Theranos (defunct) vs Wirecard (defunct)

Elizabeth Holmes dropped out of Stanford University in 2003 at age 19, having completed one year of chemical engineering. She founded Theranos with her tuition refund money and a single idea: a blood testing device that could run hundreds of diagnostic tests from a single drop of blood taken from a finger prick. Holmes deepened her voice, adopted Steve Jobs's black turtleneck as her uniform, and began pitching. The pitch was extraordinarily effective.

By 2014, Theranos had raised over $700 million in funding at a $9 billion valuation, making Holmes the youngest female self-made billionaire in history. Walgreens and Safeway had partnered with Theranos to offer blood tests in their stores. Theranos's board included former Secretaries of State Henry Kissinger and George Shultz, former Secretary of Defense James Mattis, and former Senators. None had scientific or medical expertise. None asked to see Theranos's data. The most credentialed board in Silicon Valley history was also the most incurious.

Wall Street Journal reporter John Carreyrou began investigating Theranos in 2015 after a tip from a source. He discovered that Theranos's proprietary testing device — the Edison — could only run a handful of tests reliably. The company was secretly running most tests on conventional Siemens laboratory equipment while telling patients and investors it was using its own technology. Holmes's lawyers sent Carreyrou threatening letters. He published anyway. His book, "Bad Blood," became one of the most widely read business narratives of the decade.

Elizabeth Holmes and former Theranos president Ramesh "Sunny" Balwani were indicted on federal wire fraud charges in June 2018. The government alleged they had knowingly deceived investors, doctors, and patients. Patients had made medical decisions — including decisions about cancer treatment — based on inaccurate Theranos test results. The company had dissolved in 2018 after its laboratory certification was revoked.

Elizabeth Holmes was convicted of four counts of criminal fraud in January 2022 and sentenced to 11 years in federal prison. She appealed multiple times and attempted to delay her surrender date, exhausting every available legal avenue. She began serving her sentence in May 2023. Ramesh Balwani was convicted on all 12 counts against him and sentenced to nearly 13 years. The case became the defining narrative of Silicon Valley's "fake it till you make it" culture — and its catastrophic limits when the product is a medical device and the patients are real people receiving incorrect diagnoses.

Wirecard was founded in 1999 as a payment processor for high-risk industries — primarily online gambling and adult content — that conventional banks refused to serve. CEO Markus Braun gradually repositioned Wirecard as a mainstream fintech company, attracting institutional investors and eventually joining Germany's prestigious DAX index in 2018, replacing Commerzbank. Few investors asked too many questions about the company's origins or its opaque Asian partnerships.

Financial Times journalist Dan McCrum began investigating Wirecard in 2015 after receiving tips about accounting irregularities. Wirecard's response was aggressive: the company hired private investigators who tracked McCrum's movements, lobbied German regulators to investigate the FT for market manipulation, and filed criminal complaints against journalists. German regulator BaFin temporarily banned short selling in Wirecard shares, effectively penalising investors who had correctly identified a fraud. The German state was protecting a company it had mistaken for a champion.

In June 2020, Wirecard's auditor EY refused to sign off on the company's accounts because it could not verify €1.9 billion in cash supposedly held in bank accounts in the Philippines and Singapore. Wirecard announced the money "may not exist." The Philippine central bank confirmed Wirecard had never held any money in the country. The accounts were fictitious. Wirecard had been booking revenues from a network of fictitious partners in Asia for years. The entire business model was fraudulent.

Markus Braun was arrested on June 22, 2020 and charged with market manipulation and accounting fraud. His trial began in Munich in 2022 and was still proceeding years later due to the complexity of the fraud. Chief Operating Officer Jan Marsalek — who had overseen the Asian business that proved fictitious — disappeared before he could be arrested. A German parliamentary inquiry found that Marsalek had cultivated connections with intelligence services across Europe. He was later reported to be living in Russia under FSB protection, making him one of the most wanted fugitives in European corporate history.

A German parliamentary inquiry concluded that BaFin had failed catastrophically in its oversight of Wirecard — taking the company's word on financial matters, suppressing short sellers who had identified problems, and failing to act on multiple credible warnings over years. Germany's willingness to defend a perceived national champion had allowed a fraud to continue far longer than it should have. The Wirecard scandal prompted the most significant reform of German financial regulation since the Second World War. EY, Wirecard's auditor, received a regulatory ban from new audit engagements and faced investor lawsuits seeking billions in damages. The COO remains at large.