Elizabeth Holmes, the founder and chief executive of the blood-testing company Theranos, was charged with fraud by the Securities and Exchange Commission on Wednesday for raising more than $700 million from investors by falsely promoting a key product, the commission said.
In announcing the charges, the S.E.C. also said that Theranos and Holmes had agreed to settle them, with Ms. Holmes agreeing to pay a $500,000 penalty. As part of the settlement, she was stripped of control if the company and barred from being an officer or director of any public company for 10 years.
Ms. 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 S.E.C. complaint. Ms. Holmes also claimed that the Defense Department was deploying the company’s test in battlefield setting, which was untrue.
Theranos announced in October that it was closing its lab and laying off about 340 employees, or more than 40 percent of its work force.
In a separate complaint, the S.E.C. also accused Theranos’s former president, Ramesh Balwani, with participating in the fraud. The commission said it planned to pursue its claims against Mr. Balwani in Federal District Court for the Northern District of California.
A lawyer for Ms. Holmes, John Dwyer, declined to comment.