Theranos 2.0? Founders Of ‘Poop Testing’ Startup Indicted In $60 Million Fraud Scheme
The founders of a now-bankrupt San Francisco startup that analyzed fecal samples to compare consumers’ gut microbiomes have been indicted on multiple federal charges, including conspiracy to commit securities fraud, health care fraud, and money laundering after allegedly bilking investors and health insurance providers, according to federal prosecutors.
Zachary Schulz Apte, 36, and Jessica Sunshine Richman, 46, co-founded uBiome in 2012, offering a direct-to-consumer service called “Gut Explorer,” according to SFGate. The service initially cost less than $100.
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.” -SFGate
After meeting in 2012 through the California Institute for Quantitative Biosciences Garage, a UCSF-affiliated incubator, Apte and Richman founded uBiome and received funding from Silicon Valley investors, including 8VC in San Francisco and Andreessen Horowitz, which hold 22% and 10% stakes in uBiome respectively.
The pair’s endeavor generated quite the buzz for a time – with Richman even being named “innovator” winner in Goop’s “The Greater goop Awards” as uBiome’s valuation topped $600 million.
In 2019, right as uBiome began its ‘death spiral,’ Apte and Richman were married (and can’t testify against each other). In May, the FBI raided their offices in San Francisco – leading to the company suspending all testing and putting the pair on administrative leave. Just one month after filing for bankruptcy in September of that year, uBiome 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.
Apte annd Richman are also accused of falsifying documents, concealing facts about their billing model, and lying when asked by insurance providers – as well as defrauding investors.
Mon, 03/22/2021 – 20:40