Skip Repeated Content

BCLP Partner Andrey Spektor was quoted Nov. 16 in a featured article by Law360 that addressed the responsibility and liability of sophisticated investors who invested in Theranos. The article noted recent testimony in the criminal trial of Elizabeth Holmes, the former CEO of the now-defunct company, that suggested the investors had failed to conduct adequate due diligence. Andrey noted that the legal line between an investor who's been insufficiently diligent and one who's been criminally defrauded is "not razor sharp," and the issue is complicated when it comes to investing in private companies, which aren't subject to the stringent federal oversight like their publicly-traded counterparts. "Private companies can be more of a black box," Andrey said. He compared investors’ ability to obtain information to that of FBI agents and prosecutors, who can compel production of internal emails and witness testimony. There was also the "added wrinkle," Andrey noted, of the startup being purportedly based on cutting-edge technology “shrouded in secrecy.” The article concluded with Andrey’s observation that the “promise of a high level of return” meant that “investors naturally assumed a high level of risk.”

Related Practices

This document provides a general summary and is for information/educational purposes only. It is not intended to be comprehensive, nor does it constitute legal advice. Specific legal advice should always be sought before taking or refraining from taking any action.