- General
- March 19, 2021
- 7 minutes read
Founders Of Bankrupt Biotech Startup uBiome Indicted For Fraud
The two founders of uBiome, a San Francisco lab testing startup that drew much attention in its heyday but was…
The two founders of uBiome, a San Francisco lab testing startup that drew much attention in its heyday but was later crippled with bankruptcy, have been indicted for healthcare and securities fraud among other offenses by a federal grand jury in San Francisco, opening up a serious legal case that sees both founders facing numerous years of jail time.
Jessica Richman and Zachary Apte by name were the founders of uBiome, a startup that sold convenient tests for the microbiome, the community of microorganisms residing in the digestive tract and other parts of the body.
In its heyday, uBiome was a high-profile startup flush with tens of millions of dollars in venture capital funding from investors including Y Combinator and Andreessen Horowitz. Its fortunes though began winding down after FBI agents raided the startup’s San Francisco office in an investigation over possible insurance fraud.
- Jessica Richman and Zac Apte have been indicted for multiple crimes including conspiracy to commit health care fraud with accusations of defrauding health insurance providers with billings of over $35 million.
- Richman and Apte allegedly led uBiome to submit fraudulent reimbursement claims to insurance companies for its test kits with actions including manipulating dates, lying about the validity of its tests, and using the identity of some doctors and health care providers without their knowledge to claim authenticity for its tests.
- uBiome is alleged to have submitted over $300 million in reimbursement claims to both private and public health insurers and received over $35 million of payments from that.
- For the part of securities fraud, uBiome’s founders allegedly misled investors with false information about the success of its business model in terms of revenues and reimbursement rates and the validity of its tests in the medical community. They allegedly netted more than $12 million by selling their personal stock to investors as part of uBiome’s Series B and Series C fundraising rounds.
- Other charges uBiome’s founders were indicted with include money laundering and aggravated identity theft and aiding and abetting. The legal case against them is being prosecuted by the Special Prosecutions Section of the U.S. Attorney’s Office for the Northern District of California.
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| Jessica Richman. Photo credit: Fortunebrainstormhealth, licensed under CC BY-NC-ND 2.0 |
Getting indicted for fraud is a climax of troubles for uBiome’s founders after seeing their biotech startup go bankrupt. It’s an apparent huge fall from grace from running a once high-profile startup now to facing possible years of imprisonment.
uBiome’s fraud case feels similar to that of another famed biotech startup named Theranos, which seriously set the bar for biotech startup fraud after raising over $700 million from investors on the backs of fraudulent claims. Similarly, Theranos’s two top executives, Sunny Balwani and founder Elizabeth Holmes are facing charges of fraud in the court of law.
Holmes’s trial for the Theranos case was just recently delayed to August even after previous delays following surprise news of pregnancy due for birth by July.
