Javice Guilty: $175M JPMorgan Startup Purchase Fraud

Frank Founder Found Guilty of JPMorgan Fraud

Charlie Javice, the creator of the student loan application platform Frank, has been convicted of fraud. The conviction stems from allegations of misleading JPMorgan during the $175 million acquisition of her company.

Fabricated Customer Numbers

Following a five-week trial, the jury determined that Javice intentionally misrepresented the size of Frank’s user base. Prosecutors successfully argued that she constructed a largely fictitious customer list to induce JPMorgan into completing the purchase.

At the time of the 2021 acquisition, JPMorgan believed Frank possessed a customer base of 4 million individuals. However, subsequent investigations revealed a significantly smaller actual number.

Discovery of the Deception

The discrepancy came to light when JPMorgan initiated test marketing email campaigns to purported Frank users. A substantial 70% bounce-back rate indicated that the majority of the provided email addresses were invalid.

It was alleged that Javice engaged a mathematics professor to generate fabricated customer data. This data was then presented to JPMorgan during the due diligence phase of the acquisition process.

Defense Arguments and Javice's Plea

The defense team contended that the legal action was a consequence of post-acquisition regret. They attributed this to alterations in government procedures regarding financial aid application forms.

Javice maintained her innocence throughout the proceedings, entering a plea of not guilty and choosing not to testify in her own defense.

Potential Sentencing and Background

Now 32 years old, Javice faces a potential prison sentence extending to decades. Sentencing is currently scheduled for August, as reported by CNBC.

Frank was established by Javice in 2017, while she was in her mid-20s. Prior to the allegations, she received recognition for her entrepreneurial endeavors, being included in the Forbes 30 Under 30 list in 2019.

Key Takeaways

• Charlie Javice was found guilty of defrauding JPMorgan.
• The fraud involved inflating Frank’s customer count from 300,000 to a claimed 4 million.
• Prosecutors presented evidence of fabricated data created with the assistance of a math professor.
• Javice could face a lengthy prison sentence.