Theranos Is Shutting Down

The Silicon Valley startup is expected to shutter its operations after it failed to deliver revolutionary lab-testing amid allegations of fraud.

Theranos is going out with barely a whisper. Once heralded as a revolutionary new way to conduct a blood test to detect myriad diseases, all with a single finger prick, the company is making preparations to close its operations, according to a letter sent to shareholders.

“We are now out of time,” David Taylor, the company’s chief executive and general counsel, informed investors in an email first reported on Tuesday by The Wall Street Journal, whose in-depth investigation unraveled the company’s claims. Mr. Taylor declined to comment further, saying the letter spoke for itself.

Theranos’s efforts are now focused on avoiding bankruptcy.

It’s in default under a credit agreement reached last year with Fortress Investment Group, Mr. Taylor told shareholders. The company is negotiating a settlement with Fortress, which would then own the company’s intellectual property and allow Theranos to distribute its remaining cash — some $5 million — to unsecured creditors.

“Because the company’s cash is not nearly sufficient to pay all of the creditors in full, there will be no distribution to shareholders” under the plan, Mr. Taylor said in the letter.

The Theranos board is expected to meet on Friday, and the process of dissolving the company is expected to take six to 12 months.

Founded in 2003 by Elizabeth Holmes, a 19-year-old Stanford University dropout, Theranos promised to shake up the entire lab industry, making blood tests much easier and less expensive than traditional methods. read more »

Wells Fargo Said to Face DOJ Probe of Wholesale-Banking Business

Wells Fargo & Co. is facing a Department of Justice investigation into whether employees in the company’s wholesale-banking unit improperly altered customer data, a person familiar with the matter said.

The changes were made to meet a regulatory deadline, the Wall Street Journal reported earlier Thursday.

“This particular situation involved a new process and a new required document called Certification of Beneficial Owners that our team members have to complete to help ensure we know our customers,” said Alan Elias, a spokesman for the San Francisco-based bank. “We’ve recognized that in certain circumstances additional training and new procedures were needed and have now been applied.”

Elias, who declined to comment on the Justice Department’s involvement, said customers weren’t negatively affected by the actions, but added that “we take all issues relative to documentation seriously. If we get something wrong, we fix it.”

Some workers added information to internal customer records without the clients’ knowledge, a person briefed on the situation said in May. The bank discovered the improper activity and reported it to the Office of the Comptroller of the Currency, the person said. read more »

The warning from JPMorgan about flash crashes ahead

If markets weren’t bouncing because of presidential tweets, global debt, trade wars, coming elections and Senate hearing circuses, then they got another push this week from a top JPMorgan Chase & Co. analyst who says a stock crash spurred by electronic trading could unleash social upheaval not seen since 1968.

Marko Kolanovic, a senior analyst with JPMorgan, said in a report released Tuesday that an “autopilot” sell-off of passive mutual funds by super-fast computers could convulse markets, causing a precipitous decline similar to a “flash crash” with the potential to snowball.

“We will call this hypothetical crisis the ‘Great Liquidity Crisis,’” he said in the report.

“This is a possible scenario,” Kolanovic said in a follow-up email. “Definitely not a prediction. It is tied to the probability of a recession. We believe it will coincide with the next recession. We do think this is unlikely to happen this or next year.”

Kolanovic said the rise of populism and trade tensions between the United States and the rest of the world could combine with rising interest rates to trigger a recession, setting the stage for a crash.

He said electronic trading could rapidly cause markets to fall dramatically. Without enough buyers to put a floor under stock prices, losses could cascade through pension funds, retirement savings and so on. Eventually the Federal Reserve could be compelled to step in and buy equities.

“For the Fed to come in and buy equities, you would have to a have a really long stock market fall,” said Scott Wren, senior global equity strategist at Wells Fargo Investment Institute. read more »