Practice English Speaking&Listening with: The $9 Billion Scam: Theranos

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- Hey guys, this is the story of the 9 billion dollar scam.

There is no shortage of start-ups in Silicon Valley.

In an era of crowd-funded companies

you're never completely sure if a start-up

will even exist long enough to deliver its product.

But, some companies such as Uber and Airbnb

are able to break through and completely

revolutionize their respective industries.

Now for the healthcare industry,

that company was Theranos.

Not to be confused with Thanos, Theranos.

Well I guess it kinda makes sense

they like snap their fingers

and like billions of dollars appeared.

(laughs)

- [Man Off Camera] You're not wrong.

- [Host] Theranos was founded in 2004 by Elizabeth Holmes.

A 19-year-old Stanford drop-out

who managed to convince her parents that they should

spend her tuition money on her company instead.

I need parents like that.

(laughs)

The company's original name was Real-Time Cures

but I guess that wasn't start-up-y enough,

so instead it was changed to Theranos.

A combination of therapy and diagnosis.

It was founded with the goal of running

multiple blood tests with an extremely small sample

of around 25-50 microliters, roughly a thousand times

less than traditional vials.

Now I hate getting my blood drawn

so I'm all for that right?

By utilizing a technology it called

Lab on a Chip, the readings from a single drop of blood

could be sent wirelessly to one of Theranos'

proprietary testing machines, the Edison.

Edison's were capable of running

multiple tests at a time,

anything from a simple cholesterol reading

to a much more complex operation,

like a cancer screening.

Now because all the tests were being done

simultaneously, they could be done

at a fraction of the cost compared

to a typical lab where each test required

an entirely dedicated vial of patient's blood.

Na-ah, no thanks, I'll pass on that.

The idea was immediately popular

and it attracted high profile investors

including Henry Kissenger, Rupert Murdoch

and Betsy Devos.

Now with her Foundation built,

Holmes, spent the next decade developing

the technology and securing hundreds of millions

of dollars from other VC firms as well.

After a few small-scale trials

with independent labs, Theranos officially

launched to the public in 2013, via its website.

Almost immediately it partnered with Walgreens

to put machines on every street corner.

Now Theranos had become the lab work provider

for a number of different insurers,

AmeriHealth Caritas, and Capital BlueCross

and they were awarded

the Bioscience Company of the Year by AZBio.

This all sounds very impressive.

At that point the company was worth an estimated

9 billion dollars more than both Uber as well as Airbnb.

Now as Holmes held a 50% stake in the company,

that in turn made her a multi-billionaire.

Not bad for someone under 30.

You're not a multi-billionaire yet, right?

- [Man Off Camera] You sound like me ... you know I'm not.

- There was just one problem.

The Edison machines didn't actually work.

In the 10 years that it had been operating,

Theranos never submitted the technology

to any medical journals for peer review.

Whenever she was questioned on how

the technology works, Holmes would give

intentionally vague responses like

a chemistry is performed so that a chemical

reaction occurs and generates a signal from

the chemical interaction with the sample

which is translated into a result.

That's not science talk, that's like me

trying to explain how to make videos.

It's like, oh, how do you do YouTube?

Well you start with the YouTube juice,

you pour it into the YouTube bucket,

and then a video comes out, and then this is happens.

Things started to fall apart for Holmes

after a 2015 Wall Street Journal article

questioned the authenticity of Theranos

which resulted in the SEC finally

stepping in to investigate.

Now, eventually Theranos admitted

that only 1% of the results from the Edison's

were accurate and arguably even worse

they'd been using commercially available blood testing

machines all along.

You know, what they were trying to really replace.

Now the house of card really began to fall apart from there.

Holmes had claimed that Theranos' annual revenue

was around 100 million dollars when in reality

it was a thousand times less.

Yes, Theranos' annual revenue was only 100 thousand dollars

and just to be clear that's revenue, not profit

so by 2015 they were hemorrhaging nine to ten million

dollars per month.

Remember how expensive that traditional blood testing was?

Oops.

So now you're probably wondering how did Holmes

grow her company with a product that didn't even exist?

During the 10 or so years that Theranos was active

Holmes would get new investors to buy out

the older more impatient investors.

And some were willing to wait because Theranos

had the potential to shake up the entire health care system

and make them a ton of money in the process.

And while typically a medical equipment manufacturer

would sell a machines like Theranos' Edison

to labs and clinics Holmes made sure to keep

the technology in house.

Basically she not only covered up the massive and nefarious

scam that her company was pulling but she also guaranteed

that if she did manage to make her non existent Edison

machine a reality, she'd be able to retain a monopoly

on the technology, and keep that sweet sweet VC money

along the way.

Naturally, once Holmes was caught she was sued

by roughly everyone.

The SEC brought several charges down on her,

but she managed to settle with them outside of court

in a move that resulted in her paying a 500,000 dollar fine

but, you know, she was also barred

from serving as a director or officer of a public company

for the next ten years.

If that wasn't enough she's also still awaiting a criminal

trial for committing fraud on an astronomical scale.

If you enjoyed, definitely be sure to check out

some other episodes including our one all about

scooter companies and how they're currently making

billions of dollars and if you enjoyed this

definitely be sure to subscribe to the channel

otherwise Matt won't be able to make rent rent this month

(laughs)

That was way too serious.

- [off screen voice] Wow.

- That was much more on the nose than I intended it to be

- [off Screen voice] Yes.

- If you don't subscribe Matt's not gonna eat today.

(laughs)

- [off Screen voice] Fact, those are all scarily true.

The Description of The $9 Billion Scam: Theranos