A Delaware merger agreement forced JPMorgan Chase to pay $115 million in legal bills for two executives who defrauded the bank out of $175 million, court documents revealed last week.
A federal judge sentenced Charlie Javice and co-defendant Olivier Amar for lying about the customer base of their student finance startup Frank when JPMorgan acquired it in 2021. The defense costs amount to roughly two-thirds of the acquisition price.
Javice received seven years in prison in September after a jury found she fabricated data claiming Frank had 4.25 million users when it actually served fewer than 300,000. Prosecutors said she paid a data scientist $18,000 to create fake user data for JPMorgan.
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Read: JPMorgan Chase vs. Frank, Explained
The extraordinary legal tab stems from a clause in the merger agreement requiring JPMorgan to pay both defendants’ legal expenses. A Delaware judge ruled in 2023 that the fraud allegations fell under that provision, despite JPMorgan’s efforts to avoid payment.
Javice’s defense involved 19 attorneys while Amar’s team included 16. The costs covered not only criminal defense but also parallel civil suits that JPMorgan and the Securities and Exchange Commission filed.
“Huge, huge number,” said Kevin O’Brien, a former federal prosecutor now in private practice. The bill far exceeds the $30 million Elizabeth Holmes spent defending herself in the Theranos fraud case.
US District Judge Alvin Hellerstein ordered $287.5 million in restitution, telling Javice he was “punishing her conduct and not JPMorgan’s stupidity.” He criticized the bank’s due diligence while acknowledging its flawed vetting didn’t excuse the fraud.
Javice, who founded Frank after graduating from the University of Pennsylvania’s Wharton School, remains free on bail while appealing. JPMorgan will likely continue covering those legal costs as well.
Amar, Frank’s chief growth officer, faces sentencing on October 20.
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