Charlie Javice, an entrepreneur accused of duping JPMorgan Chase into buying her now shutdown college financial aid company Frank, has been indicted on fraud charges.
The four-count grand jury indictment filed in Manhattan federal court charged her with securities fraud, wire fraud, bank fraud and conspiracy.
Javice “engaged in a brazen scheme to defraud (JPMorgan Chase) in the course of a $175 million acquisition” of her company, U.S. Attorney Damian Williams said in a statement last month from the U.S. Attorney’s Office of the Southern District of New York.
In doing so, she “lied directly” to the biggest bank in the United States and “fabricated data to support those lies — all in order to make over $45 million from the sale of her company," Williams said.
Javice — who appeared on the Forbes 2019 “30 Under 30” list — “falsely and dramatically” inflated the number of Frank customers to “fraudulently induce” the bank to acquire Frank, prosecutors alleged.
Javice, 31, founded the college financial aid platform in 2017, and JPMorgan Chase acquired it in 2021. As part of the deal, the bank hired Javice and other Frank employees. Javice received more than $21 million for selling her 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, when it had fewer than 300,000.
Javice asked an “outside data scientist” to fabricate a list of customers when the bank asked for proof of Frank’s user data, according to a criminal complaint filed in the Justice Department case.
She paid the data scientist $18,000 for his services, according to a separate complaint from the Securities and Exchange Commission, which has also filed fraud charges.
Javice initially asked Frank’s director of engineering to generate the fake data, but the engineer was uncomfortable and said, “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 in 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 of people Javice said were Frank customers, and it generated only a few responses, according to the SEC complaint.
Javice’s attorneys didn’t immediately respond to a request for comment Saturday.
Javice was arrested in April in New Jersey. She was released on a $2 million bond after appearing in a downtown Manhattan federal court.
She has not entered a plea in either case.
JPMorgan Chase CEO Jamie Dimon said in a January conference call with analysts that the bank’s acquisition of Frank was a “huge mistake," Reuters reported. The bank shut down Frank in January.
JPMorgan sued Javice in Delaware federal court last year over alleged fraud, accusing her of lying about Frank’s size, success and “depth of Frank’s market penetration” to “cash in," according to the lawsuit.
Javice has denied the bank’s accusations and said in a counterclaim that it “cannot prove its outlandish claims.”
In the counterclaim, Javice said the bank “compromised her reputation” and “wrongfully withheld” nearly $28 million in retention payments and equity.