May 18, 2015 (Reuters) – The largest U.S. bank, JPMorgan Chase & Co. (JPM.N), is facing indictment against teenage entrepreneur Charlie Javice for allegedly deceiving them into purchasing Frank, her now-defunct college financial aid firm.
On Thursday, federal court in Manhattan released a four-count grand jury indictment that charges Javice with conspiracy, securities fraud, wire fraud, and bank fraud. It is also requesting the seizure of her accounts containing millions of dollars.
Attempts to reach out for comment were met with silence from both Javice’s attorneys and the Manhattan U.S. Attorney’s office.
On April 3, Javice, 31, who was named to Forbes’ “30 Under 30” list for 2019 for his financial acumen, was arrested and faces charges of deceiving JPMorgan into purchasing Frank for $175 million in 2021.
Charlie Javice allegedly misled JPMorgan on multiple occasions on her business dealings, including falsely asserting that Frank had secured 4.25 million student clients when in fact the figure was closer to 300,000.
Fifteen days before the indictment’s filing, prosecutors and defense attorneys had stated that they were in discussions “regarding a possible disposition of this case,” a phrase that can occasionally hint at a guilty plea.
This is related to the fact that prosecutors were given additional time to have a grand jury indict Javice.
Prosecutors have publicly accused Javice of wrongdoing. She still hasn’t made a plea.
Upon its 2017 launch, Frank promised to be a helpful resource for parents and students seeking to navigate the complex world of college financial aid.
The fact that Javice’s marketing materials went unanswered by the individuals she pretended to be real led JPMorgan to discover her scam, the bank said.
In January, the bank shut down Frank, and Jamie Dimon, CEO, has criticized the purchase as a “huge mistake.”
In December, JPMorgan took legal action against Charlie Javice and Olivier Amar, the former chief growth officer of Frank, in a federal court in Delaware. The bank claimed that Amar and Javice committed fraud by inflating Frank’s client base in order to convince the bank to buy them.
Charlie Javice asserted that JPMorgan owes her millions of dollars following her November termination “without valid cause” and filed a countersuit against the bank.
The couple is attempting to recover their legal expenses by suing JPMorgan in the Delaware Chancery Court.
United States v. Javice, Southern District of New York, United States District Court, No. 23-cr-00251, is the name of the criminal case.
In addition, a legal case was filed by the Securities and Exchange Commission, which claimed that Charlie Javice deceived JPMorgan Chase into buying her company for $175 million in 2021 by falsely claiming to have data on 4 million people.
Charlie Javice launched Frank, an application to aid students, not long after he earned his degree from Penn. According to the Justice Department, Charlie Javice received $21 million for selling her stock investment in Frank and a job as a managing partner at JPMorgan Chase, along with a retention bonus of $20 million, as part of the plan to sell the business to the banking behemoth. The scam had a total potential profit of $45 million for her, according to law enforcement officials.
According to U.S. Attorney Damian Williams, “entrepreneurs who lie to advance their businesses should know that their lies will catch up to them” (quote).
Frank allegedly held the contact details (names, emails, and phone numbers) of more than four million students, a group of prospective new clients that JPMorgan hoped to acquire, as stated in the SEC’s complaint.
The government, however, claims the figures were false. According to the SEC’s complaint, Frank only had data for approximately 300,000 clients, but Javice, with the assistance of a local data science professor, created the remaining 4.2 million.
A Frank executive who remains anonymous and Javice “engaged in a months-long scheme to fabricate the data that both of them knew JPMC was paying $175 million to acquire,” according to the lawsuit.
The claims were refuted by Javice via his attorney.
Test marketing to Frank’s fictitious clients failed, and the bank subsequently learned about the suspected scam. As part of the deal, JPMorgan Chase had access to Frank’s internal documents. Among these records were emails in which Charlie Javice discussed buying user datasets from a data broker and urged the professor to produce “synthetic data” for 4.2 million customers.
“Rather of helping kids, we allege that Ms. Charlie Javice engaged in an old school fraud,” stated Gurbir Grewal, director of the SEC’s enforcement division. “Even non-public, early-stage companies must be truthful in their representations, and when they fall short we will hold them accountable as in this case.”
Separately, JPMorgan Chase, alleging fraud, and she countersued. Javice no longer works at the bank.