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Elizabeth Holmes, founder of Theranos Inc., exits federal court in San Jose, California, on Tuesday, Aug. 31, 2021.
David Paul Morris | Bloomberg | Getty Images

SAN JOSE, CALIF. — A hedge fund manager who put $96 million into Theranos said he thoroughly investigated the company but was still misled by CEO Elizabeth Holmes about its blood-testing technology.

Brian Grossman, chief investment officer at PFM Health Sciences, told jurors in Holmes’ criminal trial on Tuesday that in 2014, as part of his due diligence, he got his own blood drawn from a Theranos machine at a Walgreens pharmacy.

“I had my blood drawn with a venous draw, not a finger stick,” said Grossman, adding that the experience undermined what he’d been told about Theranos.

Grossman said he met with Holmes and her top executive, Ramesh “Sunny” Balwani, at their office in Palo Alto, California, in December 2013. He said Holmes did most of the talking, and that he and his colleagues were told Theranos could run 1,000 blood tests on its proprietary technology.

“Ms. Holmes was actually very clear that they could match any test on a Labcorp and Quest menu of tests,” Grossman said. He told jurors that “was a really big statement about how much they had accomplished, where the technology was at that time.”

Earlier witnesses, including lab associate Erika Cheung, have testified that Theranos devices couldn’t run more than 12 different tests, contradicting the company’s public pronouncements.

Grossman said that in the meeting he was told Theranos was working with the military and that its technology was being used on medivacs in the battlefield.

“What better application for a technology like this than in a military setting under harsh conditions like one would expect in a place like Afghanistan or Iraq?” Grossman said. Theranos indicated that it had “something over $200 million in revenue from the Department of Defense,” he said.

Daniel Edlin, a former Theranos employee, told jurors last month that, to his knowledge, the blood-testing devices were never used in the Middle East.

‘No ambiguity and no confusion’

Grossman said that following his initial meeting with Holmes and Balwani, he sent them an e-mail in January 2014, with the subject: “Due Diligence Questions.”

His questions from PFM fell into seven categories. He wanted more details on issues like the accuracy and speed of the tests compared to those from traditional vendors, the limitations of the technology and whether the Walgreens relationship was exclusive.

“We as a group came up with questions that we wanted to better understand the business,” Grossman said. “We wanted to ask the same questions in as many ways as we could so there was no ambiguity and no confusion as to what the technology was doing.“

PFM then met with Holmes and Balwani a second time. Grossman testified that Holmes left about halfway through the meeting. Theranos executives told him at the time that it could get test results back in under four hours in retail stores and within one hour in hospitals.

Grossman told the jury that Holmes never told him the company was using third-party machines to run the blood tests. About his own experience at Walgreens, Grossman said he was surprised to find out that the blood was drawn from his arm and said his test results took longer than four hours.

“I asked [Balwani] why I didn’t receive a finger stick and why it was a venous draw,” Grossman said. “I also asked him why it took longer than four hours to get my test results back.”

Balwani assured him it was because his doctor ordered an unusual test, Grossman said.

Still, PFM invested $96.1 million in Theranos in February 2014. That investment included $2.2 million from a friends and family fund, which Grossman said had money in it from low-income people.

PFM eventually settled its lawsuit against Theranos after accusing the company of securities fraud.

Holmes has pleaded not guilty to 12 counts of wire fraud and conspiracy to commit wire fraud. As a witness to the prosecution, Grossman’s testimony underpins one of the wire fraud counts.

For 11 weeks, Holmes has sat at the defense table as government witnesses have testified. A key question remaining is whether the defense will present a case after the prosecution rests.

“We don’t even know if there is a defense case and if there is what it might be,” Lance Wade, an attorney for Holmes, said before the jury entered the courtroom. “We’re still in the government’s case.”

Last week Holmes’ defense team provided the government a list of potential witnesses. However, Wade said, “we’re not saying we’re presenting a defense case by giving them a sense of the witnesses.”

WATCH: The deposition tapes from the Elizabeth Holmes trial

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23andMe CEO Anne Wojcicki considers taking company private

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April 18, 2024

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23andMe CEO Anne Wojcicki considers taking company private

Signage at 23andMe headquarters in Sunnyvale, California, U.S., on Wednesday, Jan. 27, 2021.

David Paul Morris | Bloomberg | Getty Images

23andMe CEO Anne Wojcicki is considering a proposal to take the genetic testing company private after its stock price has tumbled more than 95% from its 2021 highs.

Wojcicki is working with advisors and plans to begin speaking to possible financing sources and partners, according to a filing with the U.S. Securities and Exchange Commission late Wednesday. She “wishes to maintain control” of the company and will “not be willing to support any alternative transaction,” the filing said.

The former billionaire co-founded 23andMe in 2006, and the company rocketed into the mainstream because of its at-home DNA testing kits that give customers insights into their family histories and genetic profiles. 23andMe went public in 2021 via a merger with a special purpose acquisition company, which valued the company at around $3.5 billion.

But despite launching two new businesses, 23andMe has struggled to generate steady recurring revenue since consumers only needed to take its DNA test once to get their results. The stock is trading around 45 cents per share Thursday morning.

In November, 23andMe received a deficiency letter from the Nasdaq Listing Qualifications Department giving it 180 days to bring its share price back above $1. The company’s board of directors formed a “Special Committee” in late March to help explore options that could juice the stock.

The committee said it has been made aware of Wojcicki’s interest in acquiring all of 23andMe’s outstanding shares, according to a release Thursday. She currently owns shares that make up more than 20% of those outstanding, which equates to around 49% of voting power, the release said.

“The Special Committee will carefully review Ms. Wojcicki’s proposal when and if it is made available and evaluate it in light of other available strategic alternatives, including continuing to operate as a publicly traded company,” the committee said in the release. “The Special Committee is committed to acting in the best interests of 23andMe and its shareholders.”

The committee has engaged Wells Fargo as its financial advisor, and it said there is “no assurance” that Wojcicki’s offer would result in the proposed outcome.

23andMe declined to comment beyond the release.

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AI startup Stability lays off 10% of staff after controversial CEO’s exit: Read the full memo

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April 18, 2024

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AI startup Stability lays off 10% of staff after controversial CEO's exit: Read the full memo

Emad Mostaque, founder and CEO of Stability AI, speaks during the Bloomberg Technology Summit in San Francisco, California, US, on Thursday, June 22, 2023.

David Paul Morris | Bloomberg | Getty Images

Beleaguered artificial intelligence startup Stability is laying off employees after the exit of its controversial former CEO Emad Mostaque.

Stability, which is behind the popular Stable Diffusion large language model, made more than 20 of its employees redundant to “right-size” the business after a period of unsustainable growth, according to an internal memo obtained by CNBC.

The company’s newly appointed co-CEOs Shan Shan Wong and Christian Laforte told employees in an email Wednesday night that the firm needed to “restructure parts of the business, which will sadly mean saying goodbye to some colleagues.”

“Those who are affected by this have been notified individually and we will be supporting them throughout this period,” Wong and Laforte, who were previously chief operating officer and chief technology officer at the company, respectively, said in the internal memo.

Stability AI’s layoffs amount to about 10% of its global headcount, according to publicly available data online which shows the firm employs around 200 people in total.

The employees affected by the measures are mostly on the operational side of the business and have been notified of their redundancies, according to a person familiar with the matter who spoke with CNBC under condition of anonymity as they were not able to speak publicly on the matter.

Last month, Stability announced its former CEO, Mostaque, was leaving the company to “pursue decentralized AI,” and would be replaced by Wong and Laforte.

Mostaque’s departure follows media reports throwing doubt on his credentials.

A June 2023 Forbes report said that Mostaque misled people including his own investors about receiving a master’s degree from Oxford University, as well as the nature of a partnership with Amazon which Stability characterized as a strategic deal but was nothing more than a standard cloud computing leasing contract.

Mostaque’s response at the time was that several of Forbes’ allegations were “false accusations and misrepresentations.” He said he didn’t receive his Oxford University degree because he didn’t attend his graduation ceremony but had arranged to receive his degrees by post.

'Significant' investment in networks is needed to reap AI benefits: Nokia

He also doubled down on the deal with Amazon and it’s cloud computing unit Amazon Web Services by describing it as a “strategic business alliance” that saw AWS build an “incredibly rare dedicated compute cluster” completed to the requirements of Stability.

Stability AI is still searching for a permanent CEO to fill the top leadership role. The company said it continues to operate as normal and is still releasing new products, having only recently announced developer APIs, or application programming interfaces, for its Stable Diffusion 3 AI model.

You can read the full memo from co-CEOs Wong and Christian Laforte below:

Dear team,

As you know, over the past couple of weeks the Leadership team have been working hard on a strategic plan to reduce our cost-base, strengthen support with our investors and partners, and enable our teams to continue developing and releasing innovative products. 

Following a review of the global team, we have determined the need to restructure parts of the business, which will sadly mean saying goodbye to some colleagues. Those who are affected by this have been notified individually and we will be supporting them throughout this period.  

These decisions have not been taken lightly and they are intended to right-size parts of the business and focus our operations, which is critical to setting us on a more sustainable path – and to put us in the best possible position to continue developing cutting-edge models and products. Products like the Stable Diffusion 3 API strengthen our deep-tech leadership and demonstrate our unique, systemic importance to the AI ecosystem.

We will meet as planned on Thursday for our regular town hall and we encourage you to ask any questions you might have of our Leadership team in the form that will be sent out shortly. In the meantime, please feel free to discuss any concerns with your manager.

We would like to thank everyone for their dedication and contributions. We recognize the challenges we face, but we have a plan in place. Through the hard work and commitment of this team, we are making progress every day, moving us steadily in the right direction.

Best wishes,

Shan Shan & Christian 

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Google terminates 28 employees after multicity protests: Read the full memo

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April 18, 2024

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Google terminates 28 employees after multicity protests: Read the full memo

Google terminated 28 employees Wednesday, according to an internal memo viewed by CNBC, after a series of protests against labor conditions and the company’s contract to provide the Israeli government and military with cloud computing and artificial intelligence services.

The news comes one day after nine Google workers were arrested on trespassing charges Tuesday night after staging a sit-in at the company’s offices in New York and Sunnyvale, California, including a protest in Google Cloud CEO Thomas Kurian’s office.

Some of the arrested workers in New York and Sunnyvale, who spoke with CNBC earlier Wednesday, said that during the protest they were locked out of their work accounts and offices, placed on administrative leave and told to wait to return to work until being contacted by human resources.

On Wednesday evening, a memo sent by Chris Rackow, Google’s vice president of global security, told Googlers that “following investigation, today we terminated the employment of twenty-eight employees found to be involved. We will continue to investigate and take action as needed.”

The arrests, which were livestreamed on Twitch by participants, follow rallies outside Google offices in New York, Sunnyvale and Seattle, which attracted hundreds of attendees, according to workers involved. The protests were led by the “No Tech For Apartheid” organization, focused on Project Nimbus — Google and Amazon‘s joint $1.2 billion contract to provide the Israeli government and military with cloud computing services, including AI tools, data centers and other cloud infrastructure.

“This evening, Google indiscriminately fired over two dozen workers, including those among us who did not directly participate in yesterday’s historic, bicoastal 10-hour sit-in protests,” No Tech For Apartheid said in a statement, adding, “In the three years that we have been organizing against Project Nimbus, we have yet to hear from a single executive about our concerns. Google workers have the right to peacefully protest about terms and conditions of our labor. These firings were clearly retaliatory.”

Protesters in Sunnyvale sat in Kurian’s office for more than nine hours until their arrests, writing demands on Kurian’s whiteboard and wearing shirts that read “Googler against genocide.” In New York, protesters sat in a three-floor common space. Five workers from Sunnyvale and four from New York were arrested.

“On a personal level, I am opposed to Google taking any military contracts — no matter which government they’re with or what exactly the contract is about,” Cheyne Anderson, a Google Cloud software engineer based in Washington, told CNBC earlier Wednesday. “And I hold that opinion because Google is an international company and no matter which military it’s with, there are always going to be people on the receiving end … represented in Google’s employee base and also our user base.” Anderson had flown to Sunnyvale for the protest in Kurian’s office and was one of the workers arrested Tuesday.

“Google Cloud supports numerous governments around the world in countries where we operate, including the Israeli government, with our generally available cloud computing services,” a Google spokesperson told CNBC on Wednesday evening, adding, “This work is not directed at highly sensitive, classified, or military workloads relevant to weapons or intelligence services.”

The demonstrations show Google’s increased pressure from workers who oppose military use of its AI and cloud technology. Last month, Google Cloud engineer Eddie Hatfield interrupted a keynote speech from the managing director of Google’s Israel business stating, “I refuse to build technology that powers genocide.” Hatfield was subsequently fired. That same week, an internal Google employee message board was shut down after staffers posted comments about the company’s Israeli military contracts. A spokesperson at the time described the posts as “divisive content that is disruptive to our workplace.”

On Oct. 7, Hamas carried out deadly attacks on Israel, killing 1,200 and taking more than 240 hostages.  The following day, Israel declared war and began implementing a siege of Gaza, cutting off access to power, food, water and fuel. At least 33,899 people have been killed in the Gaza Strip since that date, the enclave’s Health Ministry said Wednesday in a statement on Telegram. In January at the U.N.’s top court, Israel rejected genocide charges brought by South Africa.

The Israeli Ministry of Defense reportedly sought consulting services from Google to expand its access to Google Cloud services. Google Photos is one platform used by the Israeli government to conduct surveillance in Gaza, according to The New York Times.

“I think what happened yesterday is evidence that Google’s attempts to suppress all of the voices of opposition to this contract are not only not working but actually having the opposite effect,” Ariel Koren, a former Google employee who resigned in 2022 after leading efforts to oppose the Project Nimbus contract, told CNBC earlier Wednesday. “It’s really just creating more agitation, more anger and more commitment.”

The New York sit-in started at noon ET and ended around 9:30 p.m. ET. Security asked workers to remove their banner, which spanned two floors, about an hour into the protest, according to Hasan Ibraheem, a Google software engineer based in New York City and one of the arrested workers.

“I realized, ‘Oh, the place that I work at is very complicit and aiding in this genocide — I have a responsibility to act against it,'” Ibraheem told CNBC earlier Wednesday. Ibraheem added, “The fact that I am receiving money from Google and Israel is paying Google — I am receiving part of that money, and that weighed very heavily on me.”

The New York workers were released from the police station after about four hours.

The workers were also protesting their labor conditions — namely “that the company stop the harassment, intimidation, bullying, silencing, and censorship of Palestinian, Arab, Muslim Googlers — and that the company address the health and safety crisis workers, especially those in Google Cloud, are facing due to the potential impacts of their work,” according to a release by the campaign.

“A small number of employee protesters entered and disrupted a few of our locations,” a Google spokesperson told CNBC Wednesday evening. “Physically impeding other employees’ work and preventing them from accessing our facilities is a clear violation of our policies, and completely unacceptable behavior. After refusing multiple requests to leave the premises, law enforcement was engaged to remove them to ensure office safety. We have so far concluded individual investigations that resulted in the termination of employment for 28 employees, and will continue to investigate and take action as needed.”

Read the full memo below.

Googlers,

You may have seen reports of protests at some of our offices yesterday. Unfortunately, a number of employees brought the event into our buildings in New York and Sunnyvale. They took over office spaces, defaced our property, and physically impeded the work of other Googlers. Their behavior was unacceptable, extremely disruptive, and made co-workers feel threatened. We placed employees involved under investigation and cut their access to our systems. Those who refused to leave were arrested by law enforcement and removed from our offices.

Following investigation, today we terminated the employment of twenty-eight employees found to be involved. We will continue to investigate and take action as needed.

Behavior like this has no place in our workplace and we will not tolerate it. It clearly violates multiple policies that all employees must adhere to — including our Code of Conduct and Policy on Harassment, Discrimination, Retaliation, Standards of Conduct, and Workplace Concerns.

We are a place of business and every Googler is expected to read our policies and apply them to how they conduct themselves and communicate in our workplace. The overwhelming majority of our employees do the right thing. If you’re one of the few who are tempted to think we’re going to overlook conduct that violates our policies, think again. The company takes this extremely seriously, and we will continue to apply our longstanding policies to take action against disruptive behavior — up to and including termination.

You should expect to hear more from leaders about standards of behavior and discourse in the workplace.

Chris

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