Two married businessmen from San Francisco were indicted on Thursday on several federal charges, the latest twist in the saga of a failed and modern faecal testing startup.
Zachary Schulz Apte and Jessica Sunshine Richman, co-founders of the now extinct microbiome testing company uBiome, are accused of deceiving their investors and health insurance providers, federal prosecutors said. They were indicted on Thursday on several federal charges, including conspiracy to commit securities fraud, conspiracy to commit fraud in the healthcare system and money laundering.
Their court appearances were not scheduled and it was not immediately clear whether they had lawyers who could speak on their behalf.
Apte, 36, and Richman, 46, founded uBiome in 2012 as a direct consumer service called “Gut Explorer”. Customers would send a fecal sample that the company analyzed in a laboratory, comparing the consumer’s microbiome with that of others, prosecutors said. The service initially cost less than $ 100.
The company grew to include “clinical” testing of intestinal and vaginal microbiomes, which should be used by medical providers so that uBiome could seek up to $ 3,000 in reimbursements from health insurers. The federal prosecution claims that uBiome requested more than $ 300 million in claims for reimbursement from public and private health insurers between 2015 and 2019. The company ended up receiving more than $ 35 million for tests that “were neither validated nor 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, such as 8VC in San Francisco and Andreessen Horowitz in Menlo Park, which hold 22% and 10% of the stakes in uBiome, respectively, according to court documents.
For a time, they were the most recent and promising businesses determined to destabilize the medical examination industry. In 2018, Richman was even named an “innovative” winner at Goop’s “The Greater goop Awards” and, at its peak, uBiome was valued at $ 600 million.
Apte and Richman were married in 2019, the year their startup started its death spiral. In May, the FBI raided its San Francisco offices and uBiome suspended all tests and placed both on administrative leave. In October 2019, just a month after filing for bankruptcy, the company went into liquidation and closed.
Much like Elizabeth Holmes’ high-profile collapse of the Theranos blood test business, prosecutors claim that Apte and Richman assured investors that their medical tests were reliable when, in fact, they were not. The couple “painted a false image of uBiome as a fast-growing company with a strong track record of reliable revenue through health insurance reimbursements for its tests. UBiome’s alleged success in generating revenue, however, was a scam”, wrote the SEC in a complaint.
Defendants are also accused of falsifying documents, lying and hiding facts about their billing model when questioned by insurers, as well as deceiving and defrauding their investors.
The Associated Press contributed to this report.