The beleaguered Silicon Valley company lied to win over investors, according to a major funder. Theranos denies the accusation. 

Qmed Staff

San Francisco-based hedge fund Partner Fund Management has sued Theranos in the Delaware Court of Chancery, accusing the once-darling blood testing company of engaging in lies, material misstatements, and omissions in order to garner a nearly $100 million investment, according to reports in media outlets including The Wall Street Journal and The New York Times. 

The lawsuit documents are under seal, but the media outlets obtained a letter the hedge fund sent to investors. 

Theranos responded that it would vigorously fight the suit, which it described as revisionist history. 

The news comes days after Theranos said it would lay off hundreds of workers as it shuts down its clinical labs to focus on its desktop miniLab platform. 

Theranos and its founder and CEO Elizabeth Holmes once touted a vision of reliable, fast finger prick blood tests for the masses. But things started to unravel for Theranos in October 2015 after a Wall Street Journal exposé called into question the accuracy of Theranos's tests. (The Wall Street Journal team behind the Theranos stories recently won the Silver in the annual Barlett & Steele Awards for Investigative Journalism.)

Things got worse from there. A CMS report in January described hematology testing practices at the company's Newark, CA, lab as "deficient," saying they posed "immediate jeopardy to patient health and safety." Walgreens in June announced it was severing ties and booting the struggling blood-testing company out of 40 of its Arizona drugstores. And Theranos is in the process of appealing tough CMS sanctions that, among other things, banned Holmes from the lab testing business for at least two years. 

There are now a string of federal class-action lawsuits involving customers, and the company is reportedly under investigation by the U.S. Justice Department and the SEC. 

Chris Newmarker is senior editor of Qmed. Follow him on Twitter at @newmarker.

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[Image courtesy of Salvatore Vuono on FreeDigitalPhotos.net]