The 30-year-old founder of a college financial planning website accused of fabricating nearly 4 million user accounts before selling it to JPMorgan for $175 million has been charged with fraud.
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| Frank founder Charlie Javice, Jamie Dimon |
Founded in 2016 by CEO Charlie Javice, the company, 'Frank,' offered software to help young Americans obtain financial aid in what Javice framed as "an Amazon for higher education," and had the backing of billionaire Marc Rowan - the company's lead investor. JPMorgan touted the Sept. 2021 deal as giving it the "fastest-growing college financial planning platform" used by over 5 million students at 6,000 institutions.
The 31-year-old Javice was charged by Manhattan federal prosecutors on Tuesday with one count of conspiracy to commit bank and wire fraud, one count of wire fraud, one count of wire fraud affecting a financial institution, and one count of bank fraud according to Bloomberg.
"As alleged, Javice engaged in a brazen scheme to defraud JPMC in the course of a $175 million acquisition deal. 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," said US Attorney Damian Williams in a Tuesday statement. "This arrest should warn entrepreneurs who lie to advance their businesses that their lies will catch up to them, and this Office will hold them accountable for putting their greed above the law."
Javice says the bank rushed to buy Frank without doing proper due diligence, and was attempting to deflect attention from its violations of student privacy laws. She has countersued the bank in Delaware state court to force JPMorgan to cover her legal fees.
Javice said in a response to JPMorgan’s suit that that Chief Executive Officer Jamie Dimon pushed to acquire Frank out of fear that another bank was eyeing the company, that she was being scapegoated for the bank’s faulty due diligence and that it was JPMorgan that asked her to come up with “synthetic data” on Frank users. -Bloomberg
According to JPMorgan, however, the bank discovered the fabricated accounts after sending out emails to a batch of 400,000 Frank customers - with around 70% of them bouncing back, according to according to a lawsuit filed in December in US District Court in Delaware, CNBC reported in January.
The bank's lawsuit claims that Javice pitched the bank on the "lie" that over 4 million users had signed up to use Frank to apply for federal aid. When the bank asked for proof during due diligence, Javice allegedly fabricated an enormous list of "fake customers – a list of names, addresses, dates of birth, and other personal information for 4.265 million ‘students’ who did not actually exist."
In reality, Frank had less than 300,000 customer accounts at the time, according to the lawsuit.