They sold medical diagnostics that did nothing. They did this knowing that they did nothing.

In a way, it's worse than the ads on the internet promising to cure cancer with nettles and probiotics and yoga. Online ad scammers can plead ignorance that what they sell isn't actually useful, and I'm sure there're legal disclaimers in fine print saying the products are sold purely for entertainment. Theranos, on the other hand...

IIRC, the securities fraud is based on them claiming to perform tests that were actually performed on standard blood test equipment made by Seimens, as well as claiming to perform more diagnostics than they actually could.

The whistleblowing is based on the data 'grooming' that their machines did, which made it look like the machines were more accurate than they actually were. Tyler Shultz brought up his concerns and was rebuked, and then went to the WSJ.

The basic idea is that their machines didn't actually work.

It's a blood testing company that has been shady about its methodology and results. Does is really take an ELI5 to see how it could end being harmful to people.

They sold a new type of blood test. Turns out the company was making false claims about their blood tests so the entire company ended up being one big sham.