Theranos' Elizabeth Holmes Sentenced to Over 11 Years in Prison

Elizabeth Holmes Is Sentenced to More Than 11 Years in Prison for Defrauding Theranos Investors

Elizabeth Holmes, the founder of Theranos Inc. who was convicted of defrauding investors, was sentenced to more than 11 years in prison, capping the extraordinary downfall of a onetime Silicon Valley wunderkind who promised to revolutionize blood testing.

U.S. District Judge Edward Davila, who oversaw the trial in which Ms. Holmes was found guilty of running a yearslong fraud scheme at her blood-testing company, delivered the sentence Friday in federal court. A jury convicted Ms. Holmes in January on four charges that she misrepresented the startup’s technology, finances and business prospects to investors.

Judge Davila ordered Ms. Holmes to serve 135 months, or 11.25 years, and to surrender on April 27, 2023. The sentence length falls in the midrange of those received by the dozen white-collar criminals with similar offenses cited by the government in its sentencing memorandum.

Sam Bankman-Fried parts ways with Paul Weiss lawyersSam Bankman-Fried has parted ways with the white-shoe lawyers helping him as he faces federal investigations into the collapse of his crypto empire, people familiar with the matter said.

Bankman-Fried, the 30-year-old whose FTX exchange and web of related crypto firms unraveled last week, had been working with Martin Flumenbaum at Paul, Weiss, Rifkind, Wharton & Garrison, a dean of the white-collar bar who defended Michael Milken in his securities fraud trial in the 1990s and AIG in its post-2008 dealings with the Justice Department.

“We informed Mr. Bankman-Fried several days ago, after the filing of the FTX bankruptcy, that conflicts have arisen that precluded us from representing him,” Flumenbaum said in a statement.

Bankman-Fried is now represented by Greg Joseph, former president of the American College of Trial Lawyers. Also on his legal team as an advisor is David W. Mills, who teaches criminal law at Stanford Law School, where Bankman-Fried’s parents are both professors, some of the people said.

They Lived Together, Worked Together and Lost Billions Together: Inside Sam Bankman-Fried’s Doomed FTX Empire

The emerging picture suggests FTX wasn’t simply felled by a rival, or undone by a bad trade or the relentless fall this year in the value of cryptocurrencies. Instead, it had long been a chaotic mess. From its earliest days, the firm was an unruly agglomeration of corporate entities, customer assets and Mr. Bankman-Fried himself, according to court papers, company balance sheets shown to bankers and interviews with employees and investors. No one could say exactly what belonged to whom. Prosecutors are now investigating its collapse.

Mr. Bankman-Fried’s companies had neither accounting nor functioning human-resources departments, according to a filing in federal court by the executive brought in to shepherd FTX through bankruptcy. Corporate money was used to buy real estate, but records weren’t kept. There wasn’t even a roster of employees, to say nothing of the terms of their employment. Bankruptcy filings say one entity’s outstanding loans include at least $1 billion to Mr. Bankman-Fried personally and $543 million to a top lieutenant.

New FTX CEO Paid $1,300 an Hour, Court Filings Show

John Ray, the seasoned expert brought in to tidy up the wreckage of collapsed crypto exchange FTX, is billing $1,300 per hour for his trouble, court documents filed on Sunday show.

Restructuring experts are seeking to carry on paying senior staff wages, despite a freeze on company funds and a lack of clear records about who is owed what. Legal documents filed over the weekend at the U.S. Bankruptcy Court for the District of Delaware ahead of the first hearing on Tuesday shed more light on the insolvency proceedings.

FTX’s ex-chief regulatory officer tied to online poker scandal

The top “regulatory officer” at fallen crypto exchange FTX once served as an attorney for a company that was embroiled in a notorious online poker cheating scandal more than a decade ago — and was caught on tape allegedly aiding the perpetrators of the fraud, according to reports.

Dan Friedberg — a lawyer who was FTX’s chief regulatory officer in the months leading up to its collapse and who also did a stint as its general counsel — also had served as an attorney for UltimateBet, whose collapse was considered one of the largest online gambling scandals in history at the time. I

n the alleged scheme — which reportedly claimed actor Ben Affleck among its victims — employees between 2005 and 2008 were accused of using a software exploit dubbed “God mode” to bilk players out of anywhere between $20 million and upwards of $50 million.

Why the Fairfax County Police Pension Fund Should Divest From Crypto

Last week, I asked the Chief Investment Officer of the Police Fund, Katherine Molnar, how much the fund had invested in crypto-related investments. Molnar responded to me via email that:

“In rough terms, there are crypto-related investments having a value of approximately $120,000,000 currently in the Fairfax County Police Officer Pension Fund. The target exposure is 4.75% across venture capital, absolute return and fixed income/lending strategies. Currently, the actual exposure is 7.63%. This is due to strong early performance.”

I then asked if Molnar was concerned about the funds crypto-holdings, given especially the FTX debacle. Molnar leaned-in:

“I’m happy to report we had no direct/material exposure to FTX per our investment managers, outside of market volatility. The washing out of weak players or potentially inappropriate actors – while causing volatility and is admittedly stressful – is ultimately a healthy thing. Our underlying investment thesis – that the innovation around blockchain technology is a high growth area going forward – has not changed.”

I don’t get it. To me, this is perhaps the most reckless investment ever made by a public fund since the Chicago Housing Authority lost $14M buying fictional investments known then as prime bank notes. Yet, to Molnar this is a “healthy thing.”

ESG Foes in States, Congress Ready Attacks on ‘Woke’ Investing

Rep. Patrick McHenry of North Carolina, the likely chairman of the House Financial Services Committee, and Attorney General Patrick Morrisey of West Virginia are among several Republican officials with new ammunition to fight the Securities and Exchange Commission and investment firms on ESG.

McHenry and Morrisey have yet to speak in depth about what’s next in their fights against an ESG agenda embraced by Democrats, who will retain control of the Senate and federal agencies for at least two more years. But both Republicans see the Supreme Court’s recent West Virginia v. Environmental Protection Agency decision restricting federal agency rulemaking as a key tool to challenge the SEC’s climate disclosure work and other ESG efforts.

Inside Gary Gensler’s SEC Campaign to Rein In the Crypto Industry

In March, eight months before his cryptocurrency empire imploded, Sam Bankman-Fried joined a video call with Gary Gensler, a longtime financial regulator who now leads the Securities and Exchange Commission.

The meeting didn’t go well. Mr. Bankman-Fried, the chief executive of the Bahamas-based crypto exchange FTX, wanted approval from the S.E.C. to offer cryptocurrencies in the United States without the threat of a fine for violating securities rules.

Mr. Bankman-Fried was joined on the call by FTX staff as well as business partners at the stock exchange IEX, who began walking Mr. Gensler through a PowerPoint presentation. At about the second slide, Mr. Gensler cut them off and launched into a roughly 45-minute lecture on his vision for crypto regulation, preventing any further discussion, three people familiar with the conversation said.