- The SEC has charged uBiome cofounders Jessica Richman and Zachary Apte with fraud.
- Richman and Apte also face criminal charges related to poop-testing startup uBiome.
- uBiome was a microbiome testing startup that shut down in 2019 after an FBI raid.
- See more stories on Insider’s business page.
The US Securities and Exchange Commission has charged Jessica Richman and Zachary Apte, the cofounders of now-shuttered microbiome testing company uBiome, with fraud.
The SEC alleges that Richman and Apte defrauded investors out of $60 million by giving a false impression of how well the company was doing.
Apte and Richman are also facing criminal charges in federal court in California. They were indicted on Thursday on nine counts, including healthcare fraud and wire fraud, as well as related conspiracy charges.
The SEC complaint alleges that Richman and Apte was portrayed uBiome as receiving health insurance reimbursements for its tests, which tested poop samples for different conditions related to gut health. The complaint alleges 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, director of the SEC’s San Francisco Regional Office, said in a statement.
The Silicon Valley 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.
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 alleges that the uBiome founders duped doctors into ordering tests. To do that, uBiome built out a portal that connected patients with doctors who could order the test. The complaint alleges the network of doctors was designed to get doctors to order the two medical tests uBiome offered, prescribing based only on an online question form. The complaint also alleges the company fooled doctors into retesting old samples.
By using this network of doctors, uBiome was often able to get reimbursements from insurers.
According to the criminal complaint, 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.
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