The Justice Department on Tuesday criminally charged Charlie Javice, founder of college financial planning platform Frank, with defrauding JPMorgan Chase out of $175 million.
Javice, 31, is accused of “falsely and dramatically” inflating the number of customers Frank actually had in a scheme to “fraudulently induce” the bank to acquire the startup in 2021, federal prosecutors in Manhattan said. She stood to gain over $45 million from the alleged deception, they added.
The one-rising tech star – who was once named as one of Forbes’ 30 Under 30 – was arrested Monday night in New Jersey and is expected in Manhattan federal court Tuesday afternoon.
She faces four counts. They include 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. Three of the charges each carry a maximum sentence of 30 years in prison.
“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,” U.S. Attorney Damian Williams said in a statement.
The Securities and Exchange Commission on Tuesday also sued Javice for fraud in connection with the alleged scheme.
“Charlie denies the allegations,” a spokesperson for her attorney Alex Spiro told CNBC. Spiro had no additional comments, the spokesperson added.
JPMorgan did not immediately respond to a request for comment. The bank’s CEO, Jamie Dimon, in January called the acquisition of Frank a “huge mistake.”
The charges come months after JPMorgan filed a lawsuit against Javice alleging she duped the bank into believing Frank had more than four million customers. In reality, the startup had fewer than 300,000, JPMorgan said in its suit.
Javice used a data science professor to invent millions of fake accounts after JPMorgan pressed for confirmation of Frank’s customer base, the bank alleged. The suit included emails between the professor and Javice, including when the entrepreneur asked, “Will the fake emails look real with an eye check or better to use unique ID?”
JPMorgan only discovered the con when 70% of emails sent to a batch of about 400,000 Frank customers bounced back, according to the bank.
The bank shut down the startup in January.
Javice in February filed a counterclaim, saying it was “implausible” that JPMorgan “was led to believe Frank had 4.25 million registered users when its website publicly claimed the company had helped more than 350,000 people access financial aid.”