Tyler Shultz still remembers the exact moment he realized that Theranos, a Silicon Valley health technology startup claiming to have revolutionized blood testing, was a fraud.
Concerned about the validity of the technology, his lab team tested themselves for syphilis, and more than 20 percent received a false-positive result.
“We all laughed,” Shultz recounted recently at the “Whistleblowing from All Angles” panel discussion hosted by The Texas Lawbook, SMU Dedman School of Law and the SMU Rowling Center for Business Law & Leadership in Dallas.
Shultz stated he was aware the test was inaccurate. Nevertheless, the company chose to validate the test, claiming that the lab test technology was safe and effective.
“I felt physically sick,” he recalled. “I felt like I had been punched in the stomach, because I knew that something I was directly contributing to, without a shred of doubt, was going to hurt people.”
From that point on, Shultz, who joined Theranos in 2013 right after graduating from Stanford University, said he felt compelled to speak out.
“And so that was really the straw that broke my back, where I felt like I need to start doing more,” Shultz said. “I need to start speaking up, anywhere I can.”
He had been captivated by founder Elizabeth Holmes’ bold claim that her company had revolutionary technology that allowed them to perform medical tests with only a few drops of blood from a finger prick, instead of traditional vials drawn from veins.
At its peak, Theranos was valued at $9 billion and considered the unicorn of the century in Silicon Valley.
Holmes was hailed as a visionary, and at 30 years old was declared the youngest self-made female billionaire by Forbes in 2014. At the time, her personal stake in Theranos — estimated at over 50 percent — was valued at around $4.5 billion.
Despite the hype, instead of encountering a visionary leader and a revolutionary company, Shultz found a corporate culture riddled with deceit, regulatory evasion and a willingness to mislead investors, regulators and patients.
Whistleblowers Face a Tough Path
Shultz, who shared his story in a “fireside chat” with Reese Marketos Chief Marketing Officer Natalie Posgate and during a panel discussion, portrayed himself as a traditional whistleblower who genuinely tried to fix the problem from the inside until he became overly frustrated and left.
According to Josh Russ, a former civil chief for the U.S. attorney’s office in the Eastern District of Texas, the backlash Shultz faced is not unique.
“Tyler’s story … I’d like to tell you is an extreme example, but it’s not. Our clients get walked out of their jobs that they’ve been at for 15-plus years, once they raise issues with management,” said Russ, a partner at Reese Marketos, who heads up the firm’s False Claims Act practice.
“We’ve represented whistleblowers who have made millions and millions of dollars by bringing their concerns to light,” said Andrew Wirmani, a former assistant U.S. attorney in the Northern District of Texas.
“And I think that it’s kind of a divisive term,” added Wirmani, a partner at Reese Marketos and head of the firm’s white-collar practice. “Some people see whistleblowers as heroes. Sometimes they’re demonized.”
After becoming a whistleblower in the Theranos case, Shultz said he has doubts that he will see any money.
“For every whistleblower that gets one of those checks, there are so many more that don’t get anything,” Shultz said. “So, I think that if there is a perception that whistleblowers are reporting in order to get the payout, I just think that’s completely false.”
“I filed a claim with the SEC when I was in my early 20s,” he said. “Here we are a decade later, and who knows if I’ll ever get a reward?”
Shultz pointed to data from the U.S. Securities and Exchange Commission that shows that 84 percent of whistleblowers try to raise issues internally before reporting them.
Russ said his firm has represented young clients, including accountants and healthcare professionals, who decided to become whistleblowers.
“They have their entire lives ahead of them,” Russ said. “They are putting a lot on the line, and with full disclosure that they don’t know if they’ll ever see a dime from it, but because they want the regulators to do the right thing and stop it.”
The fraud by Theranos took years to uncover, despite red flags about the device.
“The more costly it is to blow the whistle, the less likely it is that anyone will. And Theranos made it costly,” said panel member Robert Manz, a partner and CPA with the BVA Group.
Manz, who leads BVA Group’s financial forensics and investigations practice, said Theranos “would isolate and silence” employees who suspected fraud.
A board also may fail to catch fraud, he said, “if the board doesn’t recognize its duty to oversee management, or if the board just isn’t able to ask penetrating questions and demand reasonable answers.”
Shultz said that Elizabeth Holmes was very good at targeting “a certain type of person” whom she could manipulate.
“If you look at the [Theranos] board, the average age was 80 years old,” he said “They were all white. They were all men.”
“She put in place people who couldn’t ask tough questions,” Shultz added. “Also, none of them had any experience in medicine. They were all from government.”
Early Signs of Trouble
“A big red flag” arose on Shultz’s first day at Theranos.
Despite 11 years of secretive development, Theranos launched its blood tests commercially at a Walgreens pharmacy in Palo Alto without successfully validating any tests on its proprietary devices.
Shultz said the manager responsible for validation was fired.
“She had told Elizabeth that the technology is not ready — we cannot launch the product,” he said. “And the product was just launched despite her warnings, and [she] was essentially fired on the spot.”
Instead of using their new technology, the company performed tests secretly on traditional third-party machines — often diluting blood samples to mask inaccurate results.
The employees he worked with had never seen the device.
“That is how secretive things were,” he said. “And I remember our manager telling us that things were so crazy in this validation team, because even though we just launched this product, we currently had zero tests that were validated on the Theranos platform.”
Shultz initially brushed off the red flags, believing management would correct course. But the lies grew more blatant. Within days, he was transferred from research to validation, a division in chaos. His team quickly discovered the Theranos device — touted as revolutionary — was “shockingly rudimentary.”
“And at that moment, I realized that there was an open secret at this company, that the technology, flat out, did not exist, because what we saw was an eight-channel pipette on a robotic arm,” he said.
“Every component, every reagent, was bought off the shelf and just kind of assembled.’
Shultz said the device often malfunctioned.
“The pipette tips would fall off in the middle of these runs and get stuck in the gears, and the gears would get jammed,” he recalled. “So, unsurprisingly, the data that we were getting out of this was just terrible.”
Shultz said Theranos concealed its shortcomings through elaborate deception, including locking laboratory doors during regulatory inspections and selectively reporting results to evade oversight from agencies such as the Centers for Medicare and Medicaid Services.
Despite the glaring issues, company leaders, including Holmes and her deputy, Ramesh “Sunny” Balwani, aggressively dismissed internal warnings. Employees who voiced concerns faced immediate retaliation.
He began raising alarms internally — first with colleagues and managers, then directly with the company’s executives. Each attempt only heightened the hostility toward him.
Escalating Concerns
Frustrated, Shultz attempted to address the issues directly with Holmes. At first, he thought his unique position — as the grandson of Theranos board member and former Secretary of State George Shultz — might grant him credibility.
“I felt like I had built a friendly, or almost like a mentor-type relationship with Elizabeth,” he said. “And I felt like where other people had voiced concerns and were immediately fired, she can’t possibly do that to me. I might be in a position where I can successfully raise these concerns in a way that will make her feel like she has to address them.”
Instead, he found evasiveness and hostility.
Shultz described one encounter where he asked Holmes about questionable performance claims posted on Theranos’ website, highlighting inflated statistics of the company’s accuracy rates.
He said Holmes appeared surprised and directed him to the vice president of the statistics team, who provided troubling and inaccurate answers.
Later, in response to an email raising scientific concerns, Shultz received a message from Balwani, Theranos’ president and chief operating officer, labeling him as “ignorant” and “arrogant” with “no understanding of basic math, science or statistics and that if I had any other last name, I would have already been held accountable in the strongest way.”
Shultz said he responded to that email and said, “Consider this my two weeks.”
The Breaking Point
Unable to reconcile his concerns about Theranos, Shultz resigned; however, even after his departure, the nightmare continued.
Shortly thereafter, Shultz secretly spoke with Wall Street Journal investigative reporter John Carreyrou using a burner phone he bought with cash, hoping to remain anonymous. Carreyrou was investigating Theranos, independently uncovering similar red flags.
Yet within weeks, Shultz was suspected by Theranos leadership to be a potential leak. Theranos launched an aggressive campaign to silence him, which involved threats, private investigators following him, and relentless legal intimidation.
Shultz said his father was extremely upset when he admitted to speaking with a Wall Street Journal reporter.
“And my dad was more angry with me than I’d ever seen by probably an order of magnitude,” Shultz said. “He said, ‘You know how scary they are? You know how much money they have? You know who’s on their board? You know how much they love to sue people?”
Family Under Pressure
One of Shultz’s greatest struggles involved his grandfather, George Shultz, who was not only a Theranos board member but also an ardent believer in Holmes.
With his grandfather being misled by Holmes, Shultz recalled that “essentially, our realities did not overlap at all.”
“He told me that these Theranos devices were currently being used in medevac helicopters in Afghanistan,” Shultz said. “He said that they were currently being used in operating rooms at [the University of California, San Francisco], and that the surgeons were saying that this was revolutionizing the field of surgery. He said every single test they run is done on a Theranos device, and the only reason they have third-party equipment is for validation purposes.”
One confrontation occurred at his grandfather’s home, with Theranos’ lawyers present but initially hidden from Shultz. The attorneys told his grandfather they wanted him to sign a nondisclosure agreement.
Instead, they demanded that he sign documents effectively recanting any claims or face devastating lawsuits.
The interaction became heated enough that his grandfather asked the attorneys to leave — but the damage was done. Shultz was told bluntly: signing would “end a world of suffering.” He refused, unwilling to retract what he knew was true.
Financial and Emotional Costs
Standing firm cost Shultz dearly. Theranos’ legal maneuvers left him facing nearly half a million dollars in legal fees. At one point, his parents warned him that their family might have to sell their home to finance his defense.
“They said, ‘We’re willing to sell our house to pay for your legal fees, but please do not make us do that,’” he said. “Luckily, it never came to that, but it got fairly close. And then afterwards, it was just kind of a slow unwinding. Eventually, the Wall Street Journal finally started publishing their reporting.”
Shultz acknowledged feelings of isolation, anxiety and constant pressure. Yet, despite the risks to himself and his family, he persisted.
Validation and Aftermath
Ultimately, Shultz’s persistence paid off. His whistleblowing significantly contributed to The Wall Street Journal’s bombshell coverage of Theranos, resulting in federal investigations, criminal charges and convictions.
Holmes was sentenced to more than 11 years in prison on charges of wire fraud and conspiracy to commit wire fraud.
Balwani was sentenced to 14 years on charges of wire fraud and conspiracy to commit wire fraud.
Yet even today, Shultz’s journey isn’t over. The long litigation process continues, with civil actions still pending against Balwani.
“I was 22,” he said. “So, it consumed the entirety of my 20s, the entirety of my adult life, but I am just so happy to be on the other side of it now, and to have gotten the outcome that I was hoping for.”
Shultz emerged as a strong advocate for whistleblower protections, working closely with support networks like The Signals Network and advising on corporate ethics.
Shultz left the audience at the Dallas event with a powerful call to action, urging corporations, boards and legal systems to better support those who bravely speak truth to power.
“Good corporate governance means listening to people who raise difficult truths,” he said. “And as I learned firsthand, the cost of ignoring those truths can devastate lives.”
Shultz emphasized the critical role of effective whistleblower protection programs like those offered by the U.S. Securities and Exchange Commission. He described how whistleblower incentives and legal protections helped him and others navigate difficult financial and personal challenges during their disclosures.
“Whistleblowers disrupt their lives, often irreversibly,” Shultz concluded. “I was naïve and confident enough to believe I could take on a $9 billion company essentially alone. I don’t regret it, but the costs were enormous.”
Legal experts on the panel highlighted the continued importance of strong corporate governance and regulatory oversight to prevent similar cases.
Shultz described himself as “a traditional whistleblower” who tried to work on the inside to fix the problem.
“So I talked to anyone internally who I could, you know, my colleagues, my managers, the CEO, a vice president, a board member,” he said. “I desperately wanted to correct these problems or be proven wrong. I was also open to the idea of being wrong, hoping one of these people could unlock some door I didn’t see behind.”
Shultz also had advice for both students and lawyers.
“I love speaking to students because I was literally in your shoes when this story started for me,” Shultz said. “And when I look back at some of the things that [Balwani] accused me of on my last day, he said I was arrogant, ignorant, patronizing and reckless. And I think in a lot of ways he was right. To some extent, I was very naïve. I had no idea what I was getting myself into. I was extremely confident — like a 20-something-year-old kid [who] thinks they can take on a $9 billion company essentially alone.”
“I just really hope that you all recognize the situation that you are in where you can afford to take those risks and you can use that to speak truth to power, like I did, or maybe you can start a company, or you can change your degree your senior year, or you can go get a new degree, or move to a new country. Just recognize the really unique moment you’re in in your life and make the most of it.”
Shultz said that he encountered unscrupulous lawyers during his legal fight, but also met many “really, really good ones.”
Calling attorneys “the last line of defense against abuses of power,” he said he hoped they used their abilities for good.
“I feel like lawyers really want to be great, like they want to be the best lawyer they can possibly be,” Shultz said. “But I think some lawyers, in the process of striving to be really great lawyers and win the case and win the negotiation, forget what it actually means to be a good lawyer. No tactic is off the table, and the really good lawyers who I’ve worked with use their powers for positive [ends] and they enable me to stand up for myself.”
“And the message I would like to give to all the lawyers is that you can be a great lawyer while also being a good lawyer. And so often, and I think we’re seeing this more and more, especially now, lawyers are the last line of defense against abuses of power. And I really hope that the lawyers recognize the power that they have.”
Publisher’s Note: The Texas Lawbook thanks Reese Marketos, BVA Group, SMU Dedman School of Law and the SMU Rowling Center for Business Law & Leadership for partnering on the “Whistleblowing from All Angles” CLE Ethics program. If you are interested in a recording of the panel discussion, please email brooks.igo@texaslawbook.net.