The Department of Justice filed criminal charges against Charlie Javice on Tuesday; they’re alleging the former Frank CEO was responsible for fraud when she sold her financial aid startup to JPMorgan Chase in September 2021 to the tune of $175 million. If convicted, she’d face over a century behind bars. Securities and Exchange Commission also filed a lawsuit against Javice Tuesday,
Javice, 31, is a one-hit-wonder media darling who made waves attempting to simplify the college financial aid process. According to the DOJ’s lawsuit, Javice “falsely and dramatically” inflated the number of customers Frank had in order to entice JPMorgan to buy the company. Javice allegedly claimed that the startup had 4.25 million customers, but the real number was 300,000 clients, according to the lawsuit. The fraud would have benefitted Javice in a big way.
“[Javice] 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. 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,” said U.S. Attorney Damian Williams in a statement Tuesday.
Javice was arrested on Monday night in New Jersey. The DOJ charged Javice with separate counts of conspiracy to commit wire and bank fraud, wire fraud, and bank fraud. Those each carry a maximum sentence of 30 years in prison. She was also charged with one count of securities fraud, which carries a maximum sentence of 20 years in prison.
The SEC claims that Javice concocted a fraudulent data fabrication scheme to hide the fact Frank had misled them about the customer total they really had, the lawsuit said. She allegedly enlisted the help of a university professor to create fake data that appeared to represent 4.25 million customers and provided that list to a third-party validator, Acxiom, who in turn reported it to JPMorgan Chase.
“Rather than help students, we allege that Ms. Javice engaged in an old-school fraud: She lied about Frank’s success in helping millions of students navigate the college financial aid process by making up data to support her claims, and then used that fake information to induce JPMC to enter into a $175 million transaction,” said Gurbir Grewal, director of the SEC’s division of enforcement, in a separate statement. “Even nonpublic, early-stage companies must be truthful in their representations, and when they fall short we will hold them accountable as in this case.”
In all, Javice received $9.7 million directly in stock proceeds from the sale of Frank, millions more through trusts, and a contract entitling her to a $20 million retention bonus as a JPMorgan Chase employee, the SEC said.
The SEC charged Javice with violating provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The regulator wants Janice barred from the leadership of any public company and wants her to repay all ill-gotten gains and pay penalties.
JPMorgan Chase has also sued Charlie Javice on their own, claiming the Frank founder and Olivier Amar–Frank’s chief growth officer–committed fraud with the contract, securities fraud, conspiracy to commit fraud, as well as aiding and abetting fraud for allegedly fabricating those nonexistent accounts. JPMorgan Chase shut down the Frank website earlier in the year, in January.
Javice denied the allegations.
