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Filed Suit

A hedge fund is suing Theranos, claiming the embattled company lied to attract funding, the Wall Street Journal reports.

"Through a series of lies, material misstatements, and omissions, the defendants engaged in securities fraud and other violations by fraudulently inducing PFM to invest and maintain its investment in the company," the hedge fund, Partner Fund Management, says in a letter to its investors.

According to the Journal, the suit alleges that Elizabeth Holmes, the CEO of Theranos, and Sunny Balwani, the former chief operating officer, claimed that the company's technology was capable of more than it actually was and that it was closer to regulatory approval than it actually was. In addition, it says the company overstated its ability to fulfill obligations to its partners, like Walgreens.

In a series of articles beginning about a year ago, the Journal reported that Theranos did not use its proprietary technology Edison for many of the tests it performed and highlighted concerns with the company's proficiency testing. Regulators then uncovered deficiencies at one of the company's labs and proposed banning Holmes from owning or operating a clinical lab for two years. The company also re-issued tens of thousands of test results, and Walgreens ended its partnership with the company.

Last week, Holmes announced that Theranos was closing its clinical labs and shifting from a blood testing company to a technology developer. The Journal adds that the suit "adds a new challenge to Theranos's pivot plan."

Partner Fund Management invested $96.1 million investment in Theranos in 2014 and the Journal reports it is seeking to recoup damages in excess of its investment.