Charlie Javice charged with fraud over $175m JP Morgan app deal
Frank founder Charlie Javice has been released on a $2 million bond after being charged with defrauding JP Morgan Chase in its $175 million acquisition of the college financial planning website by vastly inflating the number of its users.
Ms Javice, 31, “engaged in a brazen scheme to defraud” JP Morgan, Damian Williams, US attorney in Manhattan, alleged on Tuesday.
“She lied directly to JPMC and fabricated data to support those lies – all in order to make over $45 million from the sale of her company.”
The criminal charges include conspiracy, wire fraud affecting a financial institution and bank fraud – each of which carries a maximum sentence of 30 years in prison if Ms Javice is convicted. She has also been charged with securities fraud, which carries a 20-year prison term.
Ms Javice, who is a dual citizen of France and the US, lives in Miami. She was arrested on Monday at Newark Liberty International Airport and produced before the Manhattan federal court on Tuesday.
She surrendered her US and French passports and her travel is now limited to New York City and South Florida.
The bond is to be guaranteed by two people and the equity in her Miami home. Ms Javice will observe a curfew and is not permitted to contact witnesses or current JP Morgan or former Frank employees. Earlier on Tuesday, she was sued for fraud by the US Securities and Exchange Commission.
Ms Javice founded Frank in 2017 as an online platform to help college students fill in the Free Application for Federal Student Aid, or Fafsa. Forbes named her on its “30 Under 30” list for finance in 2019.
In 2021, she began looking for a buyer for the site, beginning the acquisition process with JP Morgan and a bank that is not named in the criminal complaint unsealed on Tuesday.
Ms Javice told both banks that Frank had 4.25 million customers who had signed up for accounts, according to the government. In reality, Frank had fewer than 300,000, allege the authorities.
Prosecutors claim that during the discussions with JP Morgan, Ms Javice asked Frank’s director of engineering to take the company’s actual customer data set and use it to create a larger, synthetic set. The computer engineer raised concerns, and said “I don’t want to do anything illegal”, according to the complaint.
Ms Javice and an unidentified co-conspirator said the request was legal. “We don’t want to end up in orange jumpsuits,” she told him, according to the complaint. The engineer, who is a current JP Morgan employee as a result of the acquisition, declined to make the data set.
Ms Javice then hired an outside data scientist to create the phoney set, falsely claiming the full database of Frank users was actually a smaller, random sample of a much larger database, authorities allege.
JP Morgan, which acquired Frank in 2021, sued Ms Javice and another executive, Olivier Amar, in federal court in Delaware in December, alleging they used fake customer accounts to lead the bank into completing the deal. Mr Amar was not named as an accused in Tuesday’s complaints.
Ms Javice claims JP Morgan bought Frank without proper due diligence and was trying to deflect attention from its violations of student privacy laws.