SAN FRANCISCO—Federal prosecutors charged Zachary Apte and Jessica Richman for defrauding investors by lying about their company’s ability to expand clinical tests to monitor gut health and obtain reimbursements from insurers. The two are co-founders of uBiome Inc., a San Francisco biotechnology startup company founded in 2012 whose primary function is to analyze gut microbes in patients with long-term intestinal disorders. Their customers could purchase mail-in kits, complete surveys and tests from home, and get quick results online.

Richman, 46, and Apte, 36, both face over 40 criminal counts, and are accused of raising more than $76 million in fundraising from investors while misleading them about the startup’s revenue growth and reimbursement rates, the medical community’s lack of acceptance for its tests, and their reliance on a “captive” group of doctors for testing.

Prosecutors claim uBiome’s tests were not clinically validated, nor medically necessary for them to fundraise investors’ money. According to the United States Department of Justice, the defendants falsified documents and lied about and concealed material facts when insurance providers asked questions to which truthful answers would reveal the fraudulent nature of uBiome’s billing model.

uBiome filed for bankruptcy in September 2019 after the FBI raided its headquarters after the Securities and Exchange Commission sued Richman and Apte. The two filed for Chapter 7 bankruptcy as uBiome sought to liquidate its assets and pay off creditors.

The following chart was released by the U.S. Department of Justice, showing the maximum statutory penalty for each of Richman and Apte’s offenses:

Each offense committed ranges from a maximum statutory penalty of 2 to 20 years.
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