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Media allowed Theranos to perpetrate a ‘scam’: Sam Waksal

Three years ago, a reporter asked Kadmon Corporation founder Samuel Waksal his opinion on embattled diagnostic start-up Theranos. Recalling the moment on Friday during a "Squawk Box" interview, Waksal said he responded candidly.

"It's a scam," he told the reporter, citing Theranos' refusal to disclose information about its core Edison technology.

In response, the reporter told him he didn't want to believe that was true because Theranos — a potentially transformative start-up led by a woman who dropped out of college — had such a great story.

Waksal told CNBC that thinking was emblematic of the way the media treated Theranos founder Elizabeth Holmes, who claimed her company could conduct a "full range" of medical tests with just a few drops of blood, in the process creating savings for patients and health-care operators alike.

Now, Theranos faces a criminal investigation into whether it misled investors, and inquiries from multiple federal agencies. It has voided two years' worth of results from its Edison machines, and this week, Walgreens ended its relationship with Theranos.

Those developments followed an expose in The Wall Street Journal that put forward evidence the company was not actually conducting many tests on the Edison machines because they were unreliable.

Waksal is himself a notorious figure in the pharma world. The former CEO of biotech firm ImClone was convicted of insider trading in 2003, spent five years in prison and was barred for life from serving as an officer or director of a publicly traded company. Martha Stewart also served jail time for trading on inside information of ImClone.

Waksal said he was skeptical of Theranos' claims from the beginning.

"When you ask someone about science, and they tell you it's a secret, one should run the other way," he said. "In science … even if we leave out minute details, we talk about what science is all about."

For example, Theranos could have explained how it was dealing with DNA to deliver multiple results from a small amount of blood, he said.

Theranos' fall from grace has damaged the pharmaceutical industry, which is often painted with broad strokes, Waksal said.

Earlier this month, Theranos board member and former Wells Fargo CEO Dick Kovacevich told "Squawk Box" he still believes in Theranos' technology. Theranos did not immediately respond to a request for comment.