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.
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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.
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archived 21 Mar 2021 21:43:52 UTC
