The U.S. Department of Justice has charged Charlie Javice, the 31-year-old founder of college financial-planning platform Frank, with fraudulently obtaining $175 million from JPMorgan Chase. Javice is accused of significantly overstating the number of customers Frank had to entice the bank into acquiring the startup in 2021, a deception that would have netted her more than $45 million, according to federal prosecutors in Manhattan.
Javice, a former Forbes 30 Under 30 honoree, was arrested on Monday night in New Jersey and was scheduled to appear in Manhattan federal court on Tuesday. She faces one count of conspiracy to commit bank and wire fraud, one count of wire fraud affecting a financial institution, one count of bank fraud, and one count of securities fraud. Each of the three charges carries a maximum sentence of 30 years in prison.
U.S. Attorney for the Southern District of New York Damian Williams said in a statement that Javice's arrest serves as a warning to entrepreneurs who engage in deceitful practices to further their businesses. The Securities and Exchange Commission has also filed a lawsuit against Javice for fraud in relation to the alleged scheme.
A spokesperson for Javice's attorney, Alex Spiro, told CNBC that Javice denies the allegations. JPMorgan, which has not yet commented on the matter, previously referred to the acquisition of Frank as a "huge mistake" in a statement by CEO Jamie Dimon.
Javice's arrest follows a lawsuit filed by JPMorgan, which claimed she deceived the bank into believing Frank had over 4 million customers, when in fact the startup had fewer than 300,000. JPMorgan alleged that Javice enlisted a data science professor to create millions of fake accounts to corroborate Frank's customer base. The bank discovered the discrepancy when 70% of emails sent to around 400,000 Frank customers were returned as undeliverable. JPMorgan subsequently shut down the startup in January.
In response to JPMorgan's allegations, Javice filed a counterclaim in February, arguing that it was implausible for the bank to have believed Frank had 4.25 million registered users when the company's website publicly claimed to have assisted over 350,000 people in accessing financial aid.
