Other People’s Problems: The Elizabeth Holmes Trial with Stephanie Byrd, JD

December 7, 2022

In this episode, we share the downfall of former Silicon Valley player and youngest self-made billionaire Elizabeth Holmes. Tune in for an exclusive interview with guest Stephanie Byrd, JD, who turned over a key piece of evidence in the trial. Stephanie shares her perspective from inside the courtroom. In the second part, we discuss the laws that protect investors from fraud and four key strategies for scaling a business.

Listen to the full episode using the player below, or by visiting one of the links below. Below is the episode’s transcript which has been edited for readability. If you have any questions or would like to learn more, email us at info@byrdadatto.com.


Intro: [00:00:00] Welcome to Legal 123s with ByrdAdatto. Legal issues simplified through real client stories and real world experiences, creating simplicity in 3, 2, 1.

Brad: Welcome back to another episode of Legal 123s with ByrdAdatto. I’m your host Brad Adatto with my co-host, Michael Byrd.

Michael: Thanks, Brad. As a business and health care law firm, we meet a lot of interesting people and learn their amazing stories. As you know, this season we are spicing things up a bit. We’re here to talk about OPP: Other People’s Problems.

Brad: Now, Michael, for those who might be listening for the first time this season, even though we’re kind of further in, what does it mean when we’re talking about OPP?

Michael: We’re going to tell public stories in the news and then talk about some legal lessons that can be learned from these fascinating stories.

Brad: Now, Michael, for some reason, your voice sounds very serious and deep, are you trying to channel your inner radio voice?

Michael: Thank you for recognizing my talent, Brad. I’d been waiting for [00:01:00] multiple seasons for you to recognize this.

Brad: I think you’re just trying to show off in front of our guests today.

Michael: Maybe a little bit. I’ve not ever said this before about a guest, nor do I plan to say so about a future guest, but I find our guest today incredibly attractive, and in fairness, I sense that she may be into me as well.

Brad: Okay, this is starting to feel really creepy. Let’s get this out of the way, it’s your wife that is joining us today. She is our guest, and Michael, I don’t think she’s really impressed with your radio voice.

Michael: I don’t…

Brad: She’s smiling because she’s your wife, but I don’t think she’s that impressed.

Michael: She’s laughing with me, I think, Brad, and to be fair to my wife, she has much more impressive credentials than being married to me.

Brad: Yes.

Michael: She actually has through her work as an attorney, a connection to today’s OPP story.

Brad: Yeah. Well, since she’s sitting here and we’re just being honest with each other, is apparently how we wanted [00:02:00] start this, has Stephanie ever made you really mad?

Michael: Hmm… I think you’re trying to stir the pot there.

Brad: What?

Michael: We know this, Brad. We have a daughter, Ellex, who is famous for using this tactic to try to get things interesting with her posed questions to get things going, but I will redirect.

Brad:  Okay.

Michael: I do have a story that I read several weeks ago where a man has 181 million reasons to be angry with himself.

Brad: Wow! That’s even more reasons than I have to be angry at you, so now I’m curious.

Michael: Okay, the title of the article is The Quest to Find 181 million in Bitcoin buried in a dump.

Brad: Okay, Michael, I’m going to behave myself today since your wife is sitting here, and I’ll act professional even though we know that we’re both not, we’re mostly 13 year old boys, so I could take this conversation a lot of ways, but, I do actually remember this article. Maybe you can kind of give some more insight here.

Michael: Okay. A person named James Howe, [00:03:00] who lived in the city of Newport in southern Wales, threw out a hard drive about the size of an iPhone back in 2013.

Brad: Yeah, and who really needs a hard drive the size of an iPhone? It’s probably hardly worth $181 million.

Michael: Fair. It was a hard drive that contained 8,000 Bitcoin in it. How do you say that, Bitcoins or Bitcoin? I’m not sure.

Brad: Yeah.

Michael: Apparently James had two identical laptop hard drives stored in a drawer. One was blank and the other one had the key to the Bitcoins. That’s the one he threw away, Brad. At his peak, they were worth 280 million. The hard drive with the 8,000 Bitcoins ended up going in a garbage bag to the local dump.

Brad: Yeah, it’s too bad for him. I also think he may have missed out on some of that Bitcoin drain.

Michael: Yeah, this probably won’t surprise you, he has been spending the better part of almost 10 years trying to search the garbage dump to find it. He’s been having to try to get permission to go [00:04:00] in and start digging through the trash.

Brad: Is that why it’s taking so long?

Michael: Yeah. Who knew, but apparently there are tons of regulations from an environmental perspective about accessing and digging up trash. The crazy thing is that they apparently can zero in on a very specific quadrant in the trash dump where it would be located.

Brad: So what do you mean by that?

Michael: Well, they can tell based on the date the trash was picked up and the location where the trash was picked up, where it would’ve been stored. I guess trash dumps are pretty organized and intentional about where and when they placed the trash, but even still if you were to get access, it would be the proverbial looking for a needle in a haystack to find it.

Brad: So, I’m assuming he has some plan?

Michael: To put it mildly, yes, he has a plan. He apparently has two plans. One will cost $11 million and the other $6 million.

Brad: Okay, so plan A, plan B, just a few million dollars between friends.

Michael: Yeah, I mean, this is [00:05:00] where it gets crazy. He has assembled a team of eight experts specializing in different areas. They include, AI, power sorting, waste management, landfill excavation, and data extract. One advisor worked for a company that recovered data from the black box of the crashed Columbia Space Shuttle.

Brad: All right, well, so he is throwing some serious science at this pile of trash.

Michael: Brad, I pulled this just for you because I know how impressed you would be. They’re even using two robotic dogs to help sweep the area for anything that looks like a hard drive, or that’s part of the plan.

Brad: Yeah. Okay. Robotic dogs, this is the most interesting part of the entire story. I wish you had had started the conversation by saying, Robot dogs are digging up the dump to find Bitcoins in Whales. That’s much better.

Michael: We wouldn’t have been able to contain you.

Brad: Yes.

Michael: You would’ve gone off on a tangent.

Brad: True.

Michael: So, they have included in the plan even providing for environmental improvements to the landfill.

Brad: Sure.

Michael: [00:06:00] They’re doing whatever they can to dress this up to hopefully get approval for the project from the city.

Brad: I’m assuming the robotic dogs are not part of the environmental improvement, but besides the fact that he’s doing all these improvements, how he’s gonna pay for all this, especially considering I don’t think he has that much money and he’s going through a trash dump?

Michael: The money is sitting in trash, Yeah, in Bitcoin.

Brad: Yeah.

Michael: Which is going down by the day. James has raised the money to fund this project through a private round of financing.

Brad: Ooh.

Michael: Investors will have a stake in the Bitcoin if it’s found. In fact, under his proposal, the city would have a stake in the recovery as well. James would ultimately keep 30% of the Bitcoin that he threw away under his plan.

Brad: So first, I guess it’s too late for us to jump in there and be investors with it, so we’ll have to hold off on that one. The second, when is he going to get approval?

Michael: Yeah. Well, based on the answer of what I’m about to tell you when he is going to get the approval, we probably don’t want in on this.

Brad: Oh.

Michael: it’s [00:07:00] pretty high risk, right?

Brad: Oh, okay.

Michael: Finding a Bitcoin in a trash up in Wales, but it also doesn’t look very promising that it’ll get approved based on the past actions of the city and comments from city Council, they’re pretty much like there’s nothing you can do to changes to let us let you in.

Brad: Sounds like some great politics happening there. How does this have to do with today’s story?

Michael: There are some high risk investments in today’s story that went to Zero. Imagine if people who had invested 11 million in James Venture to find the Bitcoin later found out that there was no Bitcoin thrown away in the first place.

Brad: Ooh.

Michael: Well, today’s story features Elizabeth Holmes, who raised a ton of money on the revolutionary potential to run labs on a finger prick. Except the invention never worked.

Brad: Yeah, I’m really excited to jump today’s story. Let’s set the table for some context before we bring in our extra special guest, your wife.

Michael: Okay. We’ll at least introduce the characters. [00:08:00] The main characters in today’s story are Elizabeth Holmes, Sunny Balwani, and a company named Theranos. There’s plenty of other major players in the story, but these are the central figures.

Brad: Yeah. This is another major story in the news that a lot of people probably have heard, that’s why it’s in our OPP season. We know there’s been some podcasts called The Dropout, a book called Bad Blood by John Cray-

Michael: Oh, this is…

Brad: Carreyrou. John, I don’t know if I’m pronouncing your name correctly, but he is a Wall Street Journal author who broke the story, and supposedly they’re making a movie with Jennifer Lawrence who’ll be staring as Elizabeth Holmes.

Michael: Yeah. There’s no possible way in today’s episode that we can go as deep as all the articles, books, and podcasts that are out there on the story. They’re so many different layers to the story. It’s fascinating, but let’s start by at least [00:09:00] touching on Elizabeth Holmes. Elizabeth went to Stanford in 2003 to study chemical engineering, and dropped out to dedicate all her time to a company she founded called Theranos. This is a combination of the word therapy and diagnosis.

Brad: It sounds like the classic Stanford dropout. Big ideas, billion dollar Silicon Valley story.

Michael: Yeah, that’s exactly what happened. At least, that’s what everyone thought was happening.

Brad: Yes, Michael. That’s some nice foreshadowing again. Elizabeth Holmes was pretty quirky, if I remember correctly, she had this shockingly deep voice and she had her signature outfits of the black turtleneck.

Michael: Yes, her idol was well documented to be Steve Jobs, so that’s where she copied the black turtleneck look, and according to the stories, her natural voice is actually pretty high pitched, and she adopted the deep voice at some point [00:10:00] early on during the Theranos early years.

Brad: All right, we could go on for a while talking about Elizabeth, but let’s introduce this company of hers, Theranos.

Michael: Theranos was founded on the revolutionary idea of testing blood from a single finger prick. Elizabeth had been warned by a Stanford professor very early on, who was an expert in clinical pharmacology that this would not work, that her idea would not work. The Professor, Phyllis Gardner recounted when she told Elizabeth this, that Elizabeth just stared through her. That’s not some foreshadowing.

Brad: Well, and I did look this up because I was curious about the name itself, Theranos, and it’s interesting because it’s actually the Greek god of blood. I was like, okay, well this Greek God is Mythology, and it sounds like the Stanford professor quickly knew that this entire business concept was a myth.

Michael: Yeah, and it’s weird. I mean, you read stuff, [00:11:00] and there are quotes that Theranos was in “stealth mode” early on, but they were totally off the radar for the early years, and they were trying to make the idea work and I mean, they were in existence going back to like 2003 and weren’t big in the news for many of those early years. In 2009, Sonny Balwani joined Theranos as Elizabeth’s right hand person.

Brad: Yes, and Sunny was about 20 years older than Elizabeth, and eventually came out that they were romantically involved.

Michael: Yeah, there’s probably a whole segment we could do on the Elizabeth and Sunny relationship because that was another one of the layers in this crazy story. That was a big deal, but in 2013, Theranos announced a long term partnership with Walgreens. This is when things, they really started getting the public’s attention. The plan was to make the finger prick lab test available at every Walgreens location.

Brad: Which helped propel [00:12:00] her by 2014 for her to be named one of the richest women in America by Forbes for a privately held company. At this point, Theranos has raised over $400 million from private investors.

Michael: So, things started turning, a Wall Street Journal article in October of 2015 was the beginning of the end. The article revealed that the finger prick lab test did not work as promoted and alleged that Theranos did traditional lab testing for most of its tests.

Brad: Yes, and by 2016, the federal regulators started investigating Elizabeth. Her romantic partner, Sonny, stepped down and Holmes net worth went from a couple hundred million dollars to zero overnight.

Michael: Fast forward to two more years, the SCC charges Holmes and Balwani with a massive fraud.

Brad: Not regular fraud?

Michael: No, they use the word massive fraud.

Brad: Oh, yeah.

Michael: Involving more than $700 million from investors through [00:13:00] elaborate years long fraud, in which they exaggerated or made false statements about the company’s technology, business, and financial performance.

Brad: Yeah, and I even read that Elizabeth or whoever it was, stole logos from pharmaceutical companies and then fixed them to the internal Theranos reporting. It looks like these companies had verified their technology. You know, Michael, we were talking earlier about big ideas and companies with these large risk associated with them. Which is why sometimes they can fail, but we won’t focus on companies that grow and fail. Let’s kind of focus on companies that lie when they’re raising money. I think we’re finally at the point because she’s been very patient, especially since she’s sitting next to you, to bring on your better half. When I say better half, I mean like substantially better, like 190% better. As everyone knows, she’s my second favorite Byrd in the family because Steve, your dad, is my favorite and she’s second, your sister is third. I think I like your kids. You’re eventually on the list. I can’t remember where you fall anymore.

Michael: I [00:14:00] feel so flattered.

Brad: Yes.

Michael: This is all true and I can’t wait to bring her on because she has a real perspective, not just the perspective we have from the media. Brad, I have to commend ourselves. We’ve done a pretty good job of acting like grownups.

Brad: Mostly.

Michael: So far.

Brad: Yeah.

Michael: Stephanie’s probably just as surprised as we are.

Brad: Yes, this is true.

Michael: Let me introduce Stephanie. Stephanie went to UT Austin, she has a finance degree in her undergrad, she went to Baylor Law School, she is general counsel for the hall group and she can tell us a little bit more about that, and she does multiple different things that serves in that general counsel role. Stephanie has five kids ranging from 25 to 13. She and her husband like to navigate life’s traumas together in their free time, and you can learn more about how we met during a prior [00:15:00] episode that we did, Brad. What’s Love Got to do with It in the business season.

Brad: That’s right.

Stephanie: I don’t think I’ve heard that one.

Michael: Well, yeah, go back. I do hope you remember the story.

Brad: Yes.

Stephanie: I hope I do too.

Brad: You were there, and audience members who don’t know, I happen to be there too. I took a picture of their first date and we did drop it in our show, so if you go listen to that episode, you’ll find some snoop taking pictures of them from a distance. Stephanie, welcome.

Stephanie: Thank you, thank you both for having me.

Brad: Yes, and so I’m curious, what has Michael done to make you really mad?

Stephanie: You don’t want this to go off, right?

Michael: Wait, there’s something? 

Stephanie: I think it could go both ways.

Brad: That’s fair enough.

Michael: Truths.

Stephanie: Yeah.

Michael: We both have the red button that we’re not going to push right now. 

Brad: Dang.

Michael: All right, so let’s move on, Brad, that’s not fair.

Brad: Okay.

Michael: So, I mentioned that you [00:16:00] work for the Hall Group. Talk a little bit about kind of what you do as general counsel for the Hall group.

Stephanie: Sure. The Hall Group is a group of private companies, primarily owned by Craig Hall and Ambassador Catherine Hall, and we’re involved in very diverse industries. One of the primary industries is commercial real estate and development, and then also we have a lending arm called our Hall Structured Finance Department. We lend to, primarily to hotels under construction, developers of hotels and multi-family housing, and then if you are a wine connoisseur we have the fabulous hall wines and walled wines and Baca Wines, and then, Mr. Hall is an entrepreneur and so we do a lot with entrepreneurs and trying to help and assist them.

Brad: Yes, big fan of their vineyard.

Stephanie: We’ll have to all go together sometime.

Brad: Yes. [00:17:00] You heard that Riley? She invited me. Well, so we’ve started this story about the OPP and we keep kind of going around it, but you have a connection to this story, and I know because of your role as general counsel, you’re limited as to what you can and cannot say. Why don’t we just kind of talk about what you can talk about, and I think our audience member would be interested. Just connect us to today’s OPP story and how you first got involved.

Stephanie: Sure, so we had two entities that were investors in Theranos, one through a private fund very early on. I believe it was around 2007.

Michael: Wow.

Stephanie: Elizabeth Holmes had actually approached Mr. Hall looking for funding early on. This was after Elizabeth Holmes had established her very well renowned board of directors and was starting to come out of stealth mode, [00:18:00] was seeking additional investors and we invested directly again, a little under $5 million.

Michael: You said something about this board of directors. We didn’t even mention this, but it’s like a who’s who of board of directors.

Stephanie: Politicians, people, former Secretaries of defense, military, go to people, mad Dog, Mattis, I mean you name it. Her board of directors was like, none I have ever seen.

Michael: I actually read an article that said that it’s one of the most powerful boards of directors for any company that’s ever been put together.

Brad: So, why wasn’t I on it?

Michael: Oh, I thought you were on it.

Brad: Oh, huh.

Michael: Isn’t that why they went down?

Brad: Damnit, got me there.

Michael: Okay, well, and then the military kind of had a connection too, as well as what they were trying to kind of pitch when they were [00:19:00] raising capital.

Stephanie: Oh, most definitely. Our connection went beyond being an investor, and ultimately we were subpoenaed by both the SEC and the DOJ. A couple of our employees were deposed by the SEC, and we had an employee who actually testified at the DOJs trial against Elizabeth Holmes, but in connection with that, our really key piece of evidence was a tape recording of Elizabeth Holmes talking to investors. During that conversation, she specifically mentioned the technology being used on medevac helicopters.

Michael: That’s crazy! And then it later turned out that that never happened, Right?

Stephanie: Well, many of the things that she said never happened and were not true.

Brad: Oh, does that matter?

Michael: Yeah, [00:20:00] Brad. That scares me a little bit since you helped lead our securities practice.

Brad: Yeah.

Michael: Yeah, so, then you actually went to the trial, right?

Stephanie: I did go to the trial.

Michael: I can vouch for that because I was home with the kids by myself for a week, and all I can say is that everyone was alive when Stephanie got home.

Stephanie: Barely.

Brad: You did a lot of cooking, right, Michael?

Michael: Well, if ordering food is cooking, yes, I did a lot of cooking.

Brad: So you got to, again, I’m not trying to push you into areas you can’t talk about, but you got to sit there and attend the trial. What was that like being in that room? Were you in the next room with her when she was being deposed or was this only when your people were on the stand?

Stephanie: It was only when our people were on the stand. We obviously didn’t want to show up before our employees were testifying. We didn’t want to tip off the defense on the [00:21:00] lineup of what was going on. I did sit through a couple of the witnesses and our witness. It was a very surreal experience. You’ve seen what Elizabeth Holmes looks like, in her CEO of Theranos stage, the black turtlenecks, the bright red lipstick, the slicked back hair, and a ponytail, and she, in my mind, clearly tried to present an entirely different impression of the much milder, stay at home mom, trying to garner some sympathy. No makeup, hair loose, much more subdued clothing, but what was still similar and just really creepy in my mind, was just the way that she held herself. She sat extremely upright on the edge of her [00:22:00] chair, the entire time just staring intently at whatever witness that was on the stand.

Michael: I’m gonna brag on you a little bit, even though it was more about the impact of the witness that you were defending, but the tape you alluded to ended up being a pretty significant factor.

Stephanie: Well, it was a critical piece of evidence. We didn’t know that at the time. Certainly, but it was no longer a he said, she said, you had her speaking on tape. You heard what she was telling the investors, and I believe when they played the tape at the trial, it was the first time that the jurors actually heard her voice.

Brad: Oh, wow. Pretty amazing. I’m pretty proud of you. 

Stephanie: Well, I had nothing to do with taping her. I simply turned over the evidence, as was [00:23:00] required.

Brad: Let me ask you this question. What the audience members don’t know, you’ve had experience as a litigator, kinda like Michael actually. As we talked about in the story, you basically took his job and probably did a much better job. Sitting there in the audience and watching how stuff was being presented, did you miss being on the litigation side of actually being in court? I know you still direct stuff a lot, but you’re not in court as you used to be.

Stephanie: You know, I actually love being a spectator because that is a once in a lifetime type of trial. There were others in our office who I think wanted to go to the trial. I think there were people all over the nation who wanted to go just to see what was going on. It was definitely interesting, and I didn’t wanna be the one who was responsible for ensuring that she was put behind bars, but it was a great experience.

Michael: Yeah, and I guess footnote we didn’t even talk about when we were [00:24:00] kind of doing the buildup is that she was convicted.


Michael: She has been sentenced, right?

Stephanie: She has been sentenced, and we also provided a victim impact statement to take into consideration with the sentencing, but yes. 

Brad: Which is public knowledge for those who want to go look at it because I actually read a quote from Mr. Hall.

Stephanie: Or from me.

Brad: From someone, but she got convicted 11 years in prison, plus she has to pay back all the money that she basically stole. It will be interesting to see how that happens.

Michael: Yeah.

Stephanie: Yeah.

Michael: And then Sunny Balwani, I think was convicted, but he has not been sentenced.

Stephanie: He hasn’t had his sentencing yet.

Brad: Interesting stuff.

Michael: Yeah. I don’t even know, you have to almost go through these other resources out there to just see the layers and layers of deception that is public knowledge about what she went through. I mean, creating fake labs so [00:25:00] that when people would come visit, it would appear as if this technology was working and everything was super double secret. It is just a really fascinating story.

Brad: Yeah.

Stephanie: We’re not talking about puffery or exaggeration.

Brad: No.

Michael: Yes.

Brad: We’re talking about something that didn’t exist.

Michael: Well, we have once again blown through our episode. Thank you very much for joining us today and putting up with us as you do, and both of us are very grateful that you said yes. What we’ll do next is we’ll say goodbye, and after we come back from break, Brad and I will come back on and do a couple minutes of legal wrap up.

Brad: Yeah, thanks for joining us.

Stephanie: That sounds great. Thanks for having me.

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Brad: Welcome back to Legal 123s with ByrdAdatto. I’m your host Brad Adatto, and I’m still here with my co-host, Michael Byrd. Now, Michael, this season our theme is OPP, and today, not only do you get to tell a story about Elizabeth Holmes and her company, that was a big fraudster. We got to spend some time with the first family member of ours to actually join us in person, but Stephanie’s not the only family members involved on our podcast.

Michael: Yes, so, special shout out right now to the [00:27:00] two people who have the really difficult job of transcribing our episodes. Reese Singleton and Ella Scott Singleton, my nieces who over Thanksgiving we visited and they were in tears laughing about the spanking episode because their mom, my sister, as I told in that episode, we would run around when my mom was trying to chase us, so they got a kick out of that.

Brad: That’s awesome.

Michael: Stephanie was on this week, and so we’ll just make it a family affair and recognize them.

Brad: There you go.

Michael: Well, before we get into kind of some application, Brad, on what goes into, I mean, we all know lying is a bad thing, right?

Brad: Yes.

Michael: Yeah, and so I want to get to why you can get in legal trouble for lying when you’re raising money in a moment, but let’s take a step back for a minute and reset for those small businesses that are out there who are thinking about, well, how do I scale my [00:28:00] business? And what are the ways? Do I have to go get investors like Elizabeth Holmes did or are there other ways? And there are other ways, so you basically broadly have four options on how you can fund if you’re trying to scale your business. One is you can self-fund, you can invest, reinvest your profits that you make in your business into growing your business.

Brad: Yep.

Michael: And so, there is some planning that goes with that because if you’re taxed as a partnership, you need to make sure there’s allocation of cash aside to cover the tax impact of growing your business that way. There actually can be some strategies. Our partner Jim, has written an article about some strategies involving C-Corps, when you’re using this method to scale your business. Another way to do it, which is probably familiar to many is going out and borrowing the money to scale your [00:29:00] business. The advantage to that is you’re not giving up equity, business people will tell you that the most valuable assets you have is the equity in your company, and you’re not giving that up. You do have some downsize to go in that route. You might have to put personal guarantees that purchase your personal balance sheet at stake, and then life can get pretty complicated as you have creditors that have security on your assets, and so it can make it pretty convoluted as you’re scaling with debt, but it also can be a quite effective strategy. The third is kind of using investors, but using investors just for part of your scaling strategy. Maybe you have a new location in another city and so you get someone to go alongside you, almost like a partner or we call it the JV model to grow that business together and [00:30:00] it takes a little bit of risk off the table, but you’re giving up some equity, at least in that particular part of the deal. What Elizabeth did is what many businesses do, which is I’m going to go and find people to invest in my business and I’m going to give them equity in return. Now, she raised, what? $700 million or something like that?

Brad: Yeah, something like that.

Michael: Talk a little bit about, what are the issues with that? And ultimately, of course, we want to know why lying will get you in trouble.

Brad: Yeah, well, lying is bad. Almost every single state, but the federal government is the one that has the big control, has something to do with when you’re raising securities. If you remember, she was a privately held company and even privately held companies have security laws that they have to abide by, and so when you bring on investors, and we could go into a deep dive on accredited versus non-accredited investors, which has to do with the net worth of the individuals. [00:31:00] Those individuals are presented with information saying, if you give me money, this is what you get, and let me disclose to you what we do for a living, what is the purpose of our company, and how are we doing, what does our books look like, How are our doing in processes, That’s pretty normal, and a lot of these closely held businesses, it’s a risk and no matter what kind of business you’re investing into. A lot of times these things called private offering memorandums or private placement memorandums, when you read, it will disclose all these risks associated with it. If the person does invest a million dollars and they lose it all, well that was part of that risk. However, that only protects you in the sense of, if you disclose everything and you’re not lying.

Michael: Yeah.

Brad: And in this particular case, all these investors, all this information was false. It was obviously a deceptive act, and [00:32:00] that on itself is criminal on top of these regular privacy laws. The fact that she was lying is problematic, but don’t forget that there are security rules even for closely health companies that you have to follow through. We’ve talked about this in other episodes. We call it the underwear drawer moment, where you’re supposed to open up your underwear drawer and show them everything, good, better, and different. If it wasn’t working as well as she thought it was and she disclosed that, but said I believe we can get there, great, that’s actually fine if you’re disclosing and you’re still working through that process or you’re still trying to get FDA approval or whatever is that process, that’s part of the duty that she would have to those investors. They knew what they were getting into, and I know we’re a little over time audience members, so I’m going to jump out here and say, Michael, what are some final thoughts here, buddy?

Michael: Yeah, I love your point, and if you just connected even to our guy that was raising money to go look for a lost iPhone with Bitcoin in a dump, and If he’s disclosing what the [00:33:00] risk is and people are willing to put their money into it and they’re following the rules on what that disclosure means, that’s okay, as you said, there’s nothing wrong with that. It’s when you start misleading or hiding things, that you can start getting yourself in trouble.

Brad: Absolutely. Well, audience members, next Wednesday we have our Jay Reyero back for another show. That’s right, he’s coming back for another other people’s problems to discuss over a million reasons why you have to have a process to check if your executives are embezzling at your money.

Outro: ByrdAdatto is providing this podcast as a public service. This podcast is for educational purposes only. This podcast is not constitute legal advice, nor does it establish an attorney client relationship. Reference to any specific product or entity does not constitute an endorsement or recommendation by ByrdAdatto. The views expressed by guests are their own, and their appearance on the program does not imply an endorsement of them or any entity they represent. Please consult with an attorney on your legal issues. [00:34:00]

ByrdAdatto founding partner Michael Byrd

Michael S. Byrd

ByrdAdatto Founding Partner Bradford E. Adatto

Bradford E. Adatto