The cofounders of bankrupt poop-testing startup uBiome have been charged with fraud

[JohnLanders]

https://www.businessinsider.com/ubio...charges-2021-3


Well this reminds me of the Theranos Scandal

Jessica Richman and Zachary Apte, the cofounders of the now shuttered microbiome company uBiome, are facing criminal and civil charges stemming from their efforts to build uBiome into a poop-testing powerhouse.

The Securities and Exchange Commission alleged that Richman and Apte defrauded investors out of $60 million by giving a false impression of how well the company was doing. The married cofounders are also facing criminal charges in federal court in California. They were indicted on Thursday on charges including healthcare fraud and wire fraud, as well as related conspiracy charges.

The SEC complaint alleged Richman, 46, and Apte, 36, portrayed uBiome as receiving health-insurance reimbursements for its tests, which tested poop samples for different conditions related to gut health. The complaint alleged the cofounders made millions as uBiome raised money from investors.

"We allege that Richman and Apte touted uBiome as a successful and fast-growing biotech pioneer while hiding the fact that the company's purported success depended on deceit," Erin Schneider, the director of the SEC's San Francisco regional office, said in a statement.

uBiome is the latest Silicon Valley biotech to be accused of tricking investors. The now shuttered blood-testing company Theranos in 2018 settled with the SEC over allegations of "massive fraud." Theranos founder Elizabeth Holmes was charged with fraud and is expected to appear in court this summer.
uBiome morphed from science project to venture-backed startup
uBiome was founded in 2012 on the promise of helping ordinary people understand the bacteria living in and on them, known as their microbiome.

The company morphed from citizen science project to venture-backed startup, taking in $105 million from investors and reaching a valuation of $600 million.

Then the troubles began. The FBI raided the company in April 2019. By the end of June that year, the company's top leadership and many of its board members had departed. In October 2019, the company said it was shutting down in a Chapter 7 bankruptcy filing.

The complaints paint a detailed picture of how uBiome got health-insurance companies to cover its tests using what prosecutors say was deception.

The SEC complaint alleged the uBiome founders duped doctors into ordering tests. uBiome built out a portal that connected patients with doctors who could order the test. The complaint alleged the network of doctors was designed to get doctors to order the two medical tests uBiome offered and prescribe based only on an online question form.

How uBiome got health insurers to pay for its tests
The civil complaint also alleged the company fooled doctors into retesting old samples. The criminal complaint alleged that uBiome worked to "re-sequence" existing samples by telling consumers that there had been newer versions of uBiome's test. By doing so, the complaint alleged, uBiome could increase the number of billable claims, all while using an existing sample.

By using this network of doctors, uBiome was often able to get reimbursements from insurers.

The criminal complaint alleged uBiome tricked insurers into paying for tests that weren't medically necessary or properly vetted by medical regulators. In some cases, the company faked documents by using the names of doctors and other healthcare workers without their knowledge, prosecutors said.

But the insurers were catching on to uBiome.

According to the SEC complaint, at least 18 insurers had sent the company letters about its billing practices by April 2019. The criminal complaint alleged that Apte and Richman didn't tell investors about the questions insurers were asking.

What's more, the complaint alleged that Apte and Richman "had to falsify documents and lie to insurance providers in order to attempt to keep them at bay."

[JohnLanders]

https://www.sfgate.com/news/editorsp...d-16042042.php

A married pair of San Francisco entrepreneurs were indicted Thursday on multiple federal charges, the latest twist in the saga of a once trendy, now bankrupt fecal matter-testing startup.

Zachary Schulz Apte and Jessica Sunshine Richman, co-founders of defunct microbiome testing company uBiome, are accused of bilking their investors and health insurance providers, federal prosecutors said. They were indicted Thursday on multiple federal charges, including conspiracy to commit securities fraud, conspiracy to commit health care fraud and money laundering.

Their court appearances have not been scheduled, and it was not immediately clear if they had attorneys who could speak on their behalf.

Apte, 36, and Richman, 46, founded uBiome in 2012 as a direct-to-consumer service called “Gut Explorer.” Customers would submit a fecal sample that the company analyzed in a laboratory, comparing the consumer's microbiome to others' microbiomes, prosecutors said. The service cost less than $100 initially.

The company grew to include “clinical” tests of gut and vaginal microbiomes, which were aimed to be used by medical providers so uBiome could seek up to $3,000 in reimbursements from health insurance companies. The federal indictment states that uBiome sought upwards of $300 million in reimbursement claims from private and public health insurers between 2015 and 2019. The company was ultimately paid more than $35 million for tests that “were not validated and not medically necessary."

Apte and Richman met in San Francisco in 2012 through the California Institute for Quantitative Biosciences Garage, an incubator used by UCSF. Together, they founded uBiome and received funding from Silicon Valley investors like 8VC in San Francisco and Andreessen Horowitz in Menlo Park, which hold 22% and 10% stakes in uBiome, respectively, according to court documents.


For a time, they were the latest up-and-coming business determined to disrupt the medical testing industry. In 2018, Richman was even named an "innovator" winner in Goop's "The Greater goop Awards" and at its peak, uBiome was valued at $600 million.

Apte and Richman married in 2019, the year their startup began its death spiral. In May, the FBI raided their San Francisco offices and uBiome suspended all testing and put the pair on administrative leave. In October 2019, just a month after filing for bankruptcy, the company went into liquidation and shut down.

Much like the high-profile collapse of Elizabeth Holmes' Theranos blood-testing business, prosecutors allege Apte and Richman assured investors their medical tests were reliable when, in fact, they weren't. The couple "painted a false picture of uBiome as a rapidly growing company with a strong track record of reliable revenue through health insurance reimbursements for its tests. UBiome’s purported success in generating revenue, however, was a sham," the SEC wrote in a complaint.

The defendants are also accused of falsifying documents, lying and concealing facts about their billing model when asked by insurance providers, as well as misleading and defrauding their investors.

[JohnLanders]

Wow James Corden had no idea his parody of Theranos turned out to be real on Ubiome.