Frank Founder Faces Criminal Charges Over $175 Million Fraud With JPMorgan
Charlie Javice, the creator of the college financial planning website Frank, was accused criminally by the United Department on Tuesday with defrauding JPMorgan Chase of $175 million.
In an effort to “fraudulently entice” the bank to purchase the business in 2021, Javice, 31, is accused of “falsely and significantly” exaggerating the number of customers Frank actually had. This accusation was made by federal authorities in Manhattan. According to them, she stood to collect more than $45 million from the alleged lie.
The former rising star in technology, who was once included among Forbes’ 30 Under 30, was detained on Monday night in New Jersey and is scheduled to appear in federal court in Manhattan on Tuesday afternoon.
Indicated are four counts. They consist of one count each of conspiracy to commit securities fraud, bank fraud, wire fraud, and wire fraud affecting a financial institution. The maximum term for each of the three offenses is 30 years in jail.
The U.S. Attorney for the Southern District of New York, Damian Williams, said in a statement that this arrest “should serve as a warning to entrepreneurs who lie to advance their businesses that their lies will catch up with them and that this Office will hold them accountable for putting their greed above the law.”
In conjunction with the alleged conspiracy, the Securities and Exchange Commission on Tuesday also sued Javice for fraud.
According to a representative for Charlie Spiro’s lawyer, Alex Spiro, “Charlie denies the claims.” The spokeswoman stated that Spiro had nothing further to offer.
A request for comment from JPMorgan did not immediately receive a response. Jamie Dimon, the CEO of the bank, referred to the purchase of Frank as a “big blunder” in January.
The accusations were made months after JPMorgan sued Javice, claiming that she deceived the bank into thinking that Frank had more than 4 million clients. JPMorgan said in its lawsuit that the firm actually had fewer than 300,000 employees.
Once JPMorgan pushed for confirmation of Frank’s customer base, Javice allegedly recruited a data science professor to create millions of fictitious accounts, according to the bank. The lawsuit contained emails between the professor and Javice, including one in which the businessman questioned whether using unique ID would be preferable to using phony emails that would pass an eye test.
JPMorgan only became aware of the error when, according to the bank, 70% of emails sent to a batch of about 400,000 Frank clients bounced back. In January, it closed down the startup.
It was “implausible,” according to Javice, that JPMorgan “was persuaded to believe Frank had 4.25 million registered customers when its website openly claimed the company had assisted more than 350,000 people receive financial aid,” in a complaint filed in February.