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Catch of the Week: Founders of Poop-Testing Startup uBiome Face Fraud Charges

Posted  March 24, 2021

San Francisco-based uBiome and its founders Jessica Richman and Zachary Apte claimed they were “inventing the microbiome industry” and “making products that improve people’s lives.” Once considered a Silicon Valley success story, today, uBiome is bankrupt and its founders face various federal securities fraud and related criminal conspiracy charges.

The biotech startup sold home medical tests including fecal sample kits to help diagnose patients suffering from digestive conditions. Initially a direct-to-consumer service, the company expanded to a clinical model, meaning medical professionals ordered uBiome’s tests for their patients and billed the patients’ health insurance provider. This shift allowed uBiome to bill insurers up to $3,000 per test, making the company attractive to investors. From its relatively humble beginnings, including an early crowdfunding campaign that generated $350,000, the married co-founders led the company to a nearly $600 million peak valuation in a 2018 Series C funding round.

But according to the Securities and Exchange Commission and the Department of Justice, uBiome’s supposed success was a sham, built on lies and hiding key information from investors, doctors, insurers, and even the company’s own board and top lawyer. At Richman and Apte’s direction, uBiome adopted improper billing practices to get health insurance companies to pay for tests that fell below insurer requirements and duped doctors into ordering unnecessary tests, the SEC alleges. By repeatedly representing that its clinical tests were “ordered by doctors, reimbursed by insurance,” Richman and Apte misled investors to believe the business fit within the “lucrative healthcare insurance reimbursement model,” according to the SEC’s complaint.

The “indictment illustrates that the heavily regulated healthcare industry does not lend itself to a ‘move fast and break things’ approach, but rather to an approach of compliance and accountability,” said FBI Special Agent in Charge Craig D. Fair in a Justice Department press release. uBiome failed to foster compliance and accountability, ignoring employee warnings that the company needed to meet certain insurance requirements before the tests could be approved for reimbursement, according to the SEC.

When companies turn a blind eye to employee concerns, whistleblowers have alternatives to reveal the truth. Whistleblowers play a crucial role in promoting corporate accountability, particularly at the intersection of healthcare and technology, where reporting can stop patient and investor harm. If you think you might have a case, contact our whistleblower lawyer team to learn more.

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Tagged in: Catch of the Week, Criminal Proceedings, Improper Medical Facility, Medical Billing Fraud, Securities Fraud,