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Theranos founder, former exec must pay $450 million in restitution

Elizabeth Holmes -- now headed to prison while fighting her conviction on appeal -- and ex-partner Ramesh "Sunny" Balwani must pay investors restitution of $452,047,268.

SAN JOSE, Calif. (CN) — A federal judge ruled Tuesday that Elizabeth Holmes and her ex-partner Ramesh "Sunny" Balwani must pay more than $450 million to investors they were found guilty of injuring by wire fraud.

U.S. District Court Judge Edward Davila ordered the two to pay restitution of $452,047,268. Both defendants are liable to pay the total sum to certain investors in the now-defunct Silicon Valley startup Theranos. The federal government had asked the judge to order restitution totaling $807,465,307.

In a 19-page order filed Tuesday, Davila said that while the defendants' trials were severed, joint and several liability is warranted as to the victims’ losses arising from the conspiracy to commit wire fraud against Theranos investors.

"Here, two separate juries found both defendants to be guilty of the same count — conspiring to defraud Theranos investors — which indicates that both defendants contributed to the losses arising from that conspiracy," Davila wrote. "To the extent defendant Holmes may object that restitution is improper as to her on the individual investor fraud counts for which she was not convicted, restitution may nonetheless be ordered 'based on related but uncharged conduct that is part of a fraud scheme.'"

Holmes lost a bid for a new trial in November and had asked for a maximum of 18 months in confinement followed by community service — or no prison sentence at all — when she appeared in court the month before visibly pregnant. Instead, U.S. District Judge Edward Davila sentenced her to 11 years, which she sought to delay due to the birth of her second child.

Before surrendering to authorities, Holmes won a delay to beginning her 11-year prison sentence in Texas last month by deploying the same legal maneuver that enabled her co-conspirator in the blood-testing hoax to remain free for an additional month. She filed an appeal of Davila's order earlier in April to report to prison April 27.

The appeal, filed with the Ninth Circuit, automatically delays her reporting date because she has been free on bail since a jury convicted her on four counts of fraud and conspiracy in January 2022. The verdict followed a four-month trial revolving around her downfall from a rising Silicon Valley star to an alleged scam artist chasing fame and fortune while fleecing investors and endangering the health of patients relying on Theranos' flawed blood tests.

However, the Ninth Circuit Court of Appeals rejected her bid to remain free — meaning Holmes is now bound for prison. On Wednesday Davila set a new date for Holmes, 39, to leave her current home in the San Diego area and report to prison. He has ordered her to report to the Bureau of Prisons to begin her sentence no later than 2 p.m. on May 30.

Holmes will be separated from her partner, William “Billy” Evans and children, their 1-year-old William and 3-month-old Invicta, born after her mother's conviction. Davila has recommended that Holmes serve her sentence at a women’s prison in Bryan, Texas but the federal Bureau of Prisons has not disclosed whether it accepted Davila’s recommendation or assigned Holmes to another facility.

After the Ninth Circuit rejected his appeal, Balwani, 57, began serving a nearly 13-year prison sentence in a federal prison located in San Pedro, California after being convicted of 12 counts of fraud and conspiracy.

"We respectfully disagree with the district court's restitution order, but even more fundamentally, the guilty verdict on which the restitution order stands is the product of an unfair trial rife with constitutional and other errors," Balwani's attorney Jeffrey Coopersmith said in an email. "We will continue to fight for Mr. Balwani on appeal."

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Categories / Business, Criminal, Financial

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