In recent years, the U.S. Securities and Exchange Commission (SEC) has pursued enforcement actions against several Silicon Valley companies. While the SEC’s case against Theranos and its CEO, Elizabeth Holmes, is perhaps the most well-known, there have been several additional cases involving substantial losses for companies’ investors. In this article, securities fraud lawyer Jake Zamansky discusses the SEC’s recent charges against the co-founders of San Francisco-based uBiome Inc.
Co-Founders of uBiome Inc. Charged with Multiple Counts of Securities Fraud
On March 18, the SEC announced that it has charged the co-founders of uBiome Inc. with multiple counts of securities fraud. The charges stem from allegations that the co-founders portrayed the company as, “a successful start-up with a proven business model and strong prospects for future growth,” when in fact the company’s success hinged on its ability to “dup[e] doctors into ordering unnecessary tests . . . which, if discovered, would have led to insurers refusing to reimburse uBiome.”
The SEC alleges that uBiome Inc. raised approximately $60 million from investors and that the co-founders pocketed millions of dollars in investors’ funds directly. In addition to making false public statements about the company’s success and prospects, the SEC alleges that uBiome Inc.’s co-founders also engaged in fraudulent conduct such as:
- Directing employees to provide insurance companies with falsified medical records;
- Falsely claiming that the company had a strong track record of receiving health insurance reimbursements for its tests; and,
- Selling their personal shares in the company to outside investors during a “fraudulent fundraising round.”
In addition to facing SEC enforcement action, uBiome Inc.’s co-founders are also facing criminal prosecution by the U.S. Attorney’s Office for the Northern District of California.
While the types of allegations asserted against uBiome Inc.’s co-founders should be shocking, in today’s world, they are not out of the norm. Investment fraud scams are becoming increasingly common, including scams touting biotech breakthroughs and other industry-disrupting products and services. The SEC’s allegations against the co-founders of uBiome Inc. highlight the importance of carefully evaluating all investment opportunities—while also highlighting the lengths to which some people will go to perpetrate investment fraud scams.
What Investors Can Do to Avoid (and Recover From) Fraudulent Investment Scams
Given the growing prevalence of sophisticated investment scams, individual investors must do everything they can to protect themselves. This means conducting thorough research and verifying companies’ claims to the extent possible. When in doubt, investors should proceed cautiously, and they should consider foregoing investments that require decisions based upon incomplete or unverified information.
What if the realization that an investment is fraudulent comes too late? For investors who fall victim to fraud, it may be possible to recover their losses through FINRA arbitration or federal securities litigation. If you need to seek to recover fraudulent investment losses, we encourage you to contact us immediately for a free consultation.
Speak with a Securities Fraud Lawyer at Zamansky LLC
Are you concerned that you may have fallen victim to an investment fraud scam? If so, contact us to speak with a securities fraud lawyer about the options you have available. Call 212-742-1414 or get in touch with us online to discuss your situation in confidence as soon as possible.