US reveals fraud case against CEO of startup bought by JPMorgan Chase

US officials unveiled criminal charges Tuesday against the head of a startup who allegedly defrauded JPMorgan Chase in the course of a $175 million sale to the banking giant.

Charlie Javice, 31, was scheduled to be arraigned Tuesday in US magistrate court following her arrest Monday night, according to a Department of Justice news release.
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Once a high-flyer named as part of the Forbes “30 Under 30” list, Javice touted her Frank online platform as a way to simplify the complicated process of filling out the US application for financial aid

During talks with JPMorgan and another major bank that did not pursue an acquisition, Javice “repeatedly” represented that Frank had 4.25 million users.

In fact, the platform had fewer than 300,000, according to US charges unsealed Tuesday.

“Frank was an appealing acquisition target for JPMorgan due to the marketing potential of Frank’s large — according to Javice — customer base, which consisted of young and diverse students,” the filing said.

When JPMorgan sought to verify Frank’s user base, Javice “fabricated” a data set, the DOJ said.

After Frank’s director of engineering declined the request, citing concerns about illegality, Javice hired an outside data scientist to “create the synthetic data set,” DOJ said.

“As alleged, Javice engaged in a brazen scheme to defraud JPMorgan in the course of a $175 million acquisition deal,” said US Attorney Damian Williams.

“This arrest should warn entrepreneurs who lie to advance their businesses that their lies will catch up to them, and this Office will hold them accountable for putting their greed above the law.”

Javice was charged with four counts of fraud, with potential sentencing of 20-30 years per charge.

In a parallel case, the Securities and Exchange Commission asked a US court to bar Javice from serving as an officer or director of a public company and civil penalties.
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