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Theranos, CEO Holmes agree to resolve SEC charges of investor fraud

Theranos, Inc. and its CEO Elizabeth Holmes agreed to settle fraud charges brought by the U.S. Securities and Exchange Commission over allegedly false statements about the privately held medical testing company.

The SEC had accused Holmes, Theranos and its former president, Ramesh Balwani, of defrauding investors to raise more than $700 million by fabricating data on its key product — a portable blood analyzer — and on the financial performance of the company.

Under the proposed settlement, Holmes agreed to pay a $500,000 penalty and be barred from serving as an officer or director of a public company for 10 years.

Holmes also agreed to relinquish her voting control over the company by converting her super-majority Theranos class B common shares to class A common shares and return the remaining 18.9 million shares obtained during the alleged fraud.

The SEC had charged that Theranos' analyzer could complete only a small number of tests, while the company conducted most of its patient tests on modified and commercial analyzers manufactured by other companies.

The securities regulator claimed that the defendants falsely stated that Theranos' products were deployed by the U.S. Department of Defense in Afghanistan and forecast more than $100 million in revenue for 2014.

Instead, the Palo Alto, Calif.-based company's technology was never deployed by the Department of Defense and generated just over $100,000 in revenue from operations in 2014, the SEC complaint said.

Theranos and Holmes neither admitted to nor denied the allegations in the SEC's complaint.

The settlements with Theranos and Holmes are subject to court approval.

The regulator said it will pursue its claims against Balwani in federal district court in the Northern District of California.

Previously, Theranos settled a lawsuit with Walgreens Boots Alliance Inc. after the pharmacy chain sued the company for making misleading claims about its blood-testing technology while signing a contract.