After several high-profile hiccups a few years ago, which included an FBI operation and ultimately led to a bankruptcy filing, uBiome saw its founders facing more problems on Thursday: securities fraud.
Jessica RichmanThe SEC accused Jessica Richman and Zachary Apte, the co-founders of the uBiome poop test startup, of defrauding investors by $ 60 million through misleading statements and misrepresentations of the company’s prospects. According to the SEC’s complaint, the charges stem from a 2018 Series C round evaluating the company that once appointed former Novartis CEO Joe Jimenez to its board for nearly $ 600 million.
Regulators have submitted their lawsuit to the federal court in San Francisco and are trying to prevent Richman and Apte from serving in future director and director positions. Thursday’s indictment describes Richman and Apte as fugitives, on the one hand. Wall Street Journal report.
Zac ApteFounded in 2012, uBiome came on the scene with the promise of crowdsourcing the sequencing and mapping of the human microbiome – the bacterial ecosystem within the gut that, according to some scientists, has far-reaching impacts on health. The company introduced itself as the next 23andMe, offering to analyze stool samples and return health-related advice.
It was an idea that captured the imagination of Silicon Valley in the early 2010s. When Indiegogo’s funding page ended in February 2013, uBiome had raised more than $ 350,000. The company has also recruited several notable scientists over the years, including geneticist George Church for its scientific advisory board.
UBiome ended up expanding its products to include vaginal health and STDs that women face. And to ostensibly reinforce a drug R&D plan, the company added Jimenez to its board in 2018, despite a scandal in which Jimenez paid former President Donald Trump’s personal lawyer, Michael Cohen, a $ 1.2 contract. million.
But the house of cards started to crumble when some researchers raised the alarm that the science behind the company was meaningless. They said that, as when 23andMe started, there was simply not enough research into the microbiome to offer comprehensive health advice based on a stool sample. 23andMe, after facing its own criticism, finally obtained FDA approval for several of its services.
Then, in early 2019, uBiome cut 55 jobs from its workforce of 300 people. This was quickly followed by reports that April of an impending FBI investigation into uBiome’s business practices, which culminated in an invasion of its offices. Authorities were concerned that the startup was supposed to persuade doctors to pass its tests with little supervision and overcharged customers.
The SEC brought these concerns to light in its complaint. Regulators say that in order to generate revenue, Richman and Apte instructed uBiome to trick doctors into ordering unnecessary tests and, despite several warnings from employees and their general counsel, ignored the need for the tests to meet certain insurer requirements. of health.
Defendants ignored these notices and adopted and approved a number of improper billing practices that they knew, or were reckless in not knowing, fell below the insurer’s requirements and thus, once discovered, would lead insurers to reject claims for reimbursement for clinical trials. from uBiome. Defendants engaged in deceptive acts to conceal facts pertaining to uBiome’s practices from the company’s general board, the uBiome board, prescribing doctors and insurers.
After the investigation was made public, Richman and Apte left the company to make room for a new management team. In September of that year, uBiome filed for Chapter 11 bankruptcy, switching to Chapter 7 settlement a month later, in order to sell its data and IP.