Startup Scam: Founder Who Lied to JPMorgan Faces Prison!
Frank Founder Faces Sentencing After $175M JPMorgan Chase Deal Gone Wrong
Charlie Javice, the founder of the financial aid startup Frank, is facing a significant prison sentence after being convicted of fraud. Federal prosecutors are seeking a 12-year prison term for Javice, who allegedly lied about the number of users her company had, ultimately leading to its $175 million acquisition by JPMorgan Chase in 2021.
Javice, now 33, founded Frank in 2017 with the aim of simplifying the Free Application for Federal Student Aid (FAFSA) process. However, prosecutors allege that she fraudulently inflated Frank's user base, claiming the company had 4 million customers when the actual number was only in the hundreds of thousands. This misrepresentation, they argue, was the primary driver behind JPMorgan Chase's decision to acquire Frank.
"The sole source of value in Frank was its purported relationships with millions of college-age students. Those millions of relationships with students turned out to be illusory and, as a result, so too was Frank’s value," prosecutors stated in a memorandum.
According to the prosecution, JPMorgan Chase would not have acquired Frank had they known the true number of users. The bank has since determined that Frank had no value to the institution. The defense, however, is arguing for a more lenient sentence, characterizing Javice's actions as a "singular lapse in judgment" and highlighting her efforts to help families, particularly first-generation Americans, achieve their educational dreams.
The case highlights the risks associated with startup acquisitions and the importance of due diligence. The sentencing hearing is scheduled for Monday, where the judge will determine Javice's fate.