of millions and millions of dollars. And she just went off and married someone who's rich and well known and just is laughing and smiling and has not a carry in the world, a carry, a care in the world. And that's really strange to me at least. This whole thing is so mind blowing to me, but I also have a hard time believing that not a single other person besides Elizabeth Holmes and Sunny Balwani, the president of Theranos, knew that the blood test didn't work. Through Walgreens and all the other professional organizations she partnered with, through all the board members and all the famous well-known investors, not one person tested the blood test through a third party or did their own due diligence testing. If they didn't do their own due diligence, I can't help but believe that they're kind of at fault too. As an investor, I kind of feel like you also have a responsibility to know about the companies you're investing in. And the fact that so many famous investors didn't even look into Theranos and whether the technology worked is like so wrong and stupid. You know, I'm sorry you were frotted out of millions of dollars, but you kind of deserve it if you didn't even look into the company that you were investing in. I mean, maybe that's just me. So is Elizabeth Holmes a fraud or simply an aspiring inventor who refused to give up on her dream? I'll let you be the judge of that. In my opinion personally, I feel like when she started putting real people at risk is when she transitioned into being a full blown fraud. To me, that's the line that shouldn't be crossed. Elizabeth Holmes put real people in harm's way when she let real innocent people take Theranos blood test knowing that they didn't work. So that's my outlook on Theranos and the whole story of Theranos itself and its rise and then downfall. Let me know in the comments down below what companies you'd like to see next. I love looking into different like fraudulent companies and examining all these stories. The scariest thing to me, I think is that there are definitely other businesses out there besides Theranos who are scamming like this, but maybe possibly getting away with it. The fact that Theranos went on for so long and was with so many legitimate companies like Walgreens and no one suspected a thing until this report came out makes me feel like what other companies are out there that are hiding something that we just don't know about. I mean, that's crazy to me. So anyways, if you enjoyed this video, subscribe down below and until next time, have a good one.