He has not agreed to a settlement, so the charges against him will be litigated in federal court. The Department of Justice is also investigating the matter - but that's a separate case.
The SEC said: "In truth".
Elizabeth Holmes declined to comment through her attorney.
The company said it could run dozens of diagnostic tests using a single drop of blood, an advance that could have upended a medical diagnostics market worth billions of dollars.
Theranos' reputation was inflated over the years with the help of some profile figures, including former secretary of states, Henry Kissinger and George Schultz, former secretary of defense William Perry, and senators Bill Frist and Sam Nunn - all were once board members.
Behind the scenes, things were very different. She also will return about 18.9 million shares she obtained during the fraud.
"Sunny Balwani accurately represented Theranos to investors to the best of his ability", Coopersmith said in a statement. The SEC refers to the pharmacy chain as "Pharmacy A".
- June, 2016: Drug chain Walgreens, which had Theranos centers at 40 locations, pulls out of its three year partnership with the company. The companies eventually settled.
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After the end of her freshman year, Holmes worked for a time at the Genome Institute Lab in Singapore to help develop systems to detect the Sars virus.
Holmes's fall from grace began way back in 2015 with a bombshell piece in The Wall Street Journal by reporter John Carreyrou. Regulators subsequently raised serious concerns about the accuracy of testing that Theranos did conduct with its machines, and the company eventually retracted two years of blood tests.
"Investors are entitled to nothing less than complete truth and candour from companies and their executives", SEC Enforcement Division co-director Steven Peikin said.
"Holmes knew that Theranos had no active discussions with pharmaceutical companies, had partnered with only a handful of hospitals, and had no knowledge of any contracts between Theranos and physicians' offices", the SEC states.
The SEC also alleges that Theranos, Holmes and Balwani claimed that their products were being used by the Department of Defense on the battlefield in Afghanistan and on medevac helicopters. The commission said it planned to pursue its claims against Balwani in Federal District Court for the Northern District of California.
The SEC investigation has been underway since 2016, and it's not the only one. Theranos and Holmes neither admitted nor denied wrongdoing. In 2016 the Centres for Medicare and Medicaid Services, which oversees blood-testing labs in the USA, banned Ms Holmes from operating a lab and revoked Theranos' blood-testing license.
Holmes met with investors, explaining her fear of needles and her vision for fast, cheap blood testing. The company has been on life support ever since, and is rumoured to be close to bankruptcy.
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