U.S. charges Frank financial aid startup’s founder with defrauding JPMorgan By Reuters

By Jonathan Stempel

NEW YORK (Reuters) -The U.S. government on Tuesday filed criminal charges accusing Charlie Javice, the founder of the now-shuttered college financial planning company Frank, of defrauding JPMorgan Chase & Co (NYSE:) into buying the startup for $175 million in 2021.

Javice, 31, was accused by the Department of Justice of 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 said that when JPMorgan asked for a list of names, Javice paid an unnamed data science professor $18,000 to concoct a sham list of names.

Authorities said JPMorgan discovered the fraud after receiving only a few responses when it sent marketing materials to people who Javice claimed were real customers.

JPMorgan 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 potential 20 or 30 years in prison. The Securities and Exchange Commission filed related fraud 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.

Prosecutors said Javice was arrested on Monday in New Jersey.

’30 UNDER 30′

Frank, founded in 2017, 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.

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.