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In a resounding legal blow, a Ninth Circuit panel on Monday affirmed the criminal fraud convictions of former Theranos CEO Elizabeth Holmes and former executive Ramesh "Sunny" Balwani, cementing their respective 11-year and nearly 13-year prison sentences. The three-judge panel dismissed arguments that the lower court had made crucial evidentiary missteps that prejudiced the jury.

Judicial Panel Stands Firm on Evidence Rulings

A 54-page decision, penned by U.S. Circuit Judge Jacqueline Nguyen, upheld U.S. District Judge Edward Davila's numerous evidentiary rulings that Holmes and Balwani had challenged during their separate but parallel trials. While the appellate court acknowledged that some layperson witnesses may have been improperly allowed to offer expert testimony, it deemed these errors "harmless."

The court further upheld an order mandating the two defendants to jointly pay $452 million in restitution to 14 Theranos investors—including a staggering $125 million to media tycoon Rupert Murdoch and $100 million to RDV Corp, the DeVos family's investment firm. Both Holmes and Balwani are currently serving their sentences.

Theranos: A Cautionary Tale of Silicon Valley’s Fall from Grace

Once heralded as a game-changing Silicon Valley unicorn—reaching a valuation of over $1 billion in 2015—Theranos collapsed spectacularly in 2018 amid a flurry of lawsuits, regulatory scrutiny, and public outrage. The company had promised to revolutionize blood testing with a mere finger prick, but prosecutors argued that the technology never worked as advertised.

Though indicted together, Holmes and Balwani faced separate trials after Holmes alleged that Balwani—her former business partner and romantic partner—had subjected her to years of emotional, physical, and sexual abuse. Their trials stretched across 2021 and 2022, culminating in convictions on multiple fraud charges. Holmes was convicted on four counts of defrauding investors, while Balwani was convicted on all 12 counts against him.

Failed Appeals and Harmless Errors

In their appeals, Holmes and Balwani argued that Judge Davila had committed evidentiary errors that unfairly influenced the jury. Holmes’ attorney, Amy Mason Saharia, contended that the court's directed verdict form obscured which investor misrepresentations the jury relied on. Meanwhile, Balwani’s legal team, led by Jeffrey B. Coopersmith, argued that the government had unfairly altered its indictment to include claims about conventional third-party blood-testing devices.

The Ninth Circuit rejected these claims, concluding that any errors in evidentiary rulings did not alter the trial's outcome. Notably, the panel scrutinized testimony from Dr. Kingshuk Das, a former Theranos lab director, who was allowed to provide expert-like testimony without a pretrial Daubert hearing. The court agreed that Das’ insights were "highly specialized knowledge," but ruled that his testimony was ultimately nonessential to the case's core fraud allegations.

Government’s Case Against Holmes and Balwani Holds Firm

The appellate judges found that prosecutors presented substantial evidence proving Holmes and Balwani had misled investors about Theranos' financial health, its reliance on third-party testing devices, and its purported partnerships with Walgreens, the military, and major pharmaceutical companies.

Additionally, the panel affirmed the admissibility of a damning 2016 report from the U.S. Centers for Medicare & Medicaid Services (CMS), which highlighted glaring deficiencies in Theranos’ lab operations. The court reasoned that the report was relevant in establishing Holmes’ awareness of the lab’s unreliability—even if it was released after the alleged fraud period.

Restitution and Investor Losses: A Final Nail in the Coffin

The court rebuffed Holmes and Balwani’s argument that the sentencing judge should have applied a lower legal standard in calculating investor losses. The Ninth Circuit upheld the existing standard, citing a 2023 precedent in United States v. Lucas, which reaffirmed the requirement for clear and convincing evidence in sentencing enhancements.

However, in a minor concession, the appellate panel acknowledged a miscalculation in the $452 million restitution order, as investors technically retained their Theranos shares even after the company’s collapse. Nonetheless, the court deemed this error "harmless," emphasizing that the shares had become effectively worthless.

What’s Next for Holmes and Balwani?

This decision leaves Holmes and Balwani with dwindling legal options. They could seek an en banc review from the full Ninth Circuit or petition the U.S. Supreme Court—though the likelihood of either court intervening remains slim.

As of now, the once-celebrated tech visionary and her former right-hand man remain behind bars, their legacies forever stained by one of Silicon Valley’s most infamous fraud scandals.