![]() On one hand, Holmes being found guilty would send a powerful message to future startup executives, as the looming threat of criminal fraud charges may cause careful investigation into the truth of the claims they plan to make to investors. Holmes used the lore of the tech industry to build her brand, and potentially inflated the capabilities of her product and technology to inspire belief in potential investors, a tactic not uncommon among entrepreneurs looking to acquire funding. Holmes’ tale is a microcosm of the culture for many up-and-coming startups. The result of this case could have massive implications for Silicon Valley and venture capital more generally. Over the next few weeks, the financing world will hold its collective breath as this criminal fraud trial unfolds. What you are trying to present and what investors are understanding may be two different things. Always be wary of how your pitch may be interpreted by others. The more an investor knows or has access to in writing, the harder it is to argue reliance upon statements.Ĥ. Provide the most detailed disclosures possible. You should make it obvious to investors as to what is the current status of the business and what is a projection.ģ. Be extremely clear in any written materials. You can sell your dream without ignoring the facts.Ģ. ![]() Keep the truth in mind when pitching to investors. Only Elizabeth Holmes truly knows all that she knew and intended, and thus proving beyond a reasonable doubt that she knew her claims were false and intended to defraud investors becomes increasingly difficult absent definitive evidence.ġ. Whether looking at criminal wire fraud’s element of voluntary and intentional participation in a scheme to defraud another out of money, or criminal securities fraud’s requirement of scienter, knowledge and intent are requisite elements in finding one guilty for almost all cases of criminal fraud. The key element that her case turns on is whether or not she had the requisite knowledge and intent. However, for Holmes’ actions to constitute criminal fraud, mere misrepresentation is not enough. These misrepresentations caused numerous wealthy families and venture capitalists to invest and eventually lose hundreds of millions of dollars. When pitching to investors, Holmes and her team detailed a product and technology capable of far beyond the reality of its abilities. Whether faced with charges of securities fraud, wire fraud or potentially both, the consequences can be severe. That proximately caused the plaintiff’s injury Upon which the plaintiff justifiably relied upon Ĥ. A false statement or omission of material fact ģ. To constitute securities fraud, it must be established that there was in fact:ġ. ![]() That interstate wire communications were in fact usedĪlternatively, many charges brought against potential fraudsters in the venture capital ecosystem are charges of securities fraud.That it was reasonably foreseeable that interstate wire communications would be used and. ![]()
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