The fallout from the collapse of Theranos, the disgraced Silicon Valley blood-testing company, continues to multiply at a disastrous pace. On the heels of its $140 million lawsuit from Walgreens, Theranos is now getting sued by more investors who claim they were misled.
Robert Colman, co-founder of investment bank Robertson Stephens & Co., and fellow investor Hilary Taubman-Dye, filed a lawsuit against Theranos and company founder Elizabeth Holmes, alleging the company lied about its technology to gain investor money. For those keeping score, this is the third lawsuit against the company -- it was also sued by a hedge fund partner in October -- but it's the first that seeks class-action status.
In the months since exposés were published in Vanity Fair and the Wall Street Journal, it's been revealed that Theranos' top-secret technology, which alleged to deliver full diagnostic blood tests with just a pinprick, was actually just old-school intravenous blood tests using competitors' technology. Yikes!
The new lawsuit also says Theranos claimed to have contracts with big players in the medical world, including drug makers, insurance agencies, and hospitals. Its only legitimate partner was Walgreens, which ended up with unsafe and inaccurate blood tests -- 31,000 results had to be thrown out due to faulty testing. Yikes again!
So, to recap: Theranos said it had invented revolutionary new technology that didn't exist, and as Theranos continues to unravel, it's become clear that investors put their millions and blind faith into a company and CEO that were shady, at best -- one of the conditions of investment, as revealed by the Vanity Fair feature, was that investors couldn't know how the technology worked. Which seems... problematic. People still forked over their cash.
It wasn't until an investor from Google went to Walgreens and saw vial after vial of his blood being drawn that eyebrows started to raise. So it's a little hard to feel sorry for these hedge funds who threw millions of dollars at a company without bothering to vet the fake technology that was the basis of all the hype.
If there's a silver lining, now would be a good time to start selling volcano insurance door-to-door in Silicon Valley. Just make sure you're wearing a black turtleneck when you do it.