Yeah. The person that's constantly bragging about fantasy stuff or reflexively claiming nothing was ever their fault might warrant cutting off because they're tiresome, but they're not likely to undermine you never mind pull off this level of scam because they're so unconvincing, and that might make them more harmlessly amusing than anything else. The manipulative person who's constant spreading false rumours might raise red flags, and definitely isn't someone you want to spend time with once you've spotted that some of their claims simply don't line up. But a large part of why people are often good at covering stuff up even if its the most heinous shit is that they manage to be plausible and likeable most of the time and generally tell the truth on other subjects.

Holmes likely fell into that category, though she didn't exactly downplay her lies in the way someone covering their deep dark secret usually does.

And yeah, in practice whether you cut someone off after learning their deep dark secret probably depends a lot on what it is and how it relates to you (and usually it's more "I'm hiding my affair" than "my billion dollar enterprise supplies fraudulent medical tests")