By Nate Raymond
(Reuters) - Theranos Inc founder Elizabeth Holmes and the embattled blood-testing company's former president were indicted on charges that they engaged in schemes to defraud investors, doctors and patients, the U.S. Justice Department announced on Friday.
The charges against Holmes, 34, and Ramesh “Sunny” Balwani, 53, were announced shortly after the privately-held company said that she was stepping down as its chief executive officer.
Prosecutors said that Holmes and Balwani used advertising and solicitations to encourage doctors and patients to use its blood testing laboratory services despite knowing the company could not produce accurate and reliable results consistently.
The indictment also alleged that Holmes and Balwani made numerous misrepresentations about Theranos' financial condition and futures prospects.
Each defendant faces two counts of conspiracy to commit wire fraud and nine counts of wire fraud. Prosecutors said both made initial court appearances on Friday before a federal magistrate judge in San Jose.
The criminal charges came after Holmes in March settled civil fraud charges brought by the U.S. Securities and Exchange Commission under which she was barred from serving as an officer or director of a public company for 10 years.
In a statement, Theranos said Holmes would remain chair of the company's board and David Taylor, the firm's general counsel, has been appointed its CEO.
Lawyers for Holmes and Balwani could not be immediately reached for comment.
Once called the Steve Jobs of biotech, Holmes started Theranos at the age of 19 and the company was soon considered a Silicon Valley darling with a $9 billion (£6.7 billion) valuation based on its promise to disrupt the laboratory testing business.
Theranos claimed its innovative blood testing device would give quicker and more reliable results than standard blood tests using just a single drop of blood from a finger stick.
In 2015, the Wall Street Journal reported that Theranos' devices were flawed and inaccurate, setting off a downward spiral for the company that had bagged investors including venture capital firm DFJ, Walgreens <WBA.O>, media mogul Rupert Murdoch and Oracle <ORCL.N> co-founder Larry Ellison.
(Reporting by Tamara Mathias in Bengaluru and Nate Raymond in Boston; Editing by Maju Samuel and Bill Berkrot)