Indian American Entrepreneur Sunny Balwani Sentenced to Prison
Sunny Balwani. Twitter account photo.
December 7, 2022
A judge in California today sentenced Sunny Balwani to 12 years and 11 months in prison. Balwani, 58, was the Chief Operating officer and President of Theranos, a private health care and life sciences company based in Palo alto, California. The Silicon Valley startup was founded by Elizabeth Holmes, 38.
In July, a jury in California found Balwani guilty of conspiracy and “a multi-million-dollar scheme to defraud investors and patients in connection with the operations of Theranos.” Prosecutors had alleged that “Holmes and Balwani defrauded doctors and patients (1) by making false claims concerning Theranos’s ability to provide accurate, fast, reliable, and cheap blood tests and test results, and (2) by omitting information concerning the limits of and problems with Theranos’s technologies“ Also, they “allegedly made numerous misrepresentations to potential investors about Theranos’s financial condition and its future prospects.”
Last month, Holmes was sentenced to 11 years and 3 months, with her prison term starting in April 2023. Theranos filed for bankruptcy in 2018. Balwani’s prison term starts in March 2023.
In 2009, Ramesh “Sunny” Balwani, an investor, joined Theranos as the Chief Operating Officer. He personally guaranteed a $12 million credit line to the startup, according to John Carreyrou’s Bad Blood: Secret and Lies in a Silicon Valley Start-up. Balwani and Holmes were in a romantic relationship. He was divorced from his wife Japanese artist Keiko Fujimoto in 2002.
Theranos’ board of directors included Jim Mattis, secretary of defense under President Donald Trump, Henry Kissinger, the former secretary of state, and a couple of U.S. senators. Investors in the company included Betsy DeVos, secretary of education under President Trump, and billionaires Carlos Slim of Mexico and Rupert Murdoch, who controls News Corp. which owns The Wall Street Journal, The Times of London and other media businesses around the world.
Venture capitalists and the media hailed Holmes as the next Steve Jobs, the founder of Apple. Drug retailers Safeway and Walgreen’s, the Cleveland Clinic medical system and other reputed organizations were working on using Theranos’ blood tests. Holmes was on the cover of Fortune, Forbes and other magazines. In 2014, investors valued Theranos at $9 billion, making Holmes a billionaire.
But in 2015, some medical researchers as well as John Carreyrou, a two-time Pulitzer Prize winner then at The Wall Street Journal, exposed flaws in Theranos’ technology as well as in claims made by Holmes and the company.
In 2018, Elizabeth Holmes and Sunny Balwani were charged in civil cases brought by the U.S. Securities and Exchange Commission (SEC) “with raising more than $700 million from investors through an elaborate, years-long fraud” making false statements about the technology, business, and financial performance.
Holmes settled the SEC’s civil case by paying a $500,000 fine. Balwani is fighting the SEC charges in court.
Ramesh “Sunny” Balwani was born in Pakistan. His family, who are Hindus, migrated to India. In 1986, Balwani emigrated to the U.S. from India to study at the University of Texas, Austin; he received a degree in information systems. Later, he earned an MBA from the University of California, Berkeley.
Balwani worked as a software engineer at Lotus and Microsoft. He then joined CommerceBid.com, an e-commerce company, as one of the founders. In 1999, at the height of the dotcom bubble, it was sold to Commerce One for $230 million, almost all in stock. Balwani reportedly made about $40 million from the sale.
Scientists and engineers working at Theranos told John Carreyrou, the author of Bad Blood, that Balwani terrorized and traumatized them. Balwani drove a black Porsche with the license plate “DAZKPTL,” apparently referring to “Das Capital” Karl Marx’s book on capitalism.
Balwani and Holmes called Carreyrou a hater and sought to make fun of him while he was investigating Theranos’s claims and writing stories for The Wall Street Journal. “Proud cynic,” Holmes wrote in a text message to Balwani, The New York Times reported. In response Balwani stated, “Cynicism and skepticism are diabetes of the human soul…No one should be proud of diseases.”
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