The charges were leveled against the embattled company in a lawsuit filed Monday by hedge fund Partner Fund Management in Delaware Court of Chancery, according to a letter to investors seen by the Wall Street Journal. The Palo Alto, California-based company dismissed the lawsuit as baseless, accusing Partner Fund Management of "engaging in revisionist history.
– Just when you thought things couldn't get worse for Theranos, this: One of its major investors has sued the company and its founder, Elizabeth Holmes, in an effort to get back its $96 million investment and then some. Partner Fund Management argues "the defendants engaged in securities fraud and other violations by fraudulently inducing PFM to invest and maintain its investment in the company," per the Wall Street Journal. More specifically, Theranos—which said it could conduct blood tests using a single drop—"knowingly and repeatedly lied that they had developed proprietary technologies that worked" and misled investors about its quest for FDA approval and its partnership with Walgreens, the hedge fund says, per Forbes. A Theranos rep, however, says the suit filed at the Delaware Court of Chancery on Monday "is without merit and Theranos will fight it vigorously." "Most of the company statements the plaintiff has cited in its suit were made after the time the plaintiff invested, and could not possibly have been the original basis for investment," Theranos adds in a blog post, per CNET. "This wholesale reliance on post-investment statements, therefore, negates the claim that the plaintiff was misled." The suit is just the latest hurdle for Theranos. As Holmes has been banned from running labs for two years, the company recently announced it would close its labs and lay off 340 workers to focus on commercializing mini blood-testing labs.