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Elizabeth Holmes: Theranos founder's bid to remain out of prison on appeal denied

Elizabeth Holmes, convicted founder and CEO of the collapsed blood-testing startup, Theranos, has been denied a request to remain out of prison while she appeals her conviction on charges of defrauding the biotech company’s investors.

In an order filed late Monday, U.S. federal district court judge Edward Davila said Holmes must report to prison on April 27.

Holmes, 37, was convicted by a federal jury in January 2022 of defrauding investors in the once high-flying Silicon Valley company. On 11 counts of criminal fraud, the jury returned guilty verdicts on three counts of wire fraud and one count of conspiracy to commit wire fraud.

Holmes could make another bid to remain free on bail during her appeal. The 9th Circuit Court of Appeals, in San Francisco where her appeal is pending, is empowered to decide if Holmes must follow Davila’s order.

In his order, Judge Davila disagreed with the government's contention that Holmes presents a flight risk, though agreed with prosecutors' arguments that an appeal of her case would not change the outcome reached in district court.

"Even though Ms. Holmes had presented clear and convincing evidence that she would not flee, the court does not find that she has raised a 'substantial question of law or fact' that is 'likely to result in reversal or an order for a new trial of all counts,'" Davila wrote.

Holmes started Theranos in 2003 at 19 years old, after dropping out of Stanford University. The company shuttered in 2016 amid regulatory pressure and after a Wall Street Journal expose that showed Theranos’ touted ‘finger stick’ blood tests couldn’t produce the hundreds of tests it promised.

She was indicted in 2018 after Theranos imploded, along with Theranos COO and her onetime boyfriend, Sunny Balwani. Investments in Theranos, combined with its skyrocketed valuation, once made Holmes the wealthiest self-made female billionaire.

Following the jury’s verdict, U.S. Federal District Court Judge Edward Davila sentenced Holmes to 11 years and three months in prison. The surrender date of April 27 afforded Holmes to remain out of custody for the delivery of her second child.

Theranos founder Elizabeth Holmes arrives at the federal courthouse accompanied by her partner Billy Evans, to ask a U.S. judge at a hearing to pause her prison sentence of more than 11 years while she urges an appeals court to review her conviction on charges of defrauding investors in the blood testing startup at the federal courthouse in San Jose, California, U.S., March 17, 2023. REUTERS/Carlos Barria
Just say no: Theranos founder Elizabeth Holmes with her her partner Billy Evans, asked a U.S. judge to pause her prison sentence while she urges an appeals court to review her conviction. The judge told her, instead, to report to prison on April 27. REUTERS/Carlos Barria

In court documents Holmes’ lawyers argue that several of Davila’s decisions leading up to and during her trial were made in error.

Holmes filed 19 pretrial motions concerning the admissibility of certain evidence in her case and also requested a new trial following the jury’s verdict, which Daviia denied.

“In sum, the record is teeming with issues for appeal,” Holmes' lawyers said in the document, noting that if the 9th Circuit Court of Appeals agrees with any of Holmes' appellate arguments, a new trial would need to be held.

The court is still expected to rule on the government's request for Holmes to repay Theranos investors to the tune of nearly $900 million. The figure, prosecutors argued, represents the full extent of investments made over the course of Theranos' existence. Attorneys for Holmes characterized the dollar amount as egregious given that Holmes was convicted of defrauding only some of the investors who backed the startup.

U.S. Assistant Attorney Robert Leach argued that every dollar invested in Theranos should be repaid to its various investors. The company was backed by an impressive group of politically connected and influential investors, including former Secretary of Education Betsy DeVos, Oracle founder Larry Ellison, venture capital firm Draper Fisher Jurvetson, and media titan Rupert Murdoch.

“Just apply common sense. The money people lost is the money they put in,” Leach argued, Law360’s Dorothy Atkins wrote in a tweet. Holmes’ lawyer Patrick Looby instead said that investments on charges for which Holmes was acquitted should not be figured into a calculation for restitution.

Holmes co-defendant, former boyfriend, and former Theranos COO Ramesh “Sunny” Balwani, was denied a similar request to remain free on appeal by Judge Davila as well as the 9th Circuit Court of Appeals, after he was convicted on similar charges in July 2022. He is scheduled to report to federal prison on April 20.

A Silicon Valley jury returned guilty verdicts for Balwani on all 12 counts of criminal fraud handed down in a grand jury's indictment. Balwani was sentenced to serve 12 years in federal prison.

Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.

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