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Only Elizabeth Holmes knew it all at once-lauded Theranos: VF's Nick Bilton

A culture of secrecy at embattled blood-testing start-up Theranos was fostered by founder and CEO Elizabeth Holmes, and when things unraveled at the onetime darling of Silicon Valley, it was a like peeling the layers of an onion, said Nick Bilton, special correspondent for Vanity Fair.

In reporting his story, "How Elizabeth Holmes's House of Cards came Tumbling Down," Bilton said his "mouth was agape" with every person he spoke to about what led to the fall of Theranos. At one point, the company had been valued at more than $9 billion, making the 32-year-old Holmes the world's youngest female billionaire.

It was "one layer of an onion, after another, after another, after another," Bilton said Tuesday on CNBC's "Squawk Alley."

Amid questions the tests don't work as advertised, Theranos faces a criminal investigation into whether it misled investors and inquiries from multiple federal agencies.

Theranos has also voided two years of results from its proprietary Edison machines, which the company claims are able to perform a range of sophisticated screenings with just a few drops of blood.

"The government is looking at this as a cautionary tale," Bilton said. The Theranos story could send "real shockwaves through the Valley," if it were determined that Holmes misled investors, the reporter said.

Bilton describes in his article how Holmes and her closest advisors were holed up for two days, trying to figure out how to deal with the fallout from The Wall Street Journal investigation into whether the Theranos technology returned accurate results.

As part of that effort, Holmes went on CNBC's "Mad Money" in September 2015. She told Jim Cramer at the time: "This is what happens when you work to change things. First they think you're crazy, then they fight you, and then, all of a sudden, you change the world."

The "change the world" theme and Holmes herself, a female entrepreneur, were an attractive narrative to the deep-pocketed Silicon Valley venture capitalists who want to be seen as helping society rather than just trying to get rich, Bilton said.

Palo Alto, California-based Theranos traces its roots to 2003, when the then-19-year-old Holmes founded the company. She dropped out of Stanford University a year later.

Theranos did not immediately available to respond to CNBC's request for comment.

To read the full Vanity Fair report, click here.

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