My career as a lawyer started out on teams for two major cases: representing TNK-BP in the never-ending wrangle over control of Russian oil fields, and representing Pablo Trujillo, the first defendant extradited from Colombia under a new treaty permitting extradition for financial crimes involving drug cases. In the case against Mr. Trujillo, the prosecutor alleged that he laundered funds on behalf of the Norte del Valle and Sinaloa cartels. I've represented victims, witnesses, and defendants on civil, criminal, and regulatory matters involving investor fraud, embezzlement, RICO claims, stock-options backdating and even, the infamous Enron litigation. I also happen to be an angel investor, and have represented a number of other investors throughout my career.
There’s a lot that investors can unpack from the recent Elizabeth Holmes verdict. As you well know, the new year did not bring the cheer, accolades, public praise, or career advancement that Elizabeth Holmes, Founder & CEO of Theranos, may have hoped for. Theranos, a startup that promised to revolutionize blood testing for patients, providers, and labs, came under fire for fraudulent claims. The jury in her fraud trial found Holmes guilty of one count of conspiracy to commit fraud, and three counts of wire fraud.
The verdict confirms, in part, the prosecution’s case that Elizabeth Holmes actively misled investors, regulators, distributors, and consumers about the efficacy of the blood testing technology. The charges in which she was convicted relate to more than $100 million dollars in lost investor funds. At sentencing, expected to occur in September 2022, the prosecution will have the chance to present evidence of additional wrongdoing related to at least another half billion in lost investor dollars. 
With my past experience, and this present day high profile case, I found myself asking what lessons does this case leave us with when it comes to avoiding fraud and deceit? A lot of people are going to talk about checking SEC filings and checking out finders and brokers. That helps, but there’s a HUGE difference between a smell test and rooting out fraud at this level. Here are the tips you can’t miss if you are going to actively protect yourself from fraud and deceit as an investor.  
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I know that many times, investors fall into a potential fraud scenario because they want to be closer to the action, more involved, and have less oversight. I get that desire and I understand that appeal. As an angel investor, I’ve gone to bootcamps, served on due diligence teams for angel investor groups, and kept up with my angel investor connections over time. Being close to a deal is fun and exciting. It feels great to be in on the action. Getting to know the founders is personal and natural. Don’t feel like you HAVE to be rigid. Invest what you can afford to lose, comfortably. Understand and accept your true motivations for investing in a particular deal. And, be sure you are not working solely from the standpoint of following a trend.
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Image credit: 
Elizabeth Holmes, Theranos founder and CEO
Panelists:Elizabeth Holmes Fortune Editor Alan Murray
Photograph by Stuart Isett/Fortune Global Forum

WRITTEN BY

Lenore Horton