Theranos 'dumped' a useless, double-encrypted blood-test database on prosecutors, then destroyed the original, Feds say

• Elizabeth Holmes and Ramesh "Sunny" Balwani, executives at Theranos, are fighting charges that they defrauded investors and patients by covering up huge issues with their blood-testing technology.
• With trial looming, they are trying to prevent women from testifying about erroneous test results that gave bad indications about their pregnancies or cancer diagnoses.
• But Theranos destroyed its test-results database in 2018 after providing the government with a useless copy, justifying the use of anecdotal evidence, prosecutors said.
• "Just dump the entire bespoke database on the Government," a WilmerHale lawyer told Theranos, according to the filing. 
• Visit Business Insider's homepage for more stories.

Blood-testing startup Theranos gave prosecutors an unusable copy of a key database and destroyed it even after an employee concluded it would be impossible to reconstruct, according to a new filing by the US government.

Theranos founder Elizabeth Holmes is set to face trial in July on charges that she and Ramesh "Sunny" Balwani defrauded investors and purchasers about issues with their blood-testing technology. Her criminal defense lawyers at Williams & Connolly have sought to stop prosecutors from putting patients and doctors on the stand to testify about their test results.

But in a blistering memo filed on Monday, prosecutors said granting Holmes' request would be wrong. They said Theranos destroyed a key database in 2018 — called the Laboratory Information System, or LIS — containing millions of records, after giving prosecutors a copy that was known to be useless without passwords that they didn't have.

"At a basic level, the copy was missing the binaries and source code that would be necessary to put the database back together," prosecutors said. Even with that information, they added, the database would be too complex to reconstruct without help from the Theranos contractor that created it.

Theranos was once a Silicon Valley darling, with Holmes, who dropped out of college to work on the company, hailed as a disruptor to the blood-testing industry. Starting in 2015, however, the Wall Street Journal began raising questions about the performance of its technology. As media and regulatory scrutiny mounted into 2017, the company ran low on cash.

While the company got a $100 million lifeline from Fortress Investment Group in late 2017, Holmes was hit with civil, and then criminal, fraud charges in 2018 and the company shut its doors in the fall, with plans to give its patents to Fortress and its cash to creditors.

Prosecutors continued seeking evidence even after charging Holmes and Balwani. Theranos was a few months away from closing when the government sought the LIS data, which was stored on servers in a space in Newark, N.J., that Theranos would leave at the end of August.

Read more: 7 startups hit a valuation of $1 billion or more in 2010. By 2019, 4 of them have gone out of business or seen their valuations crumble.

As early as June 2018, IT specialists at Theranos knew that restoring the LIS database would require a password. By August, however, they hadn't tracked it down. At the end of the month, Theranos dismantled its servers and vacated the space, making the information essentially uncoverable, according to the filing. 

Meanwhile, Theranos's internal and external lawyers seemed unbothered by the government's potential inability to access it.

Xan White, an in-house lawyer at Theranos, acknowledged that the company may have to turn over any software required to access the database, but he said "it's ultimately not Theranos' problem" if its data access and storage systems were "inconvenient for outsiders." And an unnamed lawyer at WilmerHale, in a late July email to an unnamed executive, said the best strategy would be to "just dump the entire bespoke database on the Government."

The government suggested that PwC and FTI Consulting, which provided discovery assistance to Theranos, could have helped produce a copy of the LIS database.

Lawyers for Holmes have said it would be manipulative to put witnesses on the stand, including a cancer survivor who was monitoring her estrogen levels and two women who were tested for a pregnancy-related hormone, to describe the hypothetical impacts on their health if their doctors had trusted the Theranos test results. Prosecutors said individuals' stories are appropriate for the courtroom, however.

John Cline, a lawyer for Holmes, and representatives for WilmerHale didn't immediately respond to comment requests.

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