Conventional wisdom is that wealthy people make more informed investment decisions than less wealthy people, whether their wealth is inherited or acquired outside the capital market. This is an unproven premise of accredited investor regulations, and may have played a major role in the fraud trial of Theranos founder Elizabeth Holmes.
Between the lines: Fraud lawsuits are mostly about what the defendant knew and when. But, in this case, those questions may be flipped on their head — with the defense targeting Theranos investors, who lost more than $800 million.
- Holmes’ defense attorney, Lance Wade, established this in his opening statement last week, according to some people in the room (no transcript is publicly available yet).
- Specifically, he suggested that investor witnesses called by prosecutors were most likely to be fund managers, as they manage other people’s money and are looking for a scapegoat.
- Wade claimed that wealthy investors who put their money to work are less likely to be called, as they testify to due diligence; Validating the defense’s central claim that Holmes was the victim of misfortune, not the perpetrator of bad deeds.
- The blood test company’s billionaire investors were Rupert Murdoch, Carlos Slim and Bob Kraft.
Bottom-line: A big part of the Theranos story has been how the company’s cap table and board were stacked with wealthy and/or powerful men who didn’t have medical backgrounds, while Silicon Valley healthcare investors were outspoken or never approached. it was done. In other words, Elizabeth Holmes allegedly knew her traces.
- However, the jury members are going to test their biases. If wealthy investors know what they are doing, depending on their wealth, then how can they too? No Know what are they doing?