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| Former Start-Up Founder Charged by Prosecutors for Defrauding JPMorgan Chase | Former Start-Up Founder Charged by Prosecutors for Defrauding JPMorgan Chase |
| (36 minutes later) | |
| Charlie Javice, the 31-year-old start-up founder who JPMorgan Chase accused in a December lawsuit of lying to the bank as it prepared to acquire her company, is now facing criminal charges as well. | Charlie Javice, the 31-year-old start-up founder who JPMorgan Chase accused in a December lawsuit of lying to the bank as it prepared to acquire her company, is now facing criminal charges as well. |
| On Tuesday, the U.S. attorney’s office for the Southern District of New York charged her with wire, bank and securities fraud. It said that she “falsely and dramatically” exaggerated the number of customers that Frank, her now shuttered college financial planning company, actually had in a scheme to “fraudulently induce J.P. Morgan Chase to acquire” her start-up for $175 million. | On Tuesday, the U.S. attorney’s office for the Southern District of New York charged her with wire, bank and securities fraud. It said that she “falsely and dramatically” exaggerated the number of customers that Frank, her now shuttered college financial planning company, actually had in a scheme to “fraudulently induce J.P. Morgan Chase to acquire” her start-up for $175 million. |
| JPMorgan had made similar accusations after acquiring Frank, which claimed to help millions of students and families more easily file for financial aid. | JPMorgan had made similar accusations after acquiring Frank, which claimed to help millions of students and families more easily file for financial aid. |
| Ms. Javice, a Miami Beach resident, was arrested on Monday evening at Newark Airport in New Jersey. | Ms. Javice, a Miami Beach resident, was arrested on Monday evening at Newark Airport in New Jersey. |
| Three of the charges she faces each carry a maximum sentence of 30 years in prison. A spokesman said that she denied the allegations. Her lawyer, Alex Spiro, declined to comment, as did JPMorgan. | Three of the charges she faces each carry a maximum sentence of 30 years in prison. A spokesman said that she denied the allegations. Her lawyer, Alex Spiro, declined to comment, as did JPMorgan. |
| According to the federal prosecutors’ complaint — and a similar one that the Securities and Exchange Commission also filed Tuesday — Ms. Javice inflated data to make it appear that the company had over four million customers when it had only a small fraction of that. | According to the federal prosecutors’ complaint — and a similar one that the Securities and Exchange Commission also filed Tuesday — Ms. Javice inflated data to make it appear that the company had over four million customers when it had only a small fraction of that. |
| The scheme, according to the government’s claims, included hiring a professor to create fake accounts in an attempt to fool JPMorgan into thinking that there really were four million users. | The scheme, according to the government’s claims, included hiring a professor to create fake accounts in an attempt to fool JPMorgan into thinking that there really were four million users. |
| The U.S. attorney’s complaint included a slide titled the “Frank Thesis,” which was taken from a company presentation aimed at attracting potential investors or acquirers. There, the company boasted that it was an “acquisition machine” that knows “more about our students than any lender, college or employer.” | The U.S. attorney’s complaint included a slide titled the “Frank Thesis,” which was taken from a company presentation aimed at attracting potential investors or acquirers. There, the company boasted that it was an “acquisition machine” that knows “more about our students than any lender, college or employer.” |
| In fact, according to the government, Ms. Javice oversaw efforts to create a list of fabricated customers by acquiring names, contact information and other data from third-party companies. Frank then passed those names off to JPMorgan as its existing customers. | |
| In JPMorgan’s suit, the bank said that it became suspicious when a marketing test using Frank’s data failed drastically. The company also sued Olivier Amar, who was Frank’s chief growth and acquisition officer before the bank terminated him. | In JPMorgan’s suit, the bank said that it became suspicious when a marketing test using Frank’s data failed drastically. The company also sued Olivier Amar, who was Frank’s chief growth and acquisition officer before the bank terminated him. |
| Mr. Amar was not named in the complaints unsealed on Tuesday. Neither he nor his lawyer returned messages seeking comment. | Mr. Amar was not named in the complaints unsealed on Tuesday. Neither he nor his lawyer returned messages seeking comment. |
| When Frank’s director of engineering questioned the legality of one of Ms. Javice’s data manipulation requests, according to both government complaints, she responded that no one would end up in an “orange jumpsuit” over it. He refused to comply with the request. | When Frank’s director of engineering questioned the legality of one of Ms. Javice’s data manipulation requests, according to both government complaints, she responded that no one would end up in an “orange jumpsuit” over it. He refused to comply with the request. |
| The terms of the JPMorgan acquisition and subsequent retention agreement could have left Ms. Javice with over $45 million, according to prosecutors. Now, the S.E.C. is seeking to force her to forfeit “all ill-gotten gains,” including interest, and also pay penalties. | The terms of the JPMorgan acquisition and subsequent retention agreement could have left Ms. Javice with over $45 million, according to prosecutors. Now, the S.E.C. is seeking to force her to forfeit “all ill-gotten gains,” including interest, and also pay penalties. |
| “Even nonpublic, early-stage companies must be truthful in their representations,” Gurbir S. Grewal, director of the S.E.C.’s division of enforcement, said in a statement. “And when they fall short we will hold them accountable as in this case.” | “Even nonpublic, early-stage companies must be truthful in their representations,” Gurbir S. Grewal, director of the S.E.C.’s division of enforcement, said in a statement. “And when they fall short we will hold them accountable as in this case.” |