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Financial aid startup founder Charlie Javice charged in JPMorgan Chase fraud case


May 21, 2023

Charlie Javice, a businessman accused of tricking JPMorgan Chase into buying his now-closed college financial aid company called Frank, has been indicted on fraud charges.

The four-count grand jury indictment filed in Manhattan federal court charged her with conspiracy to commit wire and bank fraud, wire fraud, bank fraud and securities fraud.

Javice «engaged in a brazen scheme to defraud (JPMorgan Chase) in the course of a $175 million acquisition» of his company, U.S. Attorney Damian Williams said in a statement last month from the U.S. Attorney’s Office for the Southern District. of New York on the charges

In doing so, he «outright lied» to the largest bank in the United States and «fabricated data to support those lies, all to gain more than $45 million from the sale of his company,» Williams said.

Javice, who was featured on the Forbes 2019 «30 Under 30» list, «falsely and dramatically» inflated the number of Frank’s clients to «fraudulently induce» the bank to acquire Frank, prosecutors alleged.

The 31-year-old founded the college financial aid platform in 2017 and was acquired by JPMorgan Chase in 2021. As part of the deal, the bank hired Javice and other Frank employees. Javice received more than $21 million for selling his equity stake in Frank to the bank and an additional $20 million as a retention bonus, prosecutors said.

Prosecutors said the founder repeatedly said the company had 4.25 million student customers, yet had fewer than 300,000 users.

Javice asked an «outside data scientist» to fabricate a customer list when the bank requested proof of Frank’s user data, according to a criminal complaint filed in the Justice Department case.

He paid the data scientist $18,000 for his services, according to a separate complaint from the Securities and Exchange Commission, which also filed fraud charges.

Javice initially asked Frank’s engineering director to generate the fake data, but the engineer felt uncomfortable, saying: «I don’t want to do anything illegal,» according to the Justice Department’s criminal complaint. Javice, according to the document, said it was legal.

Javice said, “we don’t want to end up with orange jumpsuits,” according to the criminal complaint.

The financial institution learned of the alleged scam when it sent an email marketing campaign to the list Javice said were users, generating only a few responses, according to the SEC complaint.

Javice’s lawyers did not immediately respond to a request for comment on Saturday.

Javice was arrested in April in New Jersey. She was released on $2 million bail after appearing in downtown Manhattan federal court.

She has not entered a guilty plea in either case.

JPMorgan Chase chief executive Jamie Dimon said on a conference call with analysts in January that the bank’s acquisition of Frank was a «big mistake,» Reuters reported. The bank closed Frank this year.

JPMorgan sued Javice in Delaware federal court last year for alleged fraud, accusing her of lying about Frank’s size, success and «depth of market penetration» to «make money,» according to the lawsuit.

Javice has denied the bank’s allegations, saying in a counterclaim that it «cannot prove its outlandish claims.»

In the counterclaim, Javice said the bank “compromised its reputation” and “improperly withheld” nearly $28 million in principal and retention payments.