Partner Keri Axel Quoted on Theranos Investor Due Diligence by Law360

White Collar Partner Keri Curtis Axel was quoted by Law360 about Theranos investor due diligence, or lack thereof. A former federal prosecutor, Axel said, “Due diligence may not be sufficient to ferret out claims of intentional misrepresentation, but it is important to try.”

Axel said it is critical that investors adopt a ‘trust but verify’ approach to representations by company management. Testimony in the criminal fraud trial of ex-Theranos CEO Elizabeth Holmes reveals that many investors suffered from FOMO (fear of missing out) and rushed to put their money into the defunct blood-testing company, once valued at $10 billion.

Many wealthy individuals invested in the company based on trust and friendships only to discover that their faith was mistaken. Axel said, “Investors can be too comfortable in accepting the word of other investors, advisers or celebrity endorsers, but one doesn’t really know how much due diligence the endorser did, or what qualifications they have, so the investors should not bypass their own due diligence just because someone else claims to have done it already.”