(Bloomberg) — The founders of medical testing firm uBiome Inc. have been criminally charged with a $60 million fraud in an alleged scheme that reads like a smaller-scale, lower-profile model of the spectacular collapse of Theranos Inc.Providing merchandise that allowed customers and sufferers to investigate the DNA of their very own microbiomes from fecal samples, uBiome filed for chapter in September 2019, about 4 months after the FBI started investing its billing practices. Amongst its collectors have been high-profile enterprise capital companies 8VC and Andreessen Horowitz.Now, its former chief executives, Jessica Richman, 46, and Zachary Apte, 36, face expenses of securities fraud and health-care fraud that might ship them to jail for 20 years, together with a go well with by the U.S. Securities and Change Fee.The instances echo the prison expenses pending in opposition to Theranos Inc. founder Elizabeth Holmes and her onetime boyfriend and former Theranos President Ramesh “Sunny” Balwani.There’s one necessary distinction: Whereas Holmes and Balwani are heading to trial to defend themselves, prosecutors say Richman and Apte are fugitives.“The defendants’ preliminary federal courtroom appearances haven’t but been scheduled,” the U.S. lawyer’s workplace in San Francisco mentioned in an announcement Thursday.Like Holmes and Balwani, Richman and Apte labored intently collectively and have been romantically concerned — main them to marry in 2019, in accordance with the SEC.In one other parallel, each units of defendants are charged with telling traders their firms may carry out dependable medical assessments when, in accordance with prosecutors, they couldn’t.In the end, although, the alleged fraud at Theranos was on a a lot grander scale: Richman and Apte’s startup was valued at $600 million in a single collection of fundraising, in contrast with $9 billion for Theranos at its peak.The Spectacular Rise and Fall of Elizabeth Holmes and TheranosRichman and Apte “painted a false image of uBiome as a quickly rising firm with a powerful observe document of dependable income by medical health insurance reimbursements for its assessments,” the SEC mentioned in its criticism. “uBiome’s purported success in producing income, nonetheless, was a sham.”Initially, uBiome’s “Intestine Explorer” check was provided to carry out genetic sequencing from fecal samples and marketed as a strategy to get a greater understanding of what was happening in a single’s intestine, in accordance with the indictment. By 2014, Richman and Apte concluded the corporate couldn’t generate sufficient income to draw enterprise capital traders, so turned to advertising and marketing medical assessments used to make medical selections, in accordance with the federal government.Ubiome submitted medical health insurance claims for its assessments, finally marketed as “SmartGut,” to non-public insurers offering protection to Medicare beneficiaries in addition to private-sector employer-sponsored well being plans, in accordance with the indictment.Amongst different practices, Richman and Apte deceived well being care suppliers and insurers by submitting fraudulent reimbursement claims for re-tests, counting on a “captive community” of well being care suppliers to whom they gave partial and deceptive data, and manipulating dates of service to hide uBiome’s actual testing and advertising and marketing practices, prosecutors mentioned.The corporate founders relied on the scheme from 2015 to 2019 to promote uBiome inventory and debt to pay for operations and enrich themselves, prosecutors mentioned. The indictment describes a collection of funding rounds by varied funds not recognized by title.Learn Extra: uBiome Property Donating 40k Covid-19 Testing Kits to HospitalSan Francisco-based 8VC and Menlo Park, California-based Andreessen Horowitz maintain a 22% and 10% stake in uBiome, respectively, courtroom paperwork present.8VC led an early, $17 million fundraising spherical and took part with 10 different funding companies in an $83 million, later-stage spherical, whereas Andreessen Horowitz took half in one other early-stage, $4.5 million spherical, in accordance with market knowledge supplier PitchBook. Y Combinator, primarily based in Mountain View, California, and Tokyo-based Dentsu Ventures are amongst different uBiome traders listed by PitchBook.”We’re grateful to the authorities and can proceed to completely cooperate with them,” 8VC mentioned in an announcement. “We can not remark any additional on an ongoing case.”Y Combinator declined to remark whereas Andreessen Horowitz and Dentsu Ventures didn’t reply to requests for remark.Richman and Apte didn’t inform traders inform that insurer questions on uBiome’s billing practices known as the corporate’s “complete enterprise mannequin into query,” however that the founders “needed to falsify paperwork and mislead insurance coverage suppliers to be able to try to hold them at bay,” in accordance with the indictment.Richman and Apte couldn’t be positioned for remark. Spokespersons for the U.S. lawyer’s workplace and the San Francisco workplace of the FBI didn’t instantly reply to requests for remark.The prison case is U.S. v. Apte, 21-cr-0116, U.S. District Courtroom, Northern District of California (San Francisco).(An earlier model of this story corrected the participation by 8VC and Andreessen Horowitz in fundraising)For extra articles like this, please go to us at bloomberg.comSubscribe now to remain forward with essentially the most trusted enterprise information supply.©2021 Bloomberg L.P.