This Week in Startups - Emergency Pod! uBiome: Anatomy of an Alleged Fraud with Wall Street Journal reporter Amy Dockser Marcus | E1192

Episode Date: March 31, 2021

Podcast Notes: https://rb.gy/gbzfqm Check out Amy's work at the WSJ: https://www.wsj.com/news/author/amy-dockser-marcus FOLLOW Amy: https://twitter.com/AmyDMarcus FOLLOW Jason: https://linktr.ee/calacanis

Hey, everybody, it's another emergency podcast here on this week in startups, and this one is a doozy. We're talking Veranos-level alleged fraud to former co-executives at the now bankrupt lab testing startup. U-biom were charged with health care and securities fraud, among many other offenses, in a 33-page indictment that dropped by a federal grand jury in San Francisco recently. They've allegedly, I'm going to say allegedly a bunch of times here, misled investors about their revenue numbers, while cashing out $12 million in secondary. That's when the founder sell shares to investors. They filed fraudulent reimbursement claims, allegedly,

with insurers for lab tests that weren't validated or necessary for patients. That's a big no-no. And they submitted fake chart notes from doctors to justify the test when insurers question their validity, allegedly. This is a total show. And this is, I think, sadly, another Theranos, very interesting parallels between those.

too, including the fact that the Wall Street Journal was on this story first, and we have one of the journalists who were covering U biome to sort this all out with us. Stick with us. This week in startups is brought to you by Vanta. Compliance and security shouldn't be a deal breaker for startups to win new business. Vanta makes it easy for companies to get a SOC2 report fast. Twist listeners can get $1,000 off for a limited time at Vanta.com. slash twist. Dell's precision and XPS product lines can bring your vision to life. They are masterfully crafted from premium materials like machined aluminum and carbon fiber. You can also sign up for a free IT consultation and a coupon for special pricing at launch.co slash Dell. And Our Crowd. Our Crowd helps

you invest early in pre-IPO companies alongside professional VCs. If you're interested in investing, you can join our crowd for free at O-U-R-C-R-O-D-com slash twist. All right, Amy, Doxer, Marcus is here. She is a health and science reporter for the Wall Street Journal, and they've done, once again, incredible reporting. Really love the journal's investigative reporting on companies that maybe are behaving badly. Our friend John Kerry Rue did his first media hit on this week, startups and that hit actually resulted in some people who worked at Daroni

he told us later contacting him because they saw him on the podcast and so who knows maybe out of this some people will contact Amy and her her co-workers over there including Ann Wild Matthews who specializes in health insurance reporting welcome to the program Amy thank you so when did you first become aware of you buy them I actually became aware of Ubiome before it was trying to sell these tests and get reimbursement. You know, they started out in 2013 as a kind of citizen science experiments. They asked people, they crowdfunded online. I mean, it was a fairly novel way of raising money at the time.

Yeah. And so what did they initially raise money for? What was the product and the promise? Because they did well in that Kickstarter. I don't know if it was Indie Go Go or Kickstarter, it would be specific. Yeah, I mean, they raised around $350,000, not a huge amount of money, but what they did is they bootstrapped kind of their company that way. They asked people to buy a kit and they would send it to you.

And at home, you could send in generally a fecal sample and they could do sequencing and they would give you the results back. And the concept at the time was, let's get, everybody monitoring their health and let's collect their data. And by comparing what's happening in you to what's happening in other people, you might learn some insights about your health. At that time, they actually, even from the sort of moment of inception, ran into some ethical difficulties because there was an online debate that emerged

in the wake of that campaign where some scientists and ethicists said, you know, this is not a traditional model of doing scientific research and why, why didn't you go through an institutional review board to get permission? Got it. And this was for a gut test. Forgive me that I'm not a scientist. But what... I'm not either. In layman's terms, you know, just plain English, what are people trying to determine when they send in this fecal sample to, to get analyzed? What would they hope to get out of it? What was the sales pitch to, you know, from the executives to the crowdfunding audience

and then consumers? So the microbiome kind of in a loose layperson definition is the community of microorganisms that live on and in our body. And it's actually a really promising scientific field that's attracted a lot of attention because there's a sense that it's not only, it's not only our genes that influences us, but it's also all the microorganisms that coexist with us that can affect our health. And so people were interested in finding out what microorganisms might be generating health problems. It allowed them not only to monitor themselves, but potentially to do dietary interventions.

They could take different supplements. They could eat differently. They could figure out if they ate in a different way, maybe it would change how they feel and they could tie it to something scientific. At the start, it wasn't supposed to be a clinical test. It was designed. The utility was really you, you wanting to know more about yourself and you or the,

you determined that it was useful, not your doctor or an insurance company. And so this is part of the movement of people who are basically either doing biohacking or just really trying to understand their own bodies through information. Some people are doing those glucose monitors. Some people are using fitbits or aura rings, studying their sleep. So this seems to be a real field of products in the world. And they were not telling you, hey, you should change your diet. They're just telling you, here's what we found in your gut. Correct? Correct. I mean, it more, it's starting.

more like as something that would be kind of fun in a way. But, you know, I'm sure that they also wanted to make money. But at that time, you know, that wasn't going to make tons of money. And that's kind of what led to the problem, thinking about how to monetize this. Got it. And so this quantified self thing exists. That's real in the world. They charge $89 for this. But they quickly learned that that wouldn't. And the founders are Jessica Richmond and Zach Apte. And interestingly, like Elizabeth Holmes and her co-founder or C.O. They were in a romantic relationship, correct? They were. And according to the SEC's document, they actually got married in 2019. Ah. So did they get married after all of this dropped or before?

Well, according to the SEC document, they just all, all they said was they got married in 2019. So that would have been in the course of all of this. Wow. Do you, I mean, I hate to be cynical here. and work against the concept of true love. But is this in some way a maneuver to get spousal privilege or something? I don't know. I genuinely don't know. And they certainly were involved prior to that, you know, that was kind of an open secret

at the company. So they went through Y Combinator, which is a very real program here in Silicon Valley. But the accelerators here don't do deep due diligence. They don't check, you know, everything with a startup because it's only a $100,000 check. And the Kickstarter Indiegogo's of the world, they do a cursory check of these kind of projects. What's your sense of where the investment community or the platforms here drop the ball on their diligence? Because that I think for me as an investor, I find the most interesting. When something's an early startup, well, Indiegogo winds up,

having a successful Indiegogo is a signal, right, to an accelerator. The accelerator is a signal to angel investors and seed funds who are then a signal to venture capital. And I know, Indysohn Harowitz, the famous venture firm here, was a big backer of this company, correct? I believe so that I'm less certain about. But if you go through the indictment, which we did, I think that one thing you do take away is the level of.

deception and energy. I mean, again, it's alleged. They have to prove it. But the level of energy that went into trying to persuade people that what they were doing was real. And, you know, I've been thinking about it and the way that investors can sort of protect themselves in the future. But if you really want to deceive people, I mean, a lot of energy went into deceiving investors

and everyone else. I mean, they told the doctors one thing. They told the patients another thing. They lied to the insurance companies. I mean, the insurance companies clicked on this relatively, you know, relatively early in the process. But still, they filed around $300 million worth of claims. They got about $35 million in reimbursements.

So they didn't get everything they asked for, but they still got $35 million in reimbursements. Right. So that's real money. That's significant fraud. Hey, everybody, I thought I would have Christina Cassiopo on this week in startups to tell you about Vanta. Vanta, of course, has been sponsoring the pod and had a great reaction. I'm going to talk today just a little bit about what SOC2 compliances and why it's so important for SaaS products. Welcome to the pod. Christina.

Thank you so much for having me. How long does this typically take and what does it cost? Yeah. So in the prior world, if you didn't use software like Vanta, Often companies would take about a year on the project to figure out what they needed to do, get everything in order, work with the auditor, get the auditor what they needed to get their report. And they probably spent $20,000 on the low end, kind of can go up to hundreds of thousands of dollars, depending on how large you are. You figured out a way, Advanta to do this quicker, better, and cheaper. So what is the secret and how can people use the product? Yeah, absolutely. So secret is sort of like a lot of things. You turn a lot of things. You turn a lot of lot of this into software. So you write a standardized set of checks that a company needs to do. You base them on good security principles. And then you just monitor and alert all that those things. So the company

gets a dashboard. They always know where they are. They're not, you know, mucking around in spreadsheets. And the auditor gets just really detailed data so they can be sure that what the company says they're doing is actually happening. All right. Fantastic. Well, thanks so much for coming on and telling the audience why you should get your SOC2, when you should get it, and how you should do it. and you've been very nice to our audience, giving them $1,000 off, which is a really significant and generous offer. Go to vanta.com slash twist.

V-A-N-T-A-com slash twist to get $1,000 off your sock too. Thanks, Christina. Appreciate it. Thank you so much. To just get people a history here, because this is this week in startups, the crowdfunding was in 2013,

and then the seed round occurred with 500 startups, Y-C, Dave McClure, who since had his own issues in the Me Too movement, the series A was in June of 2014. They raised 4.5 million out of 14.5 million posts when they were at Y Combinator.

That included A16 and some other folks. They graduated in 2014. Then they did their series B and they raised 17 million from Slow Ventures, Tuesday Capital, and 8VC. Then they did a series C in September of 2018 and raised $83 million at a $600 million post. OS fund, 8VC, Collaborative Fund, start. Life Ventures and YC all invested. This is all according to the pitchbook data, which is generally correct, but it could be, there could be issues that we didn't actually validate all of this.

So let's talk about the allegations. In April of 2019, Ubiom's offices were rated by the FBI because of the billing practices related to its lab tests. And shortly after that, Richmond and Apte went on leave as co-executives and later stepped down from the board. And then in September of 2019, just six months later or so, Ubiom, filed for bankruptcy protection, and its intellectual property and other assets were sold off. And March 21, March 18th, less than two weeks ago, the feds dropped this 33-page indictment.

According to the claims, they file fraudulent reimbursement claims with insurers for lab tests that weren't validated or necessary for patients, including some that involved retesting old samples. When the insurers questioned those claims, Ubiom allegedly submitted a fake chart notes purportedly from doctors to justify the tests. this is where this goes off the rails. I mean, some... It's quite elaborate.

Yeah, I mean, submitting a bunch of tests that seems normal, okay, but then to, when you get pushback, to go and fake chart notes from doctors, that is, I mean, the definition of fraud. I mean, there's a reason you have to do that, though. And again, this goes back to the fact that if you are, if you're going out of the realm of this is kind of an interesting self-science experiment into this is clinically valuable to me and my doctor in charting the course of my disease or what to do, that's a different level of proof. When most of us feel ill, let's say we go to the doctor, we have a relationship with the doctor. The doctor meets with us in person and if not, maybe has a Zoom call, gets to

know us. I mean, in what they did in order to sort of cover all of this up was they set up a network essentially of online doctors. The consumers would fill out a list of symptoms online and many of the doctors would sign off on those symptoms without having conversations with the consumers. So they didn't have any kind of relationship. The insurers, the reason why they needed, The reason why the company ended up kind of faking the medical records is because the insurer said, hey, you all have been ordering a lot of tests. We'd like the medical records so we could see evidence of the doctor-patient relationship and the doctor's notes on why the doctor felt the patient needed all of these tests.

And those records did not exist. Ah, so this is very interesting. And it goes to a wider trend that we're seeing, especially during the pandemic, which is all these doctors who were fighting off doing telemedicine because it was new and different have now 100% embraced it. And to the point in which we have services like Roman and Hems and others that do online consultations, and when they take you through those series of questions, it's an actual doctor who then asks you follow up questions back and forth, back and forth.

And so what they did was according to this, case is they actually didn't have those doctors didn't actually review these or they didn't actually take notes one or the other I mean there were um we interviewed people who did have a sort of you know zoom call you know once once with a you know or twice with a doctor but in many cases there wasn't any sort of um you know relationship that that could be that could be document And in some cases, the doctors who were asked to sign off on these tests, they were never informed by the company that the request for a test was going to be on an old sample. Many of the doctors understood that patients had new symptoms and were providing new samples when in fact, all the company was doing was adding things, adding new microorganisms that they said their test could look for, asking, the patient if they wanted to get resequenced again, and the patient would click, yes, and no new sample

was provided. There were, you know, I mean, this was part of the ruse that that was laid out in the, in the document. So how did this get leaked to the FBI? Was it the insurers who went to the FBI and said something's funny going on here? Was there an internal whistleblower? I didn't see in the, in the series. I mean, it's, it's hard to know how it originated, but, I mean, basically, on the documents, it sounds like the insurance companies, you know, started doing due diligence on all of the reimbursements and, you know, ask some questions. In our own reporting, we did a quote from patients who they would get an explanation of benefits statement from their insurance company, which, you know, insurers routinely send, and they would realize that their insurance

company had been billed again. And that they knew that they, you know, they, had not provided another sample. And some patients also inquired, hey, what's going on? This is another allegation that comes up. And again, this was part of the things that are alleged to be improper. And that is also when we go to the doctor, the doctor generally is required to ask us to have a co-pay. You know, we're supposed to contribute into this. You biomes set up a system whereby they called it a pilot program and they told patients that they didn't, that they, that they, U biome would cover any cost of the test that insurers didn't reimburse. That pilot program extended for a very, very long time.

And when, when their own general counsel told them that the pilot program might, you know, get them into legal trouble, they created what they called a patient assistance program. and some of the patients said that nobody asked them to prove that they actually needed patient assistance. I mean, those programs exist and they're designed to help people who can't financially pay for medicine, but they were never asked for any kind of documents to show that they qualified for it. Am I correct that Jessica and her co-founder are on the lamb right now? Yeah, that's what came out in the documents as well. they are fugitives from justice, according to the documents.

So nobody knows where they are. Is there any lead? I mean, is this like Hannibal Lecter? They just like disappeared to South America or something? I mean, this is turning into an HBO series. Yeah, it's hard to know. It's, it's quite, it is quite, I mean, it's so interesting. I keep going back to this 2013 sort of event because it was so, it was born and something that

seemed idealistic. And one of the things that came out in our 2014 story where we were kind of chronicling the initial pushback on their new model, they got into kind of like an online debate with their critics. And one of the things they argued was that the ethical kind of regulations through the institutional review board for approving human research, human subject research, that that's like old school science and they're trying to, and they're trying to do. something that's new.

Is that the citizen scientist kind of movement that they were? Yes. They, you know, but interestingly, in the end, they did go to a commercial IRB. Generally speaking, IRBs are inside, inside institutions like academic, you know, universities or hospitals. They did end up having to do that because to try to be within the realm of science, you have to follow certain rules. And from the beginning, they were pushing against those rules.

arguing that they don't really fit. But in the world of testing, it's a highly regulated business, which that's what came out in all these legal documents, highly regulated. IRB is an institutional review board, which is a group formally designed to review and monitor biomedical research involving human subjects in accordance with the FDA regulations. And IRB has the authority to approve, require modifications, et cetera, disproved research. So it's basically doing it the right way. quantified self means you get your data and you interpret it as you wish. That seems like a fundamentally American concept. Probably nothing wrong with being a citizen scientist and interpreting your own medical data.

But or do you disagree with that? Do you think citizen science, I mean, it's a movement that I have covered for years and years and it's doing remarkable things. You know, citizen science again, I mean, in the beginning, patients were paying for their own tests out of pocket. You know, it's, it's designed to like, if you want to study yourself and know yourself, this is a way to get access to sequencing of your microbiome, which gives you new insights, and allows you to understand yourself better. But, you know, as, as it evolved, I mean, when you, but that is the next question.

The question that they raised was, it's not just about you studying yourself. We believe that we are actually. providing your doctor with important insights on how to how to treat you. And when you want to make that argument and you want to ask a health insurer to reimburse that, then you have to provide a different level of proof than you would if it's just you or I paying out of pocket for something that could be fun or something that could give us, you know, insights that would make us change our diet or do something different. Yeah, I literally had my yearly physical. I turned 50 yesterday. I had my physical yesterday. I turned 50.

last year. And I literally did a bunch of this elective stuff is, you know, do you want to do a scan of your heart? And then do you want to do like a full body scan? And, you know, none of this stuff is reimbursable, I think. And it's interesting to get. And there's pros and cons. I'm curious, just as a journalist, when you've wrote that October 24th story in 2014, which will pull up on the screen here if you're watching on YouTube, the ethics of experimenting on yourself and this whole citizen scientist thing, this was a full six or seven years before this whole thing collapsed. Did your spidey sense go off at all that this could be a fraud or that these people were a little, as we would say, in Brooklyn Fugazi, Fugazi.

Did you, anything kind of trigger in your mind? Not not at that point because, you know, at that point in time, I think that they saw themselves as part of this emerging landscape, which is really, been, you know, a fascinating landscape. If you think about like the 23 and me's of the world, where, you know, trying to make it like less expensive for you to find out something that might be beneficial to yourself. But again, if you're going to be, if you're going to build a business around it, it's not easy to make a lot of money for patients and consumers to pay for their own tests. If you think about what companies have, have been focusing on,

to monetize it, they have to either get a lot of people, entice a lot of people to pay smaller amounts of money so that they can grow a database and then sell access to that database to companies that can pay a lot of money. Or another model would be the way that you buy a which is charge a lot of money to insurance companies for clinical tests. But again, to do that, to go down that path where you're raising the amount of money involved here, you're going to have to come up with a higher standard of proof than you or I might demand if we're just paying like 50 bucks or 80 bucks for a test that is fun for us. Dell for Entrepreneurs is here to help you, founders with all of your hardware and software

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IT consultation and a coupon for special pricing. Okay, let's get back to this amazing episode. I'll tell you where this failed for me, just as a person who invests in companies for the last 10 years, and a formal journalist. So I started at journalism where you are, and now I'm on the other side of the table as an investor. When you get to your Series B and you're raising over $10 million and there's a lead investor, in this case, the Series B in 2016, I think 8VC was the lead, you know, somebody's got a diligence this stuff and talk to the insurance companies and,

talk to the customers, talk to the doctors, talk to employees. That's kind of what you're paid to do as a venture capitalist. So somewhere between the Series B and Series C, OS fund, the lead on the Series C and 8VC, the lead on the Series B, I think they have some serious answering to do to their LPs, the limited partners who give them money on how they did this. And even the Series A, if A16Z was the lead, it was $4.5 million. That's not a lot of money to Andreessen Horowitz, but, you know, Who knows of that 4.5 what they did.

When John Kerry, your colleague, who did the amazing Pulitzer Prize, should have one level coverage of Theranos. For some reason, he didn't get a Pulitzer. Unbelievable. They need to come up with a, we screwed up Pulitzer that, you know, they'd give five years later when they missed something.

This is just my suggestion. And that would be number one on my list of things that Pulitzer dropped. What incredible coverage and inspiring. But there is some parallel here. He got a lot of pushback that, and some folks said Elizabeth Holmes was being targeted because she was a female founder, pulling the female founder card. Oh, we finally have a female founder who's a billionaire. Did you get any pushback on this one as well because Jessica was a female, obviously, and that people were said, oh, this is, we're just giving female founders a hard time?

No, not on that particular thing, but more along the lines. and you would probably have an answer to this question even better than I because you're the investor. But I mean, like a lot of these companies, the founders are very charismatic. I mean, and as you, as you know, you're an investor, you said. So, I mean, don't you find that when there's someone with a compelling story and a charismatic personality that that can carry, that can carry you a long way, right? I mean, in fact, one of the knowledge. number one traits of successful founders is charisma. Because if you think about what you're doing, it's kind of like Shackleton, the Explorer. I don't know if you've ever seen the ad he put in the,

he put a classified out that famously said, like, looking for men to go to the North Pole, low pay, extreme hardship, injury, and death, almost a certainty, you know, show up on Sunday. And it's like a famous, you know, want ad. And yes, charisma is how you get a, employees to join the company. Charisma is how you raise money. Charisma is how you convince the public. Steve Jobs, the reality distortion field where he would claim that they created something that Walt Mossberg, another famous Wall Street Journal reported would have covered four years earlier from another company where the Palm Pilot had done what the iPhone was doing. And Steve Jobs would say, oh, no, nobody's ever done this before, right? And the distortion field would be dropped. But you really is

uncanny the similarities here. And this must have come up when you did the coverage, which is Elizabeth Holmes dropped out of Stanford before doing any real research. I think it was in her first year. And then Jessica Richmond, she kept talking about her PhD and her Twitter bio, etc. But it wasn't even a medical, wasn't even medically related. And they both went to Stanford. So there's like a little checkbox there in terms of, oh, dropped out of school like Bill Gates and Zuckerberg did from Harvard.

Oh, dropped out. And they both crazily were CEOs who presented at TEDMed. So when you think about these checkboxes, I think you're so right about the charisma thing. And I also think there's an unconscious or maybe even conscious strategy, but sometimes charismatic people, you know, who's also charismatic? Serial killers, sociopaths, you know, and you may not want to say these things, but I can tell you that out of every hundred founders I meet, you know, there are going to be three or four of them. There's going to be a lot of them that are on the spectrum of Asperger's and, you know, then there's going to be a bunch of them who might be actually. these sociopaths who get drawn to this because it's this incredible challenge and they could be narcissists and all these other great things. In fact, a lot of the great ones are narcissists. It's a

pretty good skill. But it could tip over into this, which is you just think might is right, by any means necessary, bend the rules, you know, don't ask for permission. And then all of a sudden you're committing just outright fraud. Very interesting that they both were at TEDMed in the same, you know, like two-year period. There's certain places that you go and certain things you do, again, that would present a narrative to investors and to others that, you know, you're doing something that's cutting edge. I don't know if you noticed this detail in the indictment.

I just found it kind of fascinating, which is that as part of the indictment, they noted that in an email correspondence with a reporter, Jessica lied about her age. and she told the reporter that she was under 40 years old. And you might think to yourself, why is that important? But again, it's important in building a narrative for investors and for others that you're young, you're cutting edge, you know, you're part of this rising generation. And they noted in the indictment that once the article was out, she linked to it in her bio and in materials that she showed the investors so that they would have a legitimate sort of outside

source showing that she was a young investor, a young, a young rising star in the world of medicine. It's so deranged. And, you know, it reminds me of Elizabeth Holmes who lowered her voice famously to sound more like Steve Jobs allegedly. And also, you know, with the turtleneck. It's so weird. And, you know, this 30 under and the 40 under lists, I know you don't do those at the Wall Street Journal, but my God, Fortune or Forbes or whoever, one of those publications that, you know, is just does these disastrous lists. Every year, I get people in my portfolio asking me to submit them. And I'm like, you know what? Those lists mean nothing. They're literally just a way to get traffic to Fortune or Forbes's website.

And they're just hoping you put it in your bio and send traffic to them. It's literally meaningless. But it is, it's meaningful to some people who, who use it as a piece of a story. I mean, this was another thing. If you went to their website, which we did when we were reporting the story, I mean, they did list illustrious scientists who, and, you know, that were their partners, you know, supposed partners in doing legitimate scientific experiments. But when you'd start running down those experiments and, you know, why, why did they share a kind of credit on a scientific paper, how, who did what and everything? Sometimes it would be that samples, you know, the microbiome samples that they had collected, they allowed legit scientists to do work on them. And then those scientists, as is traditional in science, would credit them, you know, sharing a name on a paper.

I mean, so again, building up credentials, you know, using signals to people that reinforces a narrative that engenders trust. You know, it's very interesting. When you think about grifters and the techniques they use, one of the great techniques is the proximity to power, celebrity, or notability. And so there are a bunch of coaching scammers, like life coaching scammers who get people out of $10,000, you know, for these things. And what they do is they hire celebrities to come speak at their events, take pictures with them, you know, do goof around with them. Then they put that on their website. Then an unsuspecting mark comes to the website, sees them with, you know, Mark Wahlberg or, you know, John Travolta in the two examples I saw, and Hal Pacino, whoever wants to get 50K for a speaking. gig and then they convert that. And it's called social proof in Silicon Valley.

Social proof is the New York Times covered us and you link to it. But what people will do is they'll say covered in the New York Times, covered in, you know, Yahoo News or whatever, but they hire some PR company to file a press release, which then gets listed on Yahoo News, but it's a scam. It's just PR Web or one of those PR ones. So this is all in that same, you know, sort of technique cynically. or, you know, there's the criminal actions, and then there's bending the truth

and trying to use these social proof techniques. But what's important for people to understand here for the founders who are listening is when you sell shares in your company and you do these techniques where you lie about your company and you're lying in the way, how does the SEC look at selling shares in a company while lying to investors?

How does the SEC look at that in your mind, Amy. Well, I think we have the 33 pages that indicate how they look at it. And I tell you, I've had this happen where I had a startup that had a team slide on their team slide on their website and in their deck, they had team members who were no longer there.

And, okay, it could have been a mistake or they maybe didn't change it because they wanted that. And I told the founder, like, listen, you can't, when somebody complained and said, you know, these two people are not working there anymore. And I said, you got to keep that page up to date. If you're selling to investors, you know, a story and the story is made up or no longer true, the SEC are very principled people, I think you would agree.

And they do not take lightly to people bilking investors out of their money. It's a very deadly serious to them. That's, you know, that is another story that we ended up doing actually about this company speaking of, you know, having things on your website that proved to be incorrect. We did a story about how they had customer, supposed customer testimonials, photos and then quotes from people who claimed to have benefited from taking their tests. And we did a story on how the photos were from shutterstock. I mean, they weren't of real people. And we showed that the same photo had been used to advertise other things. And

And, you know, again, you know, these small things, you know, taken separately might not seem dramatic, right? But they do add up to thinking about how you're presenting your story to the public. Such a great insight, an example, because sometimes when you're pitching your company, you have, you know, a customer reference and a customer quote. That's true. But the customer's identity needs to be protected for whatever. reason. And what I've always mentored founders in is to put a stock photo in there and say, meet Jane. She is one of our customers. This is a picture of a stock photo. So Jane, just so you know, isn't a stock photography model and a customer of ours. We're just putting a stock photo in

there. It's like a fun joke. And her name's not actually Jane, but this is a real person. And she is 34 years old. And she does have two kids and she does live in Brooklyn. Like, you kind of just own it. Right. And then you have no issues. And, when we look at this kind of fraud, what do you think the outcome will be here? They're going to catch them at some point. That's obvious. Like, you can only be on the run for so long. I mean, I don't think we have too many examples of people who've gone on the lamp for this level of fraud. We're talking tens of millions of dollars in fraud, probably closer to $100 million between the money they, they got $35 million in insurance fees, plus they raised over $100 million. So you put that together, this like Bonnie and Clyde on the run thing. I mean, they're going to get people. They're going to get paid. pinched. I mean, I don't have any sort of insight into that. I would assume that this would be very hard to sustain for the rest of your life being on the lamb. Yeah. I mean, if you look in the indictment, I mean, the amount of years in jail, if they're convicted, it's quite significant. Do you ever wish you invested early in some of the best performing IPOs of 2019 and 2020?

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Which is the worst fraud here? The financial fraud or the healthcare fraud in that people might have gotten information that was bogus and then made decisions based on it, which was the Theranos one, which was really crazy. I don't know if you saw Jean Gassier, who worked for Steve Jobs, had done his blood work at Stanford and with Theranos

at one of their Walgreens or whatever. And the two results were so far off that he wrote a public blog post about it and emailed Elizabeth Home who never returned. But people, it turned out in the Theranos case, were actually making health decisions with their doctor to take certain drugs based on their blood work that they wouldn't have needed to take. So that's very serious.

Is this getting to that level? Are there examples where people changed not just their diet, but maybe did something that could have been, you know, lethal, God forbid, or against their health? I mean, we unknown. I mean, we didn't find evidence of that. But, I mean, you know, that doesn't mean that it didn't happen. But I mean, when you're, when you're testing these samples, I mean, I guess a lot of people, primarily that we talk to, people change their diet, at least with the smart gut one. I'm not sure what changes people made with smart Jane, if any. But I think primarily here, the allegations centered more on the fraud, you know, the bilking of insurers, which in the end can raise insurance premiums for all of us.

I mean, that is one of the consequences. And yeah. Any civil lawsuits come after this yet? Like, because you would think if you made those dietary changes, you might want to. to sue. I'm curious. I mean, it could be. This is still new. So new, yeah. And the investors in this, generally, we don't see investors file charges against this because they're so embarrassed to have this happen in their portfolio. They tend to just write it off. But have you heard anything from the investors yet? Or have you talked to the investors in the company? Or do they just,

when a journalist calls, the investors just say, we're not going to talk about this. It's too embarrassing. Yeah, this is just the start. I mean, we'll have to see how it unfolds. We'll continue to report on it. Yeah, I think that's, you know, for me, it's a really big lesson in diligence matters, do really good diligence, talk to the customers. Now, that still doesn't mean people can't fake bank statements, can't, I mean, there really is almost so much you can do. Bernie Madoff, there were people reporting on his ridiculously consistent results through markets that were very inconsistent at times. And it took, what, three decades for that to actually come out.

So you can't get hoodwinked. You could get bamboozled even if you do diligence. But boy, it feels like there was a lack of diligence that was done here. I think we covered everything. Congratulations on, you know, this great coverage. Once again, the Wall Street Journal doing amazing investigative journalism. do you got when when you just so the audience understands the cost of doing investigative journalism like you do what we know journalists get paid well at the Wall Street Journal but um how much time

um goes into something like this for and how many journalists to really cover uh you know a case like this is this take a month to do a story two or three months well it's not the only story we're working on right so it's we have to we're balancing a lot of different things but i i do want to put a plug in for the fact that any kind of story, not only just investigative stories, but all the stories we do, it, people don't see behind the scenes the team that goes into it. I mean, you have people that do the graphics. We had a lot of graphics that were in our stories. You have people that do the photos, you have the layers of editors, and you have obviously the time that reporters spend on the stories. So it really is. A thousand hours, 500 hours? What do you think the staffing hours would be?

Thousands of hours, right? I really, it's so hard to estimate, honestly. I mean, you know, you're intensely working on something and then you're also monitoring it. It's so hard to do it. That's why it's great that, you know, to have staff reporters who can work on something over the course of years, you know, follow a company for years and years. That's a real privilege. Yeah, I mean, it's, and it's a lost art. I mean, the amount of work that go into these kind of efforts, whether it's there or no, this and it really is the best of journalism. And it's something that's worth supporting. So for those of you who are out there, paying for a subscription to the Wall Street Journal is a great way to have this backstop in society that we need because a lot of times these stories get broken by journalists, not by the FBI, not by the insurance companies, or when they do get cracked open, you need only see any of the great investigative journalism films that have come out, you know,

over the decades. The insider. Spotlight. I mean, it's such an important function in society, and we really need to support it, and we need to have you keep doing this great work. So we,

all the presidentsmen, of course, yes, my great researchers are, yeah, that is the goat journalism movie. But I will say, I think the insider is my favorite.

Okay, this is a good question first, end on, Amy. Rank, spotlight, the insider, all the president's men. Favorite, favorite number one two and three you didn't do shattered glass also oh my god shattered glass with hating christiansen yeah so many amazing i you know i was coming up as a journalist when that all went down

wow so if you you have to think about this with the story and the performances wow so you know i'm i'm a boston native so i i got to go spotlight just because i want to do a shout out to to boston yeah okay boston globe uh shout out i'm going to go with the The Insider. I just thought that that film was just so well done. Yeah. Who's your number two? We'll just do one and two.

I don't know. I mean, The Insider. Yeah, or Shattered Glass. Putting me on the spot. I love them all. I love Journal.

Shattered Glass is my number two. Shattered Glass is just such an underrated film. I was actually talking to some. It's a very weird in my life, Amy. I have the at Jason Handel Twitter and Instagram. What happens typically is people start group chats and they mean to add their friend Jason Smith, but it auto-populates and they just click me. Oh, wow.

And I was recently added to a group of German teenage girls who are super fans of Harry Stiles and Hayden Christensen. How fun. And so I've been chatting with them because I let them know they put the wrong person in. But then they had a lot of questions for me like if I knew anybody famous. And I said, have you guys like Hayden Christensen, have you seen Shattered Glass? They're like, no. I was like, okay, go go watch that and report back to me.

That was last week. So they're going to report back to me there. You've inspired a whole new generation of Shattered Glassah viewers because that was definitely before their time, if they're teenagers. Definitely. I mean, it was very interesting in the 90s that the plagiarism that we saw was during this period of time when, and I'm assuming you were around for this. I'm not sure your age exactly, but when I was coming up in the 90s, the idea of getting paid a dollar, $2, or even $3 a word, writing for Wired or some content-ass publication or the New Republic, whatever, there were these star feature writers.

And sometimes even Brett Easton Ellis or some famous novelist would do a feature story because Esquire would give him 25 grand to just have a cover story by Brett Easton Ellis or something of a celebrity profile. But being a celebrity journalist, Sebastian, who's the guy Sebastian who did a perfect storm? He was in there. Sebastian, Junger, something. Younger, yeah. Anyway, there was this whole group of this cohort, if you remember. And it led to some weird moments. Jason Blair and Stephen Glass were amongst them of just people who outright plagiarized

because they wanted to be famous investigative slash feature journalists. Very weird. All right. Lots of charismatic people in the world. Yeah, we get them on both sides of the table. Charismatic journalists, charismatic investors, and now, of course, charismatic feet. I mean, it does say something about gender and CEOs that we have enough female CEOs now that there will be some number of frauds.

And here we are. Everyone's a person. Exactly. Everybody's responsible for their own behavior. All right. Thanks so much for coming on. Amy, and thanks for the great journalism. We appreciate it. I'm speaking on behalf of all Americans in society in general in the human race. We really appreciate you doing this work.

We'll see you next time on this weekend startups.