San Francisco Poop-Testing Startup Charged With Fraud, Likened To Theranos

A married couple who promised to disrupt the health care industry and received millions without having to prove success has been charged with multiple federal crimes, including fraud.

Zachary Schulz Apte and Jessica Sunshine Richman met in 2012 at a tech incubator used by the University of California-San Francisco. There, the couple founded uBiome, a direct-to-consumer service they called “Gut Explorer” that would analyze fecal samples sent by customers, SFGate reported. Consumers were promised that they would learn about their microbiomes – the micro-organisms that live in and on every human being – and be better able to understand health issues surrounding their digestive systems, such as irritable bowel syndrome. The Company said its other test, SmartGut, would be able to tell consumers which micro-organisms within them were causing their digestive issues.

Within years, the uBiome added a new test, SmartJane, which analyzed vaginal samples and claimed it could screen for HPV, sexually transmitted infections (STIs), and overall vaginal health.

Like defunct company Theranos, uBiome received praise and funding based on promises and unproven science, raising $350,000 in an initial crowdfund and later receiving funding from major Silicon Valley investors 8VC and Andreessen Horowitz, SFGate reported.

The couple married in 2019, which the outlet noted was also the year their startup began to unravel. Prior to this, uBiome was considered the latest trendy startup, with Richman receiving an award from Gwyneth Paltrow’s company, Goop. The company was once valued at $600 million.

In May 2019, CNBC reported that the FBI raided uBiome’s offices, prompting the company to suspend its SmartGut and SmartJane tests. As the outlet reported, customers’ insurance companies were billed numerous times for the same tests. One customer told the outlet that he sent in two samples, which were billed to his insurance company a whopping five times.

That’s part of the scheme the couple was charged with last week. They would bill insurance companies for reimbursements for their medical testing, sending multiple reimbursement claims for the same tests. As SFGate reported, uBiome “sought upwards of $300 million in reimbursement claims from private and public health insurers between 2015 and 2019.” They company received $35 million in reimbursements for tests prosecutors said “were not validated and not medically necessary.”

“Much like the high-profile collapse of Elizabeth Holmes’ Theranos blood-testing business, prosecutors allege Apte and Richman assured investors their medical tests were reliable when, in fact, they weren’t,” SFGate reported. In its complaint, the U.S. Securities and Exchange Commission said the couple “painted a false picture of uBiome as a rapidly growing company with a strong track record of reliable revenue through health insurance reimbursements for its tests. UBiome’s purported success in generating revenue, however, was a sham.”

Apte and Richman were indicted last Thursday “on multiple federal charges, including conspiracy to commit securities fraud, conspiracy to commit health care fraud and money laundering,” SFGate reported. In addition, the outlet reported, they “are also accused of falsifying documents, lying and concealing facts about their billing model when asked by insurance providers, as well as misleading and defrauding their investors.”

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