It’s like Theranos, except with poop. Or at least that’s one way of looking at it.
The founders and co-CEOs of uBiome, a now-bankrupt fecal testing company were indicted yesterday on federal fraud charges and sued by the U.S. Securities and Exchange Commission over claims that they scammed insurers and venture capital investors by making it appear their products were covered.
Jessica Richman, 46, and Zachary Apte, 36, who married in 2019, are facing a combined 47 criminal charges in San Francisco federal court, including health care fraud, wire fraud, fraud in connection with the purchase and sale of securities, related conspiracy charges, and aggravated identify theft. If convicted, the two each face as long as 22 years in prison and the forfeiture of adjoining condominiums in Miami Beach, among other penalties.
They are accused of engaging in an extensive scheme, from late 2015 through early 2019, to “make it appear to investors that health care providers’ orders for uBiome’s clinical tests were routinely reimbursed by health insurance providers,” and that the reimbursements were increasingly on a monthly basis, according to the indictment.
When it was first founded in October 2012, uBiome attempted to sell its “microbiome” testing, comparing a customer’s gut bacteria to that of other fecal samples, for less than $100 each, according to prosecutors. But Rich and Apte quickly found they could not bring enough enough revenue to attract venture capital financing that way. Later, they remarketed their test as “SmartGut” for clinical purposes, billing insurers up to about $3,000 per test, the government alleged.
The company also marketed a vaginal microbiome test it called “SmartJane,” and similarly made it appear as though it was eligible for insurance reimbursement, according to the indictment. Tests were intended to help diagnose inflammatory bowel disease, ulcerative colitis and STDs.
All told, uBiome submitted $300 million worth of claims to insurers including Anthem Blue Cross, and was paid more than $35 million, according to prosecutors. Investors meanwhile sank $64 million into the company, allowing Richman and Apte to cash out of $12 million worth of their stock, the government said.
The SEC lawsuit, filed the same day, seeks civil penalties over much the same allegations.
Richman first raised eyebrows in September 2014 when she was included in a Business Insider “30 Most Important Women Under 30 In Tech” list. Then she raised eyebrows higher when it was discovered she was 40 at the time the article was written and had lied to get on the list. According to Business Insider, she also lied about her age to CNN to get on a similar list.
The startup founders made sure investors saw one of those articles, according to prosecutors.
uBiome filed for bankruptcy protection and liquidated in 2019 after an ill-fated attempt to pivot into drug development and a raid by the FBI on its headquarters.
The story in some ways resembles the downfall of Theranos, the supposedly miracle blood testing company founded by Elizabeth Holmes. Holmes awaits trial on charges that she defrauded investors out of hundreds of millions of dollars, as well as lied to patients and doctors, but claiming that her company’s devices could conduct a full battery of tests with just a few blood drops.
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