The co-founders of fecal testing startup uBiome are having a crappy month. On March 18, 2021, they were indicted in a California federal court on charges of healthcare fraud, wire fraud, and related conspiracy charges. And now the Securities and Exchange Commission is suing them for fraud, too.
The SEC alleges that uBiome co-founders Jessica Richman and Zachary Apte defrauded investors out of $60 million by portraying uBiome as a successful business, and that they got rich while the investors lost their money.
“Richman and Apte touted uBiome as a successful and fast-growing biotech pioneer while hiding the fact that the company’s purported success depended on deceit,” said Erin Schneider, the director of the SEC’s San Francisco regional office, in a statement.
The SEC alleges that Apte and Richman duped doctors into ordering tests by building out a portal that connected patients with doctors who could order uBiome’s test. Supposedly the network was designed to get doctors to order uBiome’s test and prescribe them based not on an office or telehealth visit with a healthcare provider but merely on an online question form.
The civil complaint also said the company conned doctors into retesting old samples.
The criminal complaint goes farther, alleging that uBiome “re-sequenced” existing samples by telling consumers that there were newer versions of the test that could provide more information. It also alleges that uBiome tricked insurers into paying for tests that were neither medically necessary nor properly examined by medical regulators.
Insurers were onto uBiome’s game, though. By April 2019, the month the FBI raided uBiome’s headquarters, at least 18 insurers had sent the company letters with complaints about its billing practices. The criminal complaint alleges that Apte and Richman didn’t tell investors about the fact that insurance companies were questioning their practices.
Apte and Richman “had to falsify documents and lie to insurance providers in an attempt to keep them at bay,” the criminal complaint alleges.
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