Agreed. Also there are typically legal repercussions for misrepresenting your business that are outlined in deal terms.

Those are usually covered under "reps and warranties". From what I understand, even if you do "lie" (no one really lies, they just bend the truth...if you do legitimately lie, it's fraud and it's a big deal) there's basically insurance against it (formerly called "representations and warranties"). No VC I know of ever purchases it, but PE do from time to time.

Exactly. If things go south, legal can uncover and if lies were presented then things can turn criminal as theranos now knows.

But that will not recover your investment.

It can depending on how much capital or assets are still around.

Jail is also a pretty decent incentive to make people avoid overtly lying. Unfortunately its disproportional used on the poor and minorities instead of on professionals.

What is the cost for something like that? Any way you can give an idea w/o giving away specifics you don't want to disclose?

Typically there is technology, legal, and financial diligence. Each costing anywhere between $30-100k each.

Wow. How?