A 30 year-old entrepreneur is being sued by JPMorgan, which claims it was misled into buying her education startup for $175million.
JPMorgan Chase says that Charlie Javice created four million fake users to increase the credibility of her fintech company Frank when she sold it to the bank in 2021.
Javice started the company in 2019 at 24 and was listed on the Forbes 30-under-30 list in 2016.
Frank offers software to improve the student loan application process for Americans seeking financial aid and it was once branded ‘the Amazon of higher education.’
Javice and another executive at the company, Olivier Amar, allegedly paid a data scientist $18,000 to create a list of fake customers when its own employee refused, the lawsuit alleges.
Charlie Javice, 30, oversaw the fabrication of data for four million fictitious customer to complete the sale of her education start up to JPMorgan in 2021, a lawsuit claims
Javice and another executive at the company, Olivier Amar, allegedly paid a data scientist $18,000 to create a list of fake customers, the lawsuit alleges
Javice, who is the daughter of a successful investment manager based in New York, purchased an apartment in Miami Beach in May 2021 for just under $1.5million, according to Miami-Dade property records.
She started Frank a few years after graduating from Wharton business school, she revealed during an interview about her entrepreneurial success with a former tutor, which the school uploaded to its YouTube channel.
In the lawsuit, filed in a US District Court in Delaware last year, JPMorgan said that it was pitched the company by Javice on a ‘lie’ that more than four million users had signed up to use the tool.
After the bank asked for proof of that claim while carrying out due diligence, she and Amar allegedly fabricated a database of names, addresses, schools and dates of birth for fictitious students.
The data suggested Frank had around 4,265,000 customer accounts – in reality fewer than 300,000 of those were legitimate, it’s claimed. The bank says the scheme unraveled when it tried to email those users and 70 percent of its emails bounced back, the Wall Street Journal reported.
Javice made $10million as part of the merger with JPMorgan, with a $20million bonus to follow at a later date. Amar made $5million from the deal, with a similar $3million bonus, Forbes reported. Both joined JPMorgan after the acquisition, according to their LinkedIn profiles.
The court filing includes alleged email exchanges between the hired data scientist and Javice in which they explain the methodology behind the fraud.
‘Our plan was to sample first name and last name independently and then ensure none of the sampled names are real,’ the lawsuit alleges they said to her.
Javice purchased an apartment in this complex on Miami Beach in May 2021, according to Miami-Dade property records
Javice (pictured in a modern looking high-rise with sunny skies in the background) on a call with her former tutor at Wharton who was interviewing her about her entrepreneurial success while with her family in Florida
The lawsuit also accuses Javice of initially trying to dodge the bank’s request for that customer information. ‘Javice first pushed back on JPMC’s request, arguing that she could not share her customer list due to privacy concerns,’ it said.
‘After JPMC insisted, Javice chose to invent several million Frank customer accounts out of whole cloth,’ it added. Included in the complaint were screenshots of presentations Javice gave to the bank making the false claims about its number of users.
JPMorgan has come under criticism recently for a spending spree during which its failed to carry out proper due diligence, Bloomberg noted.
‘This raises to the fore questions about whether JPMorgan is spending too much too fast,’ Mike Mayo, an analyst at Wells Fargo told Bloomberg.
‘The purchase price is less than half of 1 percent of this year’s earnings, but it still stands as a potential microcosm of a broader issue that perhaps JPMorgan is wasting more money than desired as it pursues such aggressive spending,’ he added.
Javice filed her own lawsuit against JPMorgan in the same week it filed theirs. She accused the bank of conducting ‘a series of groundless investigations’ into her conduct, saying it ‘manufactured a for-cause termination in bad faith’ in order to deprive her of a proper payout and ‘retrade the deal.’
‘After JPMC rushed to acquire Charlie’s rocketship business, JPMC realized they couldn’t work around existing student privacy laws, committed misconduct and then tried to retrade the deal,’ Javice’s lawyer, Alex Spiro, wrote in a statement to Forbes. ‘Charlie blew the whistle and then sued. JPMC’s newest suit is nothing but a cover.’
The first part of a letter written by Congress members in 2020 expressing concern at Frank’s practices
The second part of a letter written by Congress members in 2020 expressing concern at Frank’s practices
Frank’s practices, however, have been called into question before. In 2020 Congress members wrote a letter to the Chairman of the Federal Trade Commission claiming that its standardized form for applying for federal relief funds would not be viable.
Specifically, it accused Frank of ‘creating false hope and confusion for students while contributing to unnecessary extra work for financial aid administrators.’
It also made mention of the value of user information and data. ‘We further suspect that the company may be using the data collected from misled students to make a profit by selling data to third party advertisers,’ the Congress members wrote.
‘In short, this tool does not make it any easier for students to get relief funds and appears instead to be a way for Frank to mine and exploit students’ data for profit,’ the letter concluded.
