Theranos whistleblower warns AI boom is 'great opportunity to deceive people'

Tyler Shultz, the former Theranos employee whose whistleblowing helped expose the company's fraudulent blood-testing technology, is warning that the current artificial intelligence boom presents a prime opportunity for deception. In an interview with The San Francisco Standard, Shultz said that the difficulty of conducting due diligence on AI companies makes them vulnerable to hype and fraud, echoing the mistakes that allowed Theranos to raise billions despite its broken technology.

Why AI is hard to vet

Shultz, who was a key figure in uncovering that Theranos' devices delivered faulty results to real patients, argued that investors face a unique challenge when evaluating AI startups. "A huge danger with AI is that I think it is really hard to do due diligence on it," he told the publication. "It's really hard to tell the difference between what is something truly unique and new versus like, a ChatGPT wrapper." He added, "If you want to deceive people, I think this is a great opportunity to go deceive people."

The warning comes as AI companies with little or no revenue are attracting massive valuations. Shultz pointed out that the era of "thirty-minute coffee" meetings leading to six-figure checks should be over, but the scale of investment has only grown. Theranos, he noted, essentially raised the largest angel round ever by convincing wealthy individuals to back a technology that never worked.

Lessons from the Theranos scandal

Theranos, which once reached a valuation of around $10 billion, used third-party equipment for most of its tests while claiming its own machines worked. The company's investors included prominent families like the DeVos and Waltons, and it avoided scrutiny by citing trade secrets when asked for scientific evidence. Shultz's grandfather, former U.S. Secretary of State George Shultz, was an early investor and board member.

When the fraud was uncovered in 2015, it was seen as a wake-up call for investors to prioritize due diligence. But Shultz fears those lessons are being forgotten in the rush to back AI startups. He stressed that giving large sums of money to founders grants them "tremendous power," and that investors need to recognize the risks.

Holmes' second act and the documentary

The warning coincides with the release of "You Can See Everything," a documentary about Elizabeth Holmes' final weeks before entering federal prison. The film, directed by Nathan Fielder and Lance Oppenheim, has become one of the highest-grossing documentaries of all time. It portrays Holmes as someone who elicits pity rather than being a master manipulator, a portrayal Shultz finds troubling.

Shultz noted that Holmes is already working on a new venture, Haemanthus, a diagnostics company sometimes called "Theranos 2.0," which has reportedly raised about $20 million. "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."

What this means for AI investors

Shultz's comments highlight a growing concern among tech observers that the AI boom is repeating the pattern of overhyped startups that fail to deliver. While AI has genuine potential, the opacity of machine learning models and the ease of building on top of existing tools make it difficult for outsiders to assess true innovation. For investors, the lesson from Theranos is clear: demand evidence, not just promises.

As the AI sector continues to attract record funding, Shultz's warning serves as a reminder that the same dynamics that enabled one of the biggest frauds in Silicon Valley history could be at play again. The question is whether investors will heed the cautionary tale or repeat it.