The founder of a start-up that promised to revolutionise the blood testing industry has agreed to settle charges that she raised more than $700m (£500m) fraudulently.
The Securities and Exchange Commission said Elizabeth Holmes and Theranos deceived investors about the firm’s technology.
Ms Holmes will lose control of the firm and be fined $500,000.
An SEC official called the fallout an “important lesson for Silicon Valley”.
“Innovators who seek to revolutionise and disrupt an industry must tell investors the truth about what their technology can do today – not just what they hope it might do someday,” said Jina Choi, director of the SEC’s San Francisco regional office.
Theranos was founded in 2003 and sought to develop an innovative blood testing device with quicker results using one drop of blood.
In 2015, however, its fortunes waned after Wall Street Journal reports suggested the devices were flawed and inaccurate.
The charges were brought against Theranos, Ms Holmes, and its former president Ramesh “Sunny” Balwani.
The SEC plans to bring a case against Mr Balwani.