The Justice Department (DOJ) and Federal Deposit Insurance Corporation (FDIC) announced criminal charges against entrepreneur Charlie Javice for allegedly making false claims and submitting false data as part of a $175 million fraud scheme.
Javice allegedly inflated the number of customers at her company, Frank, to defraud JP Morgan Chase into buying the company for $175 million in September 2021, according to the DOJ press release published Tuesday. She was charged with 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.
Former start-up CEO charged in $175 million fraudhttps://t.co/0xMuRRtmS8
— US Attorney SDNY (@SDNYnews) April 4, 2023
She allegedly told banking giant JP Morgan that her company had 4.25 million users when it had less than 300,000, according to the press release. When the bank tried to verify her claims, she allegedly hired an outside data scientist to create a synthetic data set with 4.25 million rows in order to misrepresent her company’s total number of users. Javice and an alleged co-conspirator also tried to purchase a real data set of 4.25 million college students to cover up the misrepresentations, according to the DOJ.
Javice was featured on Forbes’ 2019 “30 Under 30” list for finance as the founder of Frank, a company designed to help college students fill out their financial aid forms. She was also named to Crain’s New York’s 2019 list of “40 Under 40” for business. (RELATED: Alleged Fraudster Sam Bankman-Fried Pleads Not Guilty To Five Added Charges In New York)
She was set to make over $45 million from the transaction by selling her equity stake in Frank and receiving a retention bonus, according to the DOJ. She was arrested Monday night in New Jersey and will be presented in front of U.S. Magistrate Judge Barbara Moses on Tuesday.
“As alleged, Javice engaged in a brazen scheme to defraud JPMC [JPMorgan Chase] in the course of a $175 million acquisition deal. She lied directly to JPMC and fabricated data to support those lies — all in order to make over $45 million from the sale of her company,” U.S. Attorney Damian Williams said, according to the press release.
“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,” Williams continued.
Javice received similar charges for the alleged fraud scheme in a civil complaint filed by the Securities and Exchange Commission (SEC) on Tuesday.
“Rather than help students, we allege that Ms. Javice engaged in an old school fraud: she lied about Frank’s success in helping millions of students navigate the college financial aid process by making up data to support her claims, and then used that fake information to induce JPMC to enter into a $175 million transaction,” Director of the SEC’s Division of Enforcement Director Gurbir Grewal said in a press release from the agency.
“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,” he added.
