Charlie Javice, the founder behind student loan startup Frank, is facing criminal charges related to alleged financial fraud related to her previous business dealings with JPMorgan Chase.
The 31 year-old entrepreneur was charged with securities fraud, bank fraud, conspiracy, and wire fraud affecting a financial institution on Tuesday by federal prosecutors from Manhattan, whilst also facing civil fraud charges by the SEC. The allegations stem from a civil suit filed by JPMorgan Chase last year after buying her startup Frank for $175 million and discovering she grossly exaggerated the number of customers her financial aid company had amassed.
Javice’s attorney refrained from commenting on the matter, but Javice herself previously asserted to Business Insider that she’d filed a countersuit against JPMorgan accusing the bank of firing her “in bad faith” in an effort to forego paying a $20 million retention bonus. If found guilty, Javice could face up to 30 years imprisonment; however, such fraud cases at the federal level typically result in significantly less jail time than the maximum sentence.
JPMorgan purchased Frank— a microfinance company supposedly armed with an innovative strategy to help post-secondary students secure substantially more financial aid— for a whooping $175 million back in 2021. At the time, Javice claimed Frank secured around $28,000 in funding for each student, which was shockingly nearly twice the amount otherwise disbursed to post-secondary attendees for the 2015-2016 year.
Javice also told JPMorgan that Frank had more than 4.25 million users, when in reality the startup only had about 250,000 students using the service. The bank uncovered her dubious claims after a failed email marketing campaign targeting 400,000 students resulted in 70% of the emails bouncing back, and only 103 of them actually being opened. In JPMorgan’s suit against Javice, the bank said an follow-up internal investigation determined that she, along with Frank’s chief growth officer Olivier Amar, gave $18,000 to a science data expert to produce nearly 4 million fake accounts that ultimately enticed JPMorgan into the deal.
“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,” wrote Attorney Damian Williams in a statement.
Information for this briefing was found via the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
How it Works: Order Spoofing, Part Two – Spoofing In The Small Cap Sector
JP Morgan’s $920 million fine for having manipulated gold markets with order spoofing was widely...