Charlie Javice, the founder of college financial-planning platform Frank, has been charged by the Justice Department with defrauding JPMorgan Chase out of $175 million. The charges stem from a scheme in which Javice is accused of “falsely and dramatically” inflating the number of Frank’s customers to “fraudulently induce” the bank to acquire the startup in 2021. Javice, who once made Forbes’ 30 Under 30 list, could face up to 30 years in prison if convicted on the charges of conspiracy to commit bank and wire fraud, wire fraud affecting a financial institution, bank fraud, and securities fraud.
According to prosecutors in Manhattan, Javice used a data science professor to invent millions of fake accounts after JPMorgan pressed for confirmation of Frank’s customer base. The bank alleges that Javice stood to gain more than $45 million from the alleged deception. Javice has denied the allegations, according to her attorney, Alex Spiro.
The charges come months after JPMorgan filed a lawsuit against Javice alleging she duped the bank into believing Frank had more than 4 million customers. In reality, the startup had fewer than 300,000, JPMorgan said in its suit. JPMorgan only discovered the discrepancy when 70% of emails sent to a batch of about 400,000 Frank customers bounced back, according to the bank.
The Securities and Exchange Commission has also sued Javice for fraud in connection with the alleged scheme. JPMorgan’s CEO, Jamie Dimon, had called the acquisition of Frank a “huge mistake” in January when the bank shut down the startup.
The criminal charges against Javice serve as a warning to entrepreneurs who lie to advance their businesses that their lies will catch up to them. This case demonstrates that the authorities will hold them accountable for putting their greed above the law. As businesses seek to raise capital and investors try to identify potential unicorns, this story serves as a cautionary tale of the importance of transparency and accuracy in financial reporting.