LibraryLeadership Ethics Case Library - University of Arizona Center for Leadership EthicsA Postmortem: Theranos, Inc.
Leadership Ethics Case Library - University of Arizona Center for Leadership Ethics
To View Full Case Details.
Register NowA Postmortem: Theranos, Inc.
Last Updated: 04/02/2026
Case Organization
https://eller.arizona.edu/departments-research/centers-labs/leadership-ethics
Eller College of Management 520-621-2165 1130 E. Helen St. | P.O. Box 210108. Tucson, AZ 85721-0108
Case Contributors
Case Disciplines
Skills & Expertise
|
Background & Objective
The challenge or opportunity you are trying to address for the organization. |
In 2003, 19-year-old Stanford University dropout Elizabeth Holmes founded biotech Theranos Inc. Holmes brazenly claimed to have developed proprietary technologies that would disrupt the blood-testing industry. One technology eliminated the need to collect blood samples through traditional needles, instead using a finger stick that collected tiny amounts of blood into a small tube called a nanotainer. Another technology was a laboratory device named Edison that was able to run dozens of tests on the same, minute amount of blood, testing a gamut of fatal diseases including diabetes, heart disease, and cancer. Theranos promised that its blood- tests would be faster, cheaper, and more accurate than traditional tests offered in labs, clinics, and hospitals.1 The media hype over the startup earned Theranos the vaunted unicorn status. However, by 2015, various media outlets exposed Theranos for perpetrating Silicon Valley’s biggest fraud. In 2018, federal prosecutors filed criminal charges against Elizabeth Holmes and the company’s former No. 2 executive Ramesh “Sunny” Balwani for defrauding investors, doctors, and patients. In the wake of the high-profile scandal, the company began the formal process of dissolution. The case involves multiple stakeholders and raises economic, legal, and ethical issues worthy of consideration. Theranos launched a series of successful funding rounds, backed by luminary venture capitalists Larry Ellison, Rupert Murdoch, and Carlos Slim. Mega-deals with Walgreens, Pfizer, and the Department of Defense (DoD) whet the appetites of new investors and fueled additional funding. In 2014, Theranos reached a valuation of $9 billion with Holmes retaining 50% of the privately held company. Holmes had a net worth estimated at $4.5 billion, making her the youngest female self-made billionaire. A blue-chip board of directors was established, which included former Secretary of State George Shultz, former Secretary of Defense, James Mattis, and Senator Sam Nunn, just to name a few. By 2015, reports surfaced that Holmes and Balwani had lied to doctors and patients about test results and deceived investors about the company’s financial position. What ensued was a complete unraveling of the company and financial implosion. The company formally dissolved and sought to pay unsecured creditors its remaining cash, estimated at roughly $5 million. All told, Theranos investors lost nearly $1 billion, and Holmes’s net worth dropped to virtually nothing.2 In June 2018, the Department of Justice (DoJ) charged Holmes and Balwani with nine counts of wire fraud and two counts of conspiracy to commit wire fraud, stemming from allegations that the two engaged in a scheme to defraud investors and a separate scam to defraud doctors and patients. Both Balwani and Holmes have pleaded not guilty to the charges. The DoJ said at the time that Holmes and Balwani could face up to 20 years in prison, a $250,000 fine, and restitution costs, for each count on which they're convicted.3 However, recently a federal judge ruled that Holmes and Balwani would have their fraud case narrowed, but not dismissed. |
|
Learning Objectives
This is what students will learn as they complete the case. |
This case focuses on corporate fraud, regulatory failure, and ethical breakdown in a high-growth healthcare startup. Students will develop skills in evaluating leadership claims, governance failures, and legal accountability while examining how innovation narratives can obscure scientific, ethical, and operational realities. The case is especially valuable for understanding how trust, oversight, and evidence should function in regulated industries.
|
|
Key Action Items
These are activities and action items you might want to complete in order to achieve the expected outcomes. |
|
| Milestones |
Milestone #1
Guiding Questions
Deliverable
Suggested Outcome(s)
Milestone #2
Guiding Questions
Deliverable
Suggested Outcome(s)
Milestone #3
Guiding Questions
Deliverable
Suggested Outcome(s)
Milestone #4
Guiding Questions
Deliverable
Suggested Outcome(s)
|
Explore the CapSource Case Library
The CapSource Case Library helps students explore real-world challenges faced by leading organizations across industries. Each case introduces a practical business or social impact problem and invites students to think critically about potential solutions.
Students can use cases to:
Educators can register and browse the library for free. Upgrade for classroom use to bring experiential learning into your courses through case discussions, assignments, and competitions. The library is constantly growing and used by schools everywhere.
What you get when you upgrade:
Unlock the Full Case
Create a free account to browse case materials, submit custom cases/case responses, and explore ways you can leverage this material to improve classroom engagement and enhance learning outcomes.
Register to View Full Case Details
Register NowAlready have an account? Log In
Educator or organization? Book A Demo