Charlie Javice was a successful businesswoman who is best known as the co-founder and CEO of the student loan start-up Frank.
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However, it turns out the entrepreneur lied and defrauded JP Morgan, now facing jail time. The sale happened in 2021, and it was only later the bank found out it was cheated.
Charlie Javice scammed JP Morgan
The Department of Justice (DoJ) claims that Charlie Javice, a former Forbes “30 Under 30” honouree, lied about the number of students her organization helped with their loan payments.
Forbes covers of fraudulent companies, source: linkedin.com
The CEO of Frank has been arrested for reportedly fabricating data to make more money. She reportedly made over $45 million thanks to this fraud. But that’s just a part of it as the acquisition deal by JP Morgan was worth a whopping $175 million.
“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,” US Attorney Damian Williams explained.
In December, JPMorgan sued Javice, claiming that she had assisted in creating phony accounts for millions of “customers” in order to convince the bank to acquire her business.
How did she do it?
This allegation forms the basis of the SEC’s complaint filed recently, which states that Javice misled JP Morgan by exaggerating the number of Frank’s users. According to the complaint, as negotiations between the two sides advanced, JPMorgan repeatedly requested consumer information from Frank’s executives.
To make it look like Frank had 4.25 million consumers, Javice allegedly asked Frank’s director of engineering to inflate the customer list. When that director wouldn’t cooperate, Javice reportedly paid over $18,000 to a data science professor.
He was obviously more than willing and capable of faking the information that was needed to finish the business transaction. Reportedly, Javice was awarded $9.7 million in stock holdings as part of the acquisition.
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Moreover, she earned more millions through trusts and a contract entitling her to a $20 million retention incentive as a new employee of JPMorgan Chase. Fantastic deal, indeed. She was even freed on Tuesday on a $2 million bond.
A lot of communication has occurred between the two sides since the case was initially filed. JP Morgan now calls the purchase a major blunder. Frank’s website was taken down by the bank in January. In March, Javice responded by filing a counterclaim, in which it claimed it was implausible that JP Morgan shut down Frank.
This is because the company has assisted more than 350,000 people to receive financial aid. Javice also argued that JP Morgan was not fooled by Frank’s business because of due diligence documents.
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