Now scams are increasing in this virtual world. Hunters don’t hesitate to investigate fundraising and find out the weakness of the founders raising funds. In the current environment, start-ups are more and more popular and thanks to some with their amazing fundraising or innovative concepts. But when these turn out to be outright scams, investors and consumers alike are often left disappointed. This is the case of an American start-up called Theranos that managed to fool everyone for many years and a French company that disappointed buyers very quickly.
Elizabeth Holmes and Theranos: The Success of a Scandal
The story begins with an innovative concept started by Elizabeth Holmes, who was only 19 years old at the time. In 2003, he created Theranos to democratize blood diagnostics. The company promises fast and cheap testing. A concept that instantly captivates you, thanks to unbeatable prices and very short wait times. With her supposedly innovative lab, which will allow more than 200 analyzes to be performed with a tiny amount of blood, Elizabeth Holmes convinces everyone, and especially investors. This is the beginning of a meteoric rise.
The company, located in the heart of Silicon Valley in Palo Alto, attracts many investors who understand the company’s immense success. Investments are not made to wait, in 2014 the value of the company is already more than $ 9 billion. A real success for a company that will succeed in fooling everyone. Elizabeth Holmes then became the woman “Steve Jobs” and toured the TV sets. Thanks to such notoriety, the company continues to grow and its leader becomes a billionaire with a net worth of more than $ 3.6 billion, estimated by Forbes magazine.
Until the publication of articles in the Wall Street Journal in 2015, start-ups continue to convince investors and Americans and start-ups. The American newspaper Theranos reports doubts about the company’s performance and innovative concept. After this, it is the health ministry that starts questioning the start-up and its activity. As it turns out, the company couldn’t maintain the speed of 200 scans in a short amount of time with its system. She could only do a few scans and would get systems from other companies to scan for her. Based on these suspicions, the SEC (Securities and Exchange Commission), a US stock market policeman looks for clues and investigates to make sure the start-up is honest. On March 21, 2018, the American company and its founders, Elizabeth Holmes and Ramesh Balwani, were charged with fraud. Thanks to a pretense about its technology and performance, the company has managed to raise more than $700 million from investors.
The two entrepreneurs didn’t hesitate to lie about their company’s achievements in order to push the deception a bit further so as to be understood by as many Americans and investors as possible. In 2014, he reportedly reported his turnover of $100 million, when it was actually only $100,000. But the lies do not end there and the company even goes so far as to communicate with the Ministry of Defense about a certain cooperation when it was not. Following this discovery, the SEC asked Theranos and Elizabeth Holmes for a $500,000 fine. In addition, the manager is obligated to sell Theranos and can no longer manage a listed company for 10 years. He will also have to return the 19 million shares in his possession. At the moment, no legal action has been taken, Elizabeth Holmes has only entered into a settlement with the SEC. The affair shocked Americans so much that it made media rounds and apparently a movie would be planned with Jennifer Lawrence to play Elizabeth Holmes.
Lucas Goretta, Company without products
A French company recently suffered a similar fate as the Theranos company in the United States. In 2015, a young company called Rift (Research and Innovation for the Technologies of the Future) comes to CES in Las Vegas to present its revolutionary product. The concept was to introduce a connected watch bracelet called the Whistle Band SimplyCity. The bracelet is popular and the company begins to make itself known. To finance his project, the entrepreneur of the start-up, Lucas Goretta, initiates various crowdfunding and reassures investors. On its site, the company also announced that it has won two awards for its technologies.
With his various projects, Lucas Goretta manages to win 4 billion euros from investors and 10,000 participants, but a problem quickly runs into the equation. It turns out that the products offered by the company have never been marketed, so disgruntled buyers are starting to file complaints with the courts. He was arrested in Annecy in early March and placed under investigation for fraud. The police are already known to have similar facts, this will be their second attempt. In 2007, he was sentenced to 18 months in suspended prison and banned from running a business for 5 years. The man eventually got angry again and managed to fool a lot of investors and customers.
If in everyday life, scam attempts occur repeatedly, they often fail. In both these cases, companies and their founders have won huge sums of money without ever inventing anything. Investors are often most disappointed, thinking they are betting on the right horse. In the case of Elizabeth Holmes, such a success story is encouraging, but in reality the leader will soon face justice.