Why does Tyler Shultz say the AI boom could enable fraud?

Tyler Shultz, the whistleblower who helped expose Theranos, says the artificial intelligence boom could give swindlers the same kind of opening Elizabeth Holmes once used. “If you want to deceive people, I think this is a great opportunity to go deceive people,” Shultz said in an interview with the San Francisco Standard.

Shultz, whose first job out of college was at Theranos, was a central figure in exposing the company’s blood-testing devices. Those machines, which were sold through Walgreens stores, delivered faulty results to real patients. Theranos reached a peak valuation of around $10 billion even though its technology never worked as promised. The company used its own machines for only a fraction of tests and sent the rest to third-party equipment.

His warning arrives as Holmes is back in the spotlight. The documentary “You Can See Everything,” directed by Nathan Fielder and Lance Oppenheim, follows Holmes through her final weeks before she began a prison sentence of more than 11 years. The film has become one of the highest-grossing documentaries of all time. Shultz said he did not need to watch it to form an opinion of Holmes. “The only reason we’re talking about Elizabeth Holmes right now is because she wants us to be talking about Elizabeth Holmes right now,” he said.

Shultz’s bigger concern is the money now moving into AI. He pointed to companies that have never turned a profit but are raising capital at trillion-dollar valuations. When the Theranos fraud came to light, it served as a hard lesson for investors about the need for due diligence. Shultz worries that lesson is fading.

Why is due diligence on AI companies so hard?

“A huge danger with AI is that I think it is really hard to do due diligence on it,” he said. “It’s really hard to tell the difference between what is something truly unique and new versus like, a ChatGPT wrapper.” A wrapper is a product built on top of someone else’s AI model, and critics have long questioned how many startups offer anything beyond a thin layer over that technology.

Shultz also criticized the way Holmes raised money. Theranos relied heavily on individual investors, including the DeVos and Walton families, rather than established venture firms. The company declined to share scientific data or evidence that its machines worked, citing concerns about trade secrets. That secrecy kept many top Silicon Valley venture capitalists away.

“I think the days of having a thirty-minute coffee with someone and sending them $100,000 should be over,” Shultz said. “Elizabeth took that model and scaled it to $100 million.”

Shultz comes from a prominent family. His grandfather, George Shultz, served as U.S. Secretary of State and Secretary of the Treasury and was a notable investor and board member at Theranos. Tyler Shultz has said the investors themselves carry responsibility for how they handle large sums. “I believe that what [Holmes] did was raise the biggest angel round of funding of all time, but even at the smaller levels, I think investors need to recognize that when they put that type of money in someone’s hands, they are giving them tremendous power,” he said.

What is Elizabeth Holmes working on now?

The documentary also shows Holmes at work on a new venture. Holmes and her partner, hotel heir Billy Evans, are seen working on Haemanthus, a diagnostics company the pair call “Theranos 2.0.” The company has reportedly raised about $20 million.

Shultz said he is uneasy about what comes next for Holmes. “I have this feeling of unease about what might come next,” he said. “She’s certainly preparing and beginning her second act, and I don’t know exactly where it’s going to go.”

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