NEW YORK (Reuters) -The U.S. government on Tuesday filed criminal charges accusing Charlie Javice, the founder of the now-shuttered college financial aid company Frank, of defrauding JPMorgan Chase & Co (NYSE:JPM) into buying the startup for $175 million in 2021.
Javice, 31, was charged by the Department of Justice with repeatedly lying to the largest U.S. bank by claiming that Frank had lined up 4.25 million student customers when in fact she had data for only about 300,000.
Prosecutors in Manhattan said that when JPMorgan asked for a list of names, Javice paid an unnamed data science professor $18,000 to fabricate the other customers.
JPMorgan has said it learned of Javice’s fraud after sending marketing materials to people who she claimed were real, and finding that just 28% were delivered and 1.1% were opened, far fewer than in other similar campaigns.
The bank shut down Frank in January, and Chief Executive Jamie Dimon branded the acquisition a “huge mistake” in a Jan. 13 conference call with analysts.
Javice, of Miami Beach, Florida, was charged with bank fraud, securities fraud, wire fraud and conspiracy, each of which carries a maximum 20- or 30-year prison term.
She appeared briefly on Tuesday before U.S. Magistrate Judge Barbara Moses in Manhattan, who set bail at $2 million. The Securities and Exchange Commission filed related civil charges.
“Javice engaged in a brazen scheme to defraud JPMorgan Chase,” U.S. Attorney Damian Williams in Manhattan said in a statement. “She lied directly to (the bank) and fabricated data to support those lies – all in order to make over $45 million from the sale of her company.”
A spokesman for Javice in an email said, “Charlie denies the accusations.” Her lawyer, Alex Spiro, declined to comment.
’30 UNDER 30′
Founded in 2017, Frank was marketed as a tool to help simplify for students and their parents the often complex college financial aid process.
JPMorgan called it the “leading college financial planning platform for students” when it bought Frank in September 2021 and, according to prosecutors, paid Javice $21 million for her equity stake.
Javice, who studied at the University of Pennsylvania’s Wharton School, had earlier received much media praise for her work, showing up in 2019 in Forbes magazine’s “30 Under 30” finance list and Crain’s New York Business’ “40 Under 40” list.
Prosecutors said that after using the sham customer list, Javice tried to cover up her fraud by paying just $105,500 for real data about 4.5 million students.
But the list was missing email addresses for 2.04 million people, which Javice had told JPMorgan were in Frank’s possession, prosecutors said.
Javice was arrested on Monday night in New Jersey.
In December, JPMorgan sued Javice and Olivier Amar, who was Frank’s chief growth officer, in Delaware federal court.
Javice filed counterclaims in February, accusing JPMorgan of having “compromised her reputation” and wrongfully withheld $28 million of retention payments and equity.
Amar is seeking to dismiss JPMorgan’s case against him.
Source: Economy - investing.com
