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Holmes to face maximum of 80 years in prison when she’s sentenced in September:
While she is likely to receive prison time for defrauding investors, she will be able to spend the next eight and a half months out on bail. She faces a maximum sentence of 20 years in prison for each of the four counts she was convicted of, though it’s unlikely that she’ll be sentenced to all 80 years.
Holmes has been out on bail since June 2018, when she and alleged co-conspirator Ramesh “Sunny” Balwani were charged. Both were released after posting $500,000 bonds and surrendering their passports. Now that Holmes has been convicted and is awaiting sentencing, her bond will have to be secured by property. Their trials have been repeatedly pushed back, first because of the COVID pandemic and then later because Holmes gave birth.
Part of the reason Holmes’ sentencing has been postponed is because the government still has to prosecute its case against Balwani.
Previously:
2022/01/04 - Elizabeth Holmes Found Guilty on 4 of 11 Charges
2020/09/13 - Judge in Theranos Fraud Case Orders 14-Hour Psychological Test for Holmes
2019/07/01 - Theranos Founder Elizabeth Holmes to Face Trial Next Year on Fraud Charges
2018/09/06 - Theranos to Dissolve in a Pool of Blood
2018/06/17 - Elizabeth Holmes Steps Down as Theranos CEO as DoJ Levels Charges
2018/03/15 - Blood Unicorn Fairy Tale: Theranos Founder Charged With Fraud
2017/12/24 - Theranos Given Indirect Lifeline From Softbank
2016/10/06 - Theranos Lays Off 340, Closes Labs and "Wellness Centers"
2016/08/03 - Theranos Introduces New Product to Distract from Scandal
(Score: 3, Informative) by Phoenix666 on Saturday January 15 2022, @10:36PM (6 children)
It has been a while since I worked in hedge funds, but when I did we did handle investments from corporate retirement funds. Most of those funds have strict limits on how much they can invest in high risk vehicles like hedge funds. 10% of their investments was the limit then. Some of those retirement funds imposed further limits on the hedge funds like they weren't allowed to hold REITs or junk bonds or that kind of thing.
The company I worked for was a fiduciary that tracked the hedge fund portfolios on behalf of the retirement funds. If the hedge funds started to go off strategy and bought instruments they weren't supposed to, I picked up the phone to the managers and warned them to cut it out or we'd pull out the billions the retirement funds had put in. Hedge funds typically leverage many times the actual dollars they get, such that if you put in a billion they might leverage that up to $50 billion. So threatening to pull out your $1 billion investment meant they had to dump $50 billion in their positions, which makes for a reasonably potent stick to beat them with.
In a low oversight environment, in which the SEC doesn't police you, many hedge funds use their leverage positions to leverage even higher, such that that 50-to-1 leverage they had before turns into a 200-to-1. That's $200 billion worth of investments riding on $1 billion in cash. If those positions go south, it's a fuck ton of margin calls to cover.
If the average guy on the street knew how precarious the financial system is because of that sort of thing, his head would explode.
Washington DC delenda est.
(Score: 2) by Barenflimski on Saturday January 15 2022, @10:57PM (1 child)
You kinda low key blew my mind here already. Whatever that bird is that sticks its head in the sand, may have something there.
(Score: 2) by Phoenix666 on Sunday January 16 2022, @08:08PM
It might not be a kindness to mention, but it's even worse than that. As publicly traded instruments, mutual funds have to disclose what they're doing. If you invest in one, you can demand to know everything they've invested in and they have to show you. So, if the mutual funds report they made 15% returns last quarter, you can double check that.
Hedge funds are "private investment clubs," so they don't have to tell you anything they don't want to. When you give them money, you are casting it into an informational black hole. They can tell you they're making 100% returns to entice you to fork over $10 billion, but there's no way to check if they actually are. All you can do is pull your money out. If it's been a year you're expecting to have doubled your money. But if they haven't made those kind of returns then they grab another investor's principal to give to you to make it appear as if you have doubled your money. The idea is then you run off, ecstatic, to the New York Racquet Club to brag to all of your wealthy buddies about how well your hedge fund did and tell them to invest, too.
In other words, they're ponzi schemes for the wealthy. Bernie Madoff, whom you may have heard of, did exactly what I described with his hedge fund. But he made his personal money from the management fees he charged his investors, and the criminal penalties and fines are almost never as big as the money they scrape off the top, so even if they spend a couple years in a country club jail they still come out as incredibly wealthy on the other side. So there's no financial disincentive to running a ponzi scheme nee hedge fund. The worst that happens to you is that Brad and Tiffany who lost money in your fund no longer want you in their social set in the Hamptons.
But don't worry, if their funds implode and pull down the whole system, the government will bail them out using tax dollars that you earned by slinging websites for the Man. Privatize the profits, socialize the losses.
Yes, that is the ugly truth at the heart of the global system.
Washington DC delenda est.
(Score: 0) by Anonymous Coward on Sunday January 16 2022, @01:20AM
I vaguely remember this coming up about 15 years ago. Probably just some academic discussions though, nothing of practical importance.
(Score: 2) by martyb on Sunday January 16 2022, @01:27AM (2 children)
I twice worked at financial services firms, but that was many, many moons ago. You obviously have more hands-one experience than I. Thanks for the elucidation; I bow to your experience and knowledge. Thanks for the explanation... please accept my gladly-given upmod!
Wit is intellect, dancing.
(Score: 2) by Phoenix666 on Sunday January 16 2022, @07:51PM (1 child)
Thanks! It was 20 years ago, though, so things may have changed quite a bit. :-)
Washington DC delenda est.
(Score: 2) by martyb on Monday January 17 2022, @07:34PM
Let's just say it was before or just when the Pentium came out ;)
Wit is intellect, dancing.