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Founder and former CEO of Frank, Charlie Javice has been charged with defrauding JPMorgan Chase for $175 million on April 4.
The accusations include falsely expanding the customers of a scheme aiming to fraudulently include the bank for the startup's acquisition in 2021 and intending to obtain more than $45 million from the scheme.
Following her arrest on April 3, the U.S. attorney for the Southern District of New York said that it is a warning to entrepreneurs who lie about the development of their businesses and that they will be held accountable for prioritizing their greed above the law.
A spokesperson for Charlie's attorney revealed that she has denied the accusations of her link to the scheme.
Reasons behind Charlie Javice's arrest and the charges imposed
Charlie Javice was arrested on Monday and four charges were imposed on her which included conspiracy to commit bank and wire fraud, wire fraud affecting a financial institution, bank fraud, and securities fraud. She could be sentenced to 30 years.
JPMorgan sued Javice a few months ago, charging her with cheating the bank and making false claims that she had more than 4 million customers while the real number was less than 300,000.
She created a fake user base for several students with the help of a data science professor when JPMorgan asked for details about her customer base. The bank discovered the truth when emails sent to around 400,000 people bounced back and the startup was shut down in January this year.
An investigation by SEC disclosed that Javice obtained $9.7 million in stoke proceeds and more via trusts and a contract promising her a retention bonus of $20 million.
Charlie Javice filed a counterclaim in February 2023, stating that it was unlikely for the bank to believe the claims made about her when the website claimed to be helping around 350,000 people get some financial help. Jamie Dimon, the bank's head, described the acquisition as a mistake.
Frank was launched in 2016
Frank was established in 2016 and helped students borrow loans and get some financial help. The company was charged with making customers believe that it was linked to the U.S. government by the United States Department of Education in 2017.
Frank's co-founder Adi Omesy filed a lawsuit against Charlie Javice over Israel's wage theft in 2018. Charlie claimed the same year that Frank secured financial aid worth $28,000 for its users.
Javice became JPMorgan's managing director in 2021 after Frank was sold to the bank. Following a lawsuit against her, she was terminated from the position in September last year.
