Elizabeth Holmes found guilty on four out of 11 federal charges

(CNN Business) Elizabeth Holmes, the former CEO and founder of failed blood testing startup Theranos, was found guilty on four charges of defrauding investors, capping off the stunning downfall of a former tech icon.

She was found not guilty on three additional charges concerning defrauding patients and one charge of conspiracy to defraud patients. The jury returned no verdict on three of the charges concerning defrauding investors, and Judge Edward Davila, who is presiding over the case, is expected to declare a mistrial on those charges.

The charges Holmes was found guilty of include one count of conspiracy to defraud investors, as well as three wire fraud counts tied to specific investors. Holmes faces up to 20 years in prison as well as a fine of $250,000 plus restitution for each count.

Holmes departed the courthouse hand-in-hand with her partner, Billy Evans, her mother and her father. She was met with a sea of cameras and reporters but did not comment in response to questions shouted from reporters.

In a statement, U.S. Attorney Stephanie Hinds applauded the verdict.

"The jurors in this 15-week trial navigated a complex case amid a pandemic and scheduling obstacles," she said, in a statement that was read aloud by a spokesperson outside the courthouse. "The guilty verdicts in this case reflect Ms. Holmes' culpability in this large-scale investor fraud, and she must now face sentencing for her crimes."

Notably, the jury of eight men and four women determined that Holmes was guilty on counts pertaining to investors, but none of the counts that pertained to defrauding patients. Over the course of its 11-week case, the government called just three patient witnesses to the stand, two of whom were individually tied to wire fraud counts.

The jury deliberated for over 50 hours before returning a verdict on eight of the 11 charges. Earlier Monday, the jury returned a note indicating they could not reach a unanimous verdict on three of the counts. In response, Judge Davila issued what is known as an Allen charge, instructing them to continue deliberating to try to reach a verdict.

However, hours later, the jury returned another note that indicated it remained unable to reach a verdict on those counts. The counts pertained to three of the investor wire fraud charges.

The verdict comes after a trial that spanned over three months at a federal courthouse in San Jose. More than 30 witnesses testified during the trial, culminating with Holmes, who took the stand for seven days in her own defense.

Holmes' case marked a rare criminal fraud trial of a Silicon Valley entrepreneur. Jurors were tasked with determining whether Holmes was a well-meaning founder who made mistakes as she built her startup, as her defense posited, or whether she intentionally deceived investors and patients in order to help herself and her company succeed, as federal prosecutors alleged.

While Holmes was the one on trial, the outcome of her case could serve as a cautionary tale for others in Silicon Valley.

"This is a verdict that should matter not just to Silicon Valley but to the people who celebrate it, invest in it and use its products," said Margaret O'Mara, a historian of the tech industry and professor at the University of Washington. "She was made possible by a Valley business culture that celebrated and encouraged very young, marginally experienced people."

George Demos, a former Securities and Exchange Commission prosecutor and adjunct law professor at the UC Davis School of Law, called the verdict "a significant win for the government and sends a powerful signal to Silicon Valley that fraud cannot masquerade as innovation."

While much of Silicon Valley has tried to distance itself from Theranos for a variety of reasons, including that the startup was a medical device manufacturer, the power and control Holmes wielded over Theranos had all the trappings of a tech company, O'Mara said.

"She was not just the CEO," O'Mara said, "she was a very powerful CEO in the Silicon Valley model."

The rise and fall of Elizabeth Holmes

Holmes, now 37, started Theranos in 2003 at the age of 19 and soon thereafter dropped out of Stanford to pursue it full-time. After a decade under the radar, Holmes began courting the press with claims that Theranos had invented technology that could accurately and reliably test for a range of conditions using just a few drops of blood taken from a finger prick. The unveiling coincided with the company's announcement in 2013 of a major retail partnership with Walgreens.

Theranos raised $945 million from an impressive list of investors, including media mogul Rupert Murdoch, Oracle founder Larry Ellison, Walmart's Walton family and the billionaire family of former Secretary of Education Betsy DeVos.

At its peak, Theranos was valued at $9 billion, making Holmes a paper billionaire. She was lauded on magazine covers, frequently wearing a signature black turtleneck that invited comparisons to the late Apple CEO. (She has not worn that look in the courtroom.)

O'Mara said Holmes was particularly beloved by the media as an intrepid entrepreneur working on a product that aimed to make the world better -- and a rare female founder at that.

But the dominoes started to fall after a Wall Street Journal investigation in 2015 found the company had only ever performed roughly a dozen of the hundreds of tests it offered using its proprietary blood testing device, and with questionable accuracy. Instead, Theranos was relying on third-party manufactured devices from traditional blood testing companies.

In 2016, Theranos voided two years of blood test results. In 2018, Holmes and Theranos settled "massive fraud" charges with the Securities and Exchange Commission, but did not admit to or deny any of the allegations as part of the deal. Theranos dissolved soon after.

The scene inside and outside the courtroom

First indicted in 2018, Holmes' trial was delayed by the pandemic and the birth of her child. But public interest in Holmes has remained strong since then, with documentaries, podcasts, an upcoming TV miniseries and a planned feature film.

That fascination was apparent outside the courtroom. Members of the public and the press gathered as early as 2 a.m. local time on major days of the trial to get one of the 34 courtroom seats available. A ticketed overflow room sat another roughly 45 people. There was otherwise no way to view the events because audio and video recordings were prohibited.

The trial drew apparent friends of Holmes, some of whom showed up on the day of opening statements dressed in a look that resembled the former CEO at Theranos' peak -- clad in black attire with blonde hair pulled back at the nape of their necks. It also attracted an artist who set up a performance art display outside the courthouse, selling a very limited number of blonde wigs, black turtlenecks and "blood energy" drinks. She said she wanted to see "what it was like experiencing her energy."

During jury selection, the father of Holmes' partner showed up early to snag a seat inside the courtroom. He assumed a nickname and claimed to be a concerned citizen, but on the first day of the trial he walked into the courtroom alongside Holmes. After his identity was revealed publicly, he wasn't seen again at the trial.

For her part, Holmes -- wearing a work dress and jacket or skirt suit in greys, blues or greens with a green or blue mask -- arrived each court day walking hand-in-hand with either her mother, Noel, or her partner, Billy Evans, or both. When Holmes took the stand, the group of friends and family sitting in reserved seating swelled. Her father was seen in the courtroom during closing arguments.

As the trial went on, three jurors were dismissed. One juror was reported by another for playing Sudoku during the proceedings. Another was excused after disclosing she was experiencing anxiety stemming from the prospect of sending Holmes to prison, and cited her Buddhist beliefs. The alternate juror tapped to replace her expressed some concern about sentencing Holmes because she is very young. She remained on the jury tasked with determining Holmes' fate.

The government's 11-week case against Holmes

In its closing arguments, the prosecution alleged that, faced with a business running out of money, Holmes "chose fraud" rather than "failure."

During the trial, federal prosecutors called 29 witnesses to testify, including former Theranos employees, retail executives and a former US Defense Secretary. Through these witnesses, the government attempted to show the layers of the alleged fraud, including how Theranos concealed its use of third-party manufactured machines to test patient blood, overstated its financials, misrepresented its work with pharmaceutical companies and the military, and used the media to perpetuate the untruths.

In his final remarks, prosecutor John Bostic said Holmes was "especially fond of using" half-truths, which he described as something that is "arguably technically correct, but still leaves the listener with an unmistakable incorrect understanding about what the truth is."

As an example of that, he pointed to journalist Roger Parloff's recordings of interviews with Holmes done in conjunction with a 2014 Fortune Magazine cover story that were played in court during the reporter's time on the stand. Holmes is heard rationalizing why some patients had their blood taken through venipuncture rather than solely its marketed fingerstick blood draws. "At no point during that conversation did she tell Mr. Parloff that the reason ... was that the company's own technology could not do the range of tests that she was offering," said Bostic.

"It does not matter whether Ms. Holmes had the intent to make the lie true or to avoid being found out. The problem is in making the misrepresentations on the day it's made," he added.

Bostic also said Holmes "borrowed the credibility" of others, through her startup's high-profile retail partnerships, her magazine cover pieces and her board stocked with powerful names, including former Defense Secretaries and two former Secretaries of State.

"By attaching herself to these individuals and organizations," he continued, "she bolstered Theranos' own credibility, and by exaggerating those contexts, she caused others to believe that Theranos must have the legitimacy of those other entities."

Holmes testifies for 7 days in her own defense

The defense called three witnesses, concluding with Holmes. Known for her charm and charisma while CEO, Holmes' testimony ranged from speaking emphatically about her belief in the company's technology to pointing the finger at others -- notably, her ex-boyfriend and former Theranos COO Ramesh "Sunny" Balwani.

While the origin story of Theranos is well-known, Holmes shed more light on her decision to drop out of Stanford. She testified she had been raped as a student and was having trouble attending classes. She said she left school to throw herself into building what became Theranos, seeking business advice from Balwani, 20 years her senior, whom she had met after graduating from high school and whom she viewed as a successful tech executive.

Holmes testified she and Balwani had a decade-long abusive relationship. She said Balwani tried to control nearly every aspect of her life as he sought to help her become successful. Balwani, through court filings, has denied the abuse allegations. (Balwani faces the same charges as Holmes and is set to be tried early this year. He has pleaded not guilty.)

Holmes also testified that Balwani, whom she lived with, served as her most important adviser during her time at Theranos. She testified that he didn't control what she said to investors, board members, retail partners, and the media during her time at the helm of Theranos. But his influence on her life loomed large.

"He impacted everything about who I was, and I don't fully understand that," Holmes testified.

Holmes' defense team did not call an expert to testify about the possible implications of the alleged abuse on her role as CEO, despite having indicated it may do so. In his closing arguments, prosecutor Jeffrey Schenk told jurors they did not need to decide whether the abuse happened to reach a verdict.

"The case is about false statements made to investors and false statements made to patients," he said.

Asked whether she ever led patients to believe Theranos could offer accurate and reliable blood tests while knowing it could not, Holmes testified: "Of course not."