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Elizabeth Holmes, the founder and chief executive of the blood-testing company Theranos, was charged with fraud by the Securities and Exchange Commission yesterday for raising more than $700 million from investors by falsely promoting a key product, the New York Times reported. In announcing the charges, the SEC also said that Theranos and Holmes had agreed to settle them, with Holmes agreeing to pay a $500,000 penalty. As part of the settlement, she was stripped of control of the company and barred from being an officer or director of any public company for 10 years. Holmes was a self-made billionaire and Silicon Valley darling who persuaded high-profile investors to back Theranos, a private company, based on promises that it would revolutionize the lab-testing industry. She promoted tests that used a finger prick of blood and cost a fraction of traditional lab tests. But a series of articles in The Wall Street Journal in 2015 cast doubt on whether the technology worked. It turned out that Theranos was exaggerating the promise of its proprietary blood tests and was actually conducting the vast majority of blood tests using traditional machines made by other companies, according to the SEC complaint. Ms. Holmes also claimed that the Defense Department was deploying the company’s test in battlefield settings, which was untrue.

A former Richmond bankruptcy lawyer was sentenced to one year in prison Monday for bankruptcy fraud and for failing to pay the government her employees’ taxes, the Richmond Times-Dispatch reported. Nnika Evangeline White, founder of The Law Offices of White and Associates, was sentenced by U.S. District Judge Henry E. Hudson. Federal sentencing guidelines, which are not binding on the judge, called for a prison term of 10 to 16 months. In pleading guilty in December, White admitted receiving roughly $50,000 in inheritance checks belonging to a bankruptcy client. After discussing it with her client, White used $31,000 of the money to pay herself legal fees. She did not disclose the inheritance checks — or that she was a creditor — in bankruptcy court filings.

Martin Shkreli, a former pharmaceutical executive notorious for sharply increasing drug prices was sentenced on Friday to seven years in prison after being convicted of fraud last year, the New York Times reported. Prosecutors had sought a sentence of at least 15 years; the defense had pushed for 12 to 18 months. Shkreli is best known for raising the price of a drug, Daraprim, by 5,000 percent in a move that was widely condemned by the public and politicians. His fraud convictions were unrelated to that episode, stemming instead from his involvement with Retrophin, a pharmaceutical company he founded in 2011, and two hedge funds he ran. In August, a jury convicted Shkreli on three of eight counts, concluding that he had lied to investors about, among other things, how the hedge funds were managed, what they invested in and how much money they had. The jury found that he had also secretly controlled a huge number of Retrophin shares.

Two former executives at Transmar Commodity Group Ltd pleaded guilty on Friday to defrauding banks to win a $400 million credit line for the now bankrupt New Jersey-based cocoa trading company, Reuters reported. Peter G. Johnson, who was Transmar’s chief executive, and his son Peter B. Johnson, who oversaw Transmar’s Euromar Commodities affiliate, both pleaded guilty to conspiracy to commit bank fraud and wire fraud before U.S. District Judge Jed Rakoff in Manhattan, according to the office of U.S. Attorney Geoffrey Berman. Transmar, a Morristown, New Jersey-based unit of Transmar Group Ltd, sold cocoa products to chocolate makers including Hershey Co. and Nestle SA prior to filing for chapter 11 protection on Dec. 31, 2016. Prosecutors have accused the three executives of “lying repeatedly” from 2014 to December 2016 by giving banks false “borrowing base” reports that inflated the amount of collateral Transmar had to support its borrowings. Transmar owed the banks roughly $360 million at the time of the bankruptcy, prosecutors said. Read more. 

For a further analysis of commercial fraud, make sure to pick up a copy of ABI’s Fraud and Forensics: Piercing Through the Deception in a Commercial Fraud Case. 

U.S. derivatives regulators are expected to file “more than 10” fraud and market-manipulation cases in the next weeks as the Commodity Futures Trading Commission chairman implements his back-to-basics approach, the Wall Street Journal reported. The stepped-up enforcement comes after the CFTC recorded a big drop in fines and enforcement actions during the fiscal year that spanned the transition from the Obama administration to the Trump administration. Enforcement has picked up since then. The agency has already filed 11 manipulation-related cases in the current fiscal year, which ends in September, just one shy of its annual record.

The international jewelry business that’s part of the empire controlled by Nirav Modi, a billionaire accused of masterminding India’s biggest bank fraud, has filed for bankruptcy in the U.S. just as the Indian lender at the heart of the scam revised up its fraud estimate, Bloomberg News reported. Firestar Diamond Inc. blamed liquidity and supply chain challenges and listed up to $100 million in assets and debt, according to chapter 11 documents filed Monday in a bankruptcy court in New York. Back in India, Punjab National Bank told the stock exchanges that the fraudulent transactions could be $204 million more than the previously estimated $1.8 billion. Modi has been accused along with Mehul Choksi of defrauding PNB. PNB alleges that the duo and their associates worked with some rogue PNB employees and used fake guarantees to obtain loans from abroad.