The San Francisco-based biotechnology uBiome Co-Founder has been charged by the US Securities and Exchange Commission and indicted by a federal grand jury for allegedly defrauding investors out of $60 million.
According to the report by the US Securities and Exchange Commission, the company falsely portrayed itself as a successful startup with a strong track record of receiving health insurance reimbursement for its clinical tests which could analyze the DNA of their own microbiomes from fecal samples.
The company uBiome filed for bankruptcy in September 2019, about four months after the FBI began investing its billing practices. Among its creditors were high-profile venture capital firms 8VC and Andreessen Horowitz.
The former chief executives are Jessica Richman and Zachary Apte face charges of securities fraud and healthcare fraud that could send them to prison for 20 years, along with a suit by the U.S. Securities and Exchange Commission. The case shows the criminal charges pending against Theranos inc which was founded by Elizabeth Holmes and her one-time boyfriend and former President Ramesh Balwani.
The prosecutor said that both sets of defendants are charged with telling investors their companies could perform reliable medical tests when they couldn’t. The alleged fraud at Theranos was on a much grander scale: Richman and Apte’s startup was valued at $600 million in one series of fundraising, compared with $9 billion for Theranos.
The company founders depended on the scheme from 2015 to 2019 to sell uBiome stock and debt to pay for operations and enrich themselves. The accusation describes a series of investment rounds by various funds not identified by name.