Charlie Javice was charged by the Department of Justice with defrauding JPMorgan Chase of USD 175 million by artificially increasing the number of customers Frank had in a scheme to get JPMorgan to acquire the startup. The plan initially worked as JPMorgan acquired the startup in September 2021. However, financial services company shuttered the project in January 2023.
Javice faces four counts, namely one count of conspiracy to commit bank and wire fraud, one count of wire fraud affecting a financial institution, one count of bank fraud, and one count of securities fraud. Three of the charges each carry a maximum sentence of 30 years in prison. In addition to her troubles with the Department of Justice, Javice was also sued by the Securities and Exchange Commission for her role in the alleged scheme.
The charges follow JPMorgan’s lawsuit against her, which alleges she fooled the bank into believing Frank had more than 4 million customers. According to JPMorgan, the startup actually had fewer than 300,000 customers, which became evident when around 70% of 400,000 emails delivered to Frank customers bounced back.
Javice filed a counterclaim in February in which she argued that it was implausible that JPMorgan was deceived regarding the number of Frank’s clients. She pointed to the company’s website, which claimed that the company had helped more than 350,000 people access financial aid.
According to the bank, when asked for a confirmation of Frank’s customer base, Javice and a data science professor managed to invent millions of fake accounts. Regarding this case, US attorney for the Southern District of New York, Damian Williams, highlighted that the arrest should act as a warning for entrepreneurs who lie to advance their businesses.
JPMorgan acquired the college financial planning platform Frank in a bid to improve its relationship with college students. At the time, JPMorgan thought it was buying a fast-growing college financial planning platform that was being used by more than 5 million students at 6,000 institutions. As part of the deal, Charlie Javice was employed by the New York-based bank.
JPMorgan figured out that something was wrong months later and subsequently filed a suit against Frank’s founder. The bank’s representatives also included incriminating emails in the suit between the unnamed professor that helped Javice inflate Frank’s user base and Javice. These emails were available to the bank because Frank’s technology systems were included in the acquisition.
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