Founders of Bankrupt Startup UBiome Indicted in Fraud Case Innovation

The former co-chief executives of bankrupt lab-testing startup uBiome Inc. were charged with healthcare and securities fraud among other offenses, in an indictment handed up by a federal grand jury in San Francisco.

Jessica Richman and Zac Apte were founders of San Francisco-based uBiome, once a high-profile startup selling tests for the microbiome, the community of microorganisms that live in the digestive tract and other parts of the body.

The two former executives and the attorneys representing them couldn’t be reached for comment.

In April 2019, uBiome’s offices were searched by the Federal Bureau of Investigation as the company came under scrutiny over billing practices related to its lab tests. Soon after, Drs. Richman and Apte went on leave as co-chief executives, and they later stepped down from the board.

UBiome filed for bankruptcy protection in September 2019, and its intellectual property and other assets were later sold off.

In a 33-page indictment Thursday, federal authorities alleged that uBiome had filed fraudulent reimbursement claims with insurers for lab tests that weren’t validated and weren’t necessary for patients, including some that involved retesting of old samples. The former startup also waived patients’ out-of-pocket charges, the indictment alleged.

The indictment alleged that Drs. Richman and Apte are currently fugitives. The maximum penalties tied to all of the charges could result in decades of prison time.

When insurers questioned the claims, uBiome submitted fake chart notes purportedly from doctors to justify the tests, the indictment alleged.

The two former executives were also charged with deceiving investors by concealing the insurers’ pushback about the billings and exaggerating the revenue they got from insurers. In all, uBiome submitted more than $300 million in claims to insurers between 2015 and 2019, and was paid more than $35 million, according to the indictment.

The indictment alleged that investors put more than $64 million into uBiome stock during two fundraising rounds, and that the two executives sold investors more than $12 million of their personal shares.

Write to Anna Wilde Mathews at [email protected]

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