Theranos, a blood-testing startup that was accused by the Securities and Exchange Commission of deceiving investors earlier this year, announced plans Tuesday to formally dissolve.
David Taylor, who became CEO in June, sent an email to shareholders to announce the decision and inform them the company will seek to pay unsecured creditors its remaining cash over future months, according to the Wall Street Journal.
Taylor took over the CEO role from founder Elizabeth Holmes, a Clinton donor and presidential ambassador for global entrepreneurship under former President Barack Obama, after she was charged with "massive fraud." He told shareholders that since April the investment bank Jefferies Group has reached out on the behalf of the company to numerous potential buyers. He said Jefferies engaged with over 80 potential buyers, but none of the leads materialized.
"Unfortunately, none of those leads has materialized into a transaction. We are now out of time. Despite our careful cash management, we are in default under the Fortress credit facility," Taylor wrote. "Fortress has the legal right to foreclose upon, and to sell or take ownership of, all of the Company’s assets, including the Company’s intellectual property (which is owned by a "special purpose subsidiary" of the Company). In addition to Fortress, we owe at least $60 million to our unsecured creditors."
In the email to shareholders, sent Tuesday, Theranos General Counsel and Chief Executive Officer David Taylor said the company is trying to negotiate a settlement with Fortress that would give the New York private-equity firm ownership of the company’s patents but leave its remaining cash—estimated at about $5 million—for distribution to other unsecured creditors.
Under a liquidation process known as "an assignment for the benefit of creditors," getting that remaining cash to the unsecured creditors could take six to 12 months, Mr. Taylor said in the email. Most of Theranos’s two-dozen remaining employees worked their last day on Friday, Aug. 31. Only Mr. Taylor and a handful of support staff remain on the payroll for a few more days.
Holmes and her ex-boyfriend Ramesh "Sunny" Balwani were indicted back in June on nine counts of wire fraud and two counts of conspiracy to commit wire fraud. Balwani was Theranos’ president and chief operating officer until his retirement in May 2016. They both face a maximum sentence of 20 years in prison and a fine of $250,000, plus restitution to those found to have been defrauded, on each count.
Obama invited Holmes to the White House back in 2015, where she was named a presidential ambassador for global entrepreneurship. The Clintons have also embraced Holmes, including Bill Clinton, who had a lengthy discussion with her at the Clinton Global Initiative’s annual meeting in 2015. Holmes talked about bringing "equality" to the health care sector.
Holmes was also scheduled to host a $2,700-a-head fundraiser for Hillary Clinton in March 2016 at the Theranos Palo Alto, California headquarters, an event Chelsea Clinton was scheduled to attend. However, the fundraiser changed locations after her campaign was criticized for holding an event at the offices of a company under federal investigation.
Holmes remained a host for the fundraiser, and Chelsea Clinton still attended the event.