Frank startup founder Charlie Javice arrested, charged with fraud over $175 million

Who is Carlie Javice？

Carlie Javice, 31 years old, was listed in Forbes “30 under 30” in 2019. Javice founded Frank in 2016, a student-aid assistance tool, shortly after graduating from the University of Pennsylvania, with the stated goal of simplifying the financial aid process for students and maximizing the amount of aid they received. Javice later became a managing director at JPMorgan Chase.

Charlie Javice (JP Morgan)

Details

Javice was arrested Monday night in New Jersey. The Federal US prosecutors charge Javice with three charges of fraud and one charge of conspiracy. One count of conspiracy to commit bank and wire fraud, one count of wire fraud affecting a financial institution, and one count of bank fraud. She was also charged with securities fraud. All these charges may cause her a maximum sentence of 110 years. However, although Javice was arrested, she was later released on a $2 million bond.

A few months ago, JPMorgan Chase shut down Frank and filed a lawsuit against Charlie Javice as the company suspect Javice of fabricating the startup‘s list of users. According to the bank’s suit, Javice hired a data scientist to fabricate a user data set with 4.25 million students. The SEC said in a complaint filed to a New York District Court that Javice.

The SEC said in a complaint filed to a New York District Court that Javice led JPMorgan Chase to believe that Frank had 4.25 million users when it in reality had fewer than 300,000.

“Ms. Javice engaged in an old school fraud: She lied about Frank‘s success in helping millions of students navigate the college financial aid process by making up data to support her claims, and used that fake information to induce JPMC to enter into a $175 million transaction.”Gurbir S. Grewal, director of the SEC’s Division of Enforcement, said in a statement.

“Old-school fraud”

The bank discovered the alleged fraud when a test marketing campaign to Frank's supposed customers flopped. Because JPMorgan Chase had acquired Frank's internal records as part of the acquisition, it soon found emails in which Javice asked the professor to create “synthetic data” for 4.2 million users and discussed purchasing user databases from a data broker.

“Rather than help students, we allege that Ms. Javice engaged in an old school fraud,” Gurbir Grewal, director of the SEC's enforcement division, said in a statement. “Even non-public, early-stage companies must be truthful in their representations, and when they fall short we will hold them accountable as in this case.”

Separately, JPMorgan Chase sued Javice last year, alleging fraud, and she countersued. Javice no longer works at the bank.