Former Frank CEO, Charlie Javice, has been charged with bank and wire fraud in the Frank loan scandal after allegedly inflating the number of clients her startup served to fraudulently induce JPMorgan Chase into acquiring the company for $175 million. Javice, who was set to receive over $45 million as a result of the sale, is facing charges that carry a maximum sentence of 30 years behind bars. Earlier this year, JPMorgan Chase shut down Frank after realizing that most of the people on the startup’s list of users were fake, exposing the Frank loan scam. This case has raised concerns about the accountability of fintech startups in the wake of high-profile fraud cases.
Former Frank CEO Charlie Javice has been charged with bank and wire fraud in the Frank loan scandal, also known as the Frank loan scam. Javice allegedly inflated the number of clients her startup served to fraudulently induce JPMorgan Chase into acquiring the company for $175 million in 2021. Javice, who was set to receive over $45 million as a result of the sale, is facing charges that carry a maximum sentence of 30 years behind bars. The Department of Justice accuses the fintech founder of “falsely and dramatically inflating” Frank’s user numbers.
The High-Stakes Acquisition
Javice created Frank in 2016 with the goal of simplifying the financial aid process for students and maximizing the amount of aid they received. She later became a managing director at JPMorgan Chase following Frank’s acquisition. However, earlier this year, JPMorgan Chase shut down Frank and filed a lawsuit against Javice and Frank executive Olivier Amar after realizing that most of the people on the startup’s list of users were fake.
The Frank loan scandal involved Javice hiring a data scientist to fabricate a user data set with 4.25 million students, when in actuality, the startup had less than 300,000 real users. Javice is also accused of purchasing a data set containing 4.5 million actual college students in an attempt to fill out Frank’s database following JPMorgan Chase’s acquisition.
The Deceptive Loan Practices
Javice denies the allegations and is countersuing for reputational harm. The Frank loan scandal has raised concerns about the accountability of fintech startups in the wake of high-profile fraud cases.
The charges against Javice 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, which comes with a 20-year maximum sentence.
US Attorney Damian Williams says in a statement, “As alleged, Javice engaged in a brazen scheme to defraud JPMC in the course of a $175 million acquisition deal. She lied directly to JPMC and fabricated data to support those lies — all in order to make over $45 million from the sale of her company.” The Frank CEO fraud case is still ongoing.
