Re: [DIYbio] UBiome co-founders charged with fraud by SEC

https://www.sfgate.com/news/editorspicks/article/ubiome-richman-apte-sec-filing-charges-fraud-16042042.php

Here is more

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.

On Saturday, March 20, 2021 at 4:18:00 PM UTC-7 Dakota Hamill wrote:

Yeah I just wish I had my microbiome data from them I got years ago as
an old control. Crazy to me how big a company can get before obvious
fraud is found.

On Sat, Mar 20, 2021 at 2:01 AM Biology Discussions
<discussio...@gmail.com> wrote:
>
> Get Ready for Theranos the Sequel
>
> https://www.fiercebiotech.com/medtech/ubiome-co-founders-charged-fraud-by-sec
>
> The founders of microbiome-testing startup uBiome have been charged with defrauding investors out of $60 million by convincing them it was a successful business before being forced to shutter operations, declare bankruptcy and flush all its assets in late 2019, according to the Securities and Exchange Commission (SEC).
>
> The federal watchdog agency charged Jessica Richman and Zachary Apte with "painting a false picture of uBiome as a rapidly growing company," including that it had established health insurance reimbursements for its clinical tests, designed to diagnose diseases by screening the microorganisms found in fecal samples.
>
> Instead, the SEC's complaint claims uBiome's revenue relied on "duping doctors into ordering unnecessary tests and other improper practices," the agency said in its announcement of the filings.
>
> "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," said Erin Schneider, director of the SEC's San Francisco regional office.
>
>
> "Investors are entitled to know the material risks of the companies they are investing in, no matter how transformative those companies claim to be," Schneider said.
>
> According to the complaint (PDF), filed in San Francisco federal court, the pair of co-CEOs directed employees to provide insurers with backdated medical records when seeking reimbursements—before ultimately having to suspend the company's entire medical testing business.
>
> At the same time, Richman and Apte made millions by selling their own uBiome shares during fundraising, according to the SEC, which is seeking court orders requiring them to return their gains and pay civil penalties.
>
> Before spiraling over the course of 2019, uBiome raised $83 million—and tapped former Novartis CEO Joe Jimenez for its board—amid promises that it planned to spin its tests into the development of its own line of therapeutics.
>
>
> But by the middle of the next year, uBiome had laid off at least half of its staff—including the laboratory leaders and key personnel necessary to fulfill its promise of offering at-home, direct-to-consumer sequencing tests for wellness, food and lifestyle choices.
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> That year, the company also put its physician-ordered tests, focusing on the gut and women's health, on indefinite hiatus following an FBI raid of its San Francisco headquarters.
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> Shortly thereafter, Richman and Apte went on administrative leave while John Rakow, the company's general counsel, would serve as interim CEO for about two months before being replaced by a firm brought in by uBiome's board of directors to review the company's operations.
>
> By early October, almost one year exactly after the $83 million round, uBiome announced it would cease operations entirely.
>
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