Frank founder is accused with fraud over a $175 million JPMorgan deal.
Charlie Javice, founder of the college financial planning platform Frank, was charged by the Justice Department on Tuesday with defrauding JPMorgan Chase of $175 million.
In an effort to "fraudulently induce" the bank to purchase the business in 2021, Javice, 31, is accused of "falsely and dramatically" exaggerating the number of customers Frank actually had. This accusation was made by federal prosecutors in Manhattan. According to them, she stood to collect more than $45 million from the alleged deceive.
The former rising star in technology, who was once included among Forbes' 30 Under 30, was detained on Monday night in New Jersey and is scheduled to appear in federal court in Manhattan on Tuesday afternoon.
She is accused on four counts. They consist of one count each of conspiracy to commit bank and wire fraud, bank fraud, wire fraud, and wire fraud affecting a financial institution. The maximum term for each of the three offenses is 30 years in jail.
Damian Williams, the U.S. attorney for the Southern District of New York, said in a statement that 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."
In conjunction with the alleged conspiracy, the Securities and Exchange Commission on Tuesday also sued Javice for fraud.
According to a representative for Charlie Javice's lawyer, Alex Spiro, "Charlie denies the allegations." The spokesperson stated that Spiro had nothing further to offer.
A request for comment from JPMorgan did not immediately receive a response. Jamie Dimon, the CEO of the bank, referred to the purchase of Frank as a "huge mistake" in January.
The accusations were made months after JPMorgan sued Javice, claiming that she deceived the bank into thinking that Frank had more than 4 million clients. JPMorgan said in its lawsuit that the firm actually had fewer than 300,000 clients.
After JPMorgan pushed for confirmation of Frank's customer base, Javice allegedly recruited a data science professor to create millions of fictitious accounts, according to the bank. The lawsuit contained emails between the professor and Javice, including one in which the entrepreneur questioned whether using unique ID would be preferable to using fake emails.
JPMorgan only became aware of the discrepancy when, according to the bank, 70% of emails sent to a batch of about 400,000 Frank clients bounced back. In January, it closed down the startup.
It was "implausible," according to Javice, that JPMorgan "was led to believe Frank had 4.25 million registered users when its website publicly claimed the company had helped more than 350,000 people access financial aid," in a counterclaim filed in February.
By fLEXI tEAM