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Startup Sold DNA Kits to test poop. Prosecutors say it is a fraud

(Bloomberg) – The founders of medical testing company uBiome Inc. criminally charged for $ 60 million fraud in an alleged scheme that reads as a smaller version, with a lower profile of the shocking fall of Theranos Inc.Offering products that allowed consumers and patients to examine the DNA of their own microorganisms from fecal samples, uBiome filed for a breach in September 2019, about four months after the FBI began deploying its billing practices. Creditors included high-profile venture capital firms 8VC and Andreessen Horowitz.Now, its senior executives, Jessica Richman, 46, and Zachary Apte, 36, are against allegations of securities fraud and health care fraud. they could be jailed for 20 years, along with a suit from the U.S. Securities and Exchange Commission. The cases are a replica of the pending criminal charges against Theranos Inc. founder Elizabeth Holmes and his former girlfriend and former Theranos President Ramesh “Sunny” Balwani. There is one important difference: While Holmes and Balwani are going to court to defend themselves, prosecutors say Richman and Apte are refugees. ”The first federal court of defense was not still registered, ”the U.S. attorney’s office in San Francisco said in a statement Thursday.Like Holmes and Balwani, Richman and Apte worked closely together and were romantically involved – forcing them to marry in 2019 , according to the SEC. In other parallels, both sets of defenders rely on telling investors that their companies could perform reliable medical tests when they could not, according to prosecutors. Unfortunately, however, the fraud alleged at Theranos was at a much sharper level: Richman and Apte started a $ 600 million startup in a single series of fundraisers, compared to $ 9 billion for Theranos at peak. Elizabeth Holmes and TheranosRichman and Apte paint Rise and Fall “a false picture of uBiome as a fast-growing company with a strong history of reliable income through health insurance reimbursement for its trials,” the SEC said in his complaint. However, uBiome’s proven success in generating revenue was a complaint. ” Initially, uBiome’s “Gut Explorer” test was offered to make a genetic sequence from fecal samples and its marketing as a way to better understand what was going on in a person’s gut. , according to the sentence. By 2014, Richman and Apte concluded that the company could not generate enough revenue to attract venture capital investors, so they turned to clinical marketing trials that were used to make decisions. medical, according to the government.Ubiome submitted health insurance claims for its tests, eventually marketed as “SmartGut,” for private insurers that cover Medicare beneficiaries as well as health plans backed by a private sector employer, according to the sentence. In addition to other practices, health care providers and insurers deceived Richman and Apte by submitting false refund claims for test refunds, relying on a “catch-up network” of health care providers to whom they provided partial and misleading information, and manipulated service deadlines to hide uBiome’s true testing and marketing practices, prosecutors said. The company’s founders relied on the scheme from 2015 to 2019 to sell uBiome stock and debt to pay for operations and to enrich themselves, prosecutors said. The Revolution accounts for a series of investment rounds with various unidentified funds.Read More: uBiome Estate delivers 40k Covid-19 Test Tests to San Francisco 8VC-based Hospital and Menlo Park, California-based Andreessen Horowitz holds 22% and 10% stake in uBiome, respectively, court papers show.8VC led an early fundraising round, $ 17 million and participated with 10 other investment firms in a $ 83 million round, later, while Andreessen Horowitz participated in another early round, $ 4.5 million, according to market data provider PitchBook. Y Combinator, based in Mountain View, California, and Tokyo-based Dentsu Ventures are among other uBiome investors listed by PitchBook. “We are grateful to the authorities and will continue to co-operate fully with them,” 8VC said in a statement. “We cannot comment further on an ongoing issue.” Y Combinator declined to comment while Andreessen Horowitz and Dentsu Ventures did not respond to requests for comment. Richman and Apte did not tell investors to tell that insurer questions about uBiome’s billing practices known as the “Company’s overall business model,” but that the founders had to “empty documents and give lies. to insurance providers to try to keep them away, ”according to the sentence. Richard and Apte could not be found for comments. Speakers for the U.S. attorney’s office and the FBI’s San Francisco office did not immediately respond to requests for comment. The U.S. criminal case is v. Apte, 21-cr-0116, U.S. District Court, Northern California (San Francisco) (Earlier version of this story corrected involvement with 8VC and Andreessen Horowitz in fundraising) For more articles like this , visit us at bloomberg.comSubscribe now to stay on top with the most trusted business news source. © 2021 Bloomberg LP