The founder of a student finance website acquired by JPMorgan Chase for $175mn has been charged with fraud by US authorities who allege she falsified user numbers as part of the sale.
Frank founder Charlie Javice, 31, was arrested in New Jersey late on Monday evening and charged with conspiracy to commit bank and wire fraud as well as securities fraud by US prosecutors in Manhattan. The entrepreneur also faces a civil suit from the Securities and Exchange Commission.
The charges come three months after JPMorgan sued Javice, accusing her of massively overestimating the number of users Frank had before the 2021 acquisition. Javice herself stood to make $45mn from the sale of the company she founded in 2016, prosecutors said.
US authorities allege that Javice represented to JPMorgan that Frank had 4.25mn customers when in fact it had only 300,000. The company helped college students apply for financial aid for their education.
Lawyers for Javice did not immediately respond to requests for comment. In a countersuit against JPMorgan, Javice has denied the bank’s allegations of falsifying accounts. JPMorgan declined to comment on the charges.
The indictment, filed on Tuesday in US District Court, quoted an exchange between a software engineer at Frank and Javice in 2021, following a video meeting in which prosecutors claim the defendant asked for “an artificial, synthetic data set” of users to be produced.
The employee allegedly stated: “I don’t want to do anything illegal,” to which Javice allegedly responded: “We don’t want to end up in orange jumpsuits.”
“Javice engaged in a brazen scheme to defraud JPMC,” said the US attorney for the Southern District of New York, Damian Williams. “She lied directly to JPMC and fabricated data to support those lies.
“Rather than help students, we allege that 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 then used that fake information to induce JPMC to enter into a $175mn transaction,” said Gurbir Grewal, director of the SEC’s division of enforcement, in a statement.
If found guilty of the four criminal charges, Javice could face a combined maximum sentence of 110 years in prison. The SEC is seeking civil penalties against Javice and to permanently prohibit her from serving as an officer or director of a public company.