business
April 5, 2023 | 10:17 a.m
The 31-year-old tech entrepreneur who allegedly inflated user numbers at his college financial aid startup to trick JPMorgan Chase into buying his company for $175 million was released on $2 million bond Tuesday.
Charlie Javice, founder of financial planning site Frank, was seen leaving Manhattan federal court on Tuesday after federal prosecutors announced multiple charges against him, including conspiracy, wire fraud, bank fraud, and securities fraud.
If convicted, Javice, a Miami Beach resident featured in the Forbes “30 under 30” list in 2019could face decades in prison.
He was taken by authorities to Newark Airport in New Jersey on Monday night ahead of his court appearance on Tuesday, according to the feds.
Javice, who holds US and French citizenship, surrendered both his passports as part of a deal with prosecutors, according to Bloomberg News.
He is also limited to travel between New York City and South Florida.
Javice “engaged in a brazen scheme to defraud” JPMorgan Chase, according to Manhattan US Attorney Damian Williams.
“He outright lied to JPMC and fabricated data to support those lies – all to make over $45 million from the sale of his company,” according to Williams.
A charging document in Manhattan federal court said he claimed his company had more than four million users when it had fewer than 300,000 customers.
When JPMorgan asked for proof of Frank’s user base, Javice allegedly paid an “outside data scientist” $18,000 to create a fake customer list.
The spoofed data allegedly helped secure JPMorgan’s commitment to a deal to buy Frank, which was designed to streamline the application process for those seeking financial aid for college tuition.
Javice received a $21 million payout for the sale for the equity stake in Frank to JPMorgan and an additional $20 million in the form of a retention bonus, the feds said.
Javice and other Frank employees were also given jobs at the bank.
The federal complaint alleges that Javice first approached Frank’s director of engineering to create a fake data set.
When the engineer pushed the request, Javice tried to assure the employee that it was legal.
“We don’t want to end up in orange jumpsuits,” Javice said, according to the complaint.
JPMorgan became aware of the scam after it launched an email marketing campaign for individuals on Frank’s purported customer list that generated few responses.
The founder of Frank is also facing a series of civil lawsuits from the SEC.
SEC enforcement chief Gurbir Grewal said Javice was involved in an “old-school fraud.”
“He lied about Frank’s success in helping millions of students navigate the college financial aid process by fabricating data to support his claims, and then used that fake information to drive the JPMC entered into a $175 million transaction,” Grewal said.
When reached for comment, a representative for Javice said he “denies the allegations.”
In late December, JPMorgan filed suit against Javice for allegedly leading the bank to believe that Frank’s was “a business that engages deeply with the college-aged market segment with 4.625 million customers .”
“Instead, it received a business with fewer than 300,000 customers,” according to the explosive suit filed in Delaware federal court.
Javice responded, saying he was fired in November from his position as head of student solutions so that JPMorgan could avoid paying a $20 million bonus.
At the time, his lawyer, Alex Spiro, described the allegations laid out in JPMorgan’s lawsuit as “nothing more than a cover-up.”
Javice’s attorney, Alex Spiro, and a JPMorgan representative declined to comment on the latest charges.
Additional Reporting by Thomas Barrabi
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