her entire Theranos empire around a product

that was supposed to solve

one of the biggest hurdles in healthcare,

access to affordable blood testing.

With her revolutionary Edison Machine,

a single drop of blood would be able to run up to 240 tests

from albumin to white blood cell count,

and everything in between.

It was going to change healthcare as we knew it.

- Our work is in the belief that access

to health information is a basic human right.

- [Narrator] By 2015 Forbes named Holmes

the youngest and wealthiest self-made billionaire in the US.

- Until we put Elizabeth on our cover

just a few months back,

I hadn't heard of you, I hadn't heard of the company,

and yet your company is valued at over $9 billion.

- [Narrator] But, there was a catch .

Behind closed doors, the Edison Machine simply didn't work

nearly as well as promised,

and Theranos was essentially a sham.

But with hundreds of millions of dollars in funding,

Theranos allegedly continued to persuade investors

into believing in their cons,

and the investments kept coming.

Venture capital funded companies are nothing new

for Silicon Valley.

In many ways, investors have become

one of the most important parts

of the entire startup ecosystem.

- When I'm an investor in a startup,

I assume that 60% of them are gonna go out of business.

- [Narrator] The question is why did investors

embrace a startup like Theranos

which built its entire empire around a product

that didn't work?

And now with Elizabeth Holmes on trial

for allegedly lying to them,

why do so few of them see mad about it?

- There is a great technology and it's gonna happen,

and she will have had a huge hand in making that happen.

- [Narrator] Having grand ambitions isn't a crime,

startups often present some pretty wild ideas.

- This will enable the creation of a lunar base.

(crowd applause)

- [Narrator] But if a company

allegedly uses deceptive practices

in order to raise hundreds of millions of dollars,

well, that's a different story,

and why Elizabeth Holmes is on trial

for numerous charges related to wire fraud.

- It's very rare that we see the CEO of a company

facing criminal charges, much less the founder of a startup.

- [Narrator] Russell Brandom is Policy Editor at The Verge.

He's been following the Holmes trial since the beginning.

- A lot of charges here a wire fraud

because they wired the money,

so if they had mailed cash, it would be mail fraud.

Most of them are wire fraud against investors.

Allegedly, she said things that weren't true,

and then based on those lies,

she was raising money and that's fraud.

- [Narrator] In 2015, the Wall Street Journal

published a slew of articles

revealing multiple levels of deceptive practices.

Theranos allegedly covered up these practices

while continuing to coax money from wealthy investors.

And the list is impressive.

Media mogul, Rupert Murdoch, General Jim Mattis,

who also served on the third most board,

and even the Walton Family, you know,

the richest family in the world.

- So because of that culture of venture capital,

investors always, always defend their companies.

And you see, even after a lot of the reporting

has come out saying, look, these machines are not working,

something doesn't smell right here,

a lot of investors were still defending Elizabeth Holmes

saying, "Oh, she's the next Steve Jobs,

you're just trying to take down

a sort of visionary founder."

- Are you willing to admit that you were wrong

about this one?

Absolutely not, I feel that we have taken down

another great icon.

- I think really it's just,

they want to give everything as much runway as possible,

and they figure look, either things will work out

and then I'll get rich and look like a genius,

or it won't and it's not really my problem.

- [Narrator] For most of the Theranos investors,

the amount of money lost pales in comparison

to their net worth.

And while some were able to claw back their investment,

many simply lost it all.

- You know, is the victim here, Rupert Murdoch?

I don't know, I don't feel that much sympathy for him.

I don't think this meaningfully affected Rupert Murdoch's

net worth, like no one is sleeping on the street tonight

because they invested in Theranos.

It was a really bad time for the employees,

but they're not really sort of represented here.

It was a really bad time for some patients

who got bad medical results.

It is odd that the investors are at the center of the trial

when they're kind of the least sympathetic players here.

- [Narrator] This obviously doesn't justify the fraud

that allegedly took place behind the scenes at Theranos,

but it does point to a larger pattern of behavior

in Silicon Valley that has become somewhat problematic.

Investors blindly tossing huge sums of money

behind overheated companies

that in reality only have a small chance

of succeeding in the first place.

If you really researched what Holmes was promising,

it didn't add up.

Testimony from the trial has revealed

that many investors failed to exercise due diligence

before handing over millions in funding to Theranos.

Many barely knew anything

about the healthcare industry at all.

- You got people who were sort of very prestigious

and very important, but maybe not rigorous enough

to really check what was being claimed.

Success builds more success.

So you hear a Rupert Murdoch invested in this company.

Well, he must have done his research.

Well, why did Rupert Murdoch invest?

Well, he heard that the army was using it.

None of these were people who were really experienced

in the blood testing world.

And when you got someone like that, who was, you know,

Bill Gates famously looked at their technology,

he has a lot of money,

he's interested in investing in things,

but he has this larger background in looking at, okay,

what are the medical interventions?

What can we, what can we be looking at?

And he was like, "This doesn't make any sense."

No one could test that much from a drop of blood.

And the things they're saying

about how they're doing it, don't add up.

- [Narrator] Ultimately what may have led Theranos

to use allegedly deceptive tactics

was the momentum from the investors themselves

who wanted so badly to turn a profit

that they ultimately couldn't see through all the hype.

- I think people are very, very angry at Elizabeth Holmes.

I think you have people who are mad at, you know,

maybe the media that enabled her,

sort of, if you wrote an article saying,

"Oh, this is a visionary genius,"

You sort of feel like a bit of a doofus,

but like, even now I don't think the people

who invested in Theranos and like enabled

all of this, are seeing any real consequences from it.