The co-founders of San Francisco-based biotechnology startup uBiome were indicted March 18 in connection to alleged schemes to cheat insurers and investors in their now bankrupt business that analyzed lab tests monitoring gut health.
Seven things to know:
1. Zachary Schulz Apte and Jessica Sunshine Richman were charged by a federal grand jury March 18 with multiple federal crimes, including conspiracy to commit securities fraud and conspiracy to commit healthcare fraud.
2. Mr. Apte and Ms. Richman were also charged with money laundering and related offenses tied to raising capital for their microbiome testing company. The SEC said uBiome defrauded investors out of $60 million, according to a U.S. Justice Department news release.
3. Founded in 2012, uBiome initially offered a direct-to-consumer service that let customers submit a fecal sample that the company would analyze in its lab and create a report comparing the customer's microbiome to the microbiomes of others who submitted samples. The service cost less than $100, according to the Justice Department.
4. Mr. Apte and Ms. Richman later expanded uBiome's business model to include development and marketing of "clinical" tests for gut and vaginal microbiomes.The company claimed the tests would be used by medical professionals to make care decisions. UBiome then would seek reimbursement from insurers in amounts up to $3,000, the Justice Department claimed.
5. Prosecutors said many of uBiome's tests were not clinically validated or medically necessary and that the company ran the fraud scheme from late 2015 through early 2019.
6. The company filed for Chapter 11 bankruptcy in September 2019 and suspended clinical operations earlier that year after being raided by the FBI over allegations that uBiome was billing customers multiple times without their consent.
7. Acting U.S. Attorney Stephanie Hinds referred to the charges as "a cautionary tale about the importance of robust programs rather than lip service," and highlighted the importance of companies being honest with investors.