Federal prosecutors have charged Charlie Javice with fraudulently misrepresenting the value of the college financial aid technology startup she founded by inflating the company's customer base ahead of a $175 million sale to JPMorgan Chase.
The Securities and Exchange Commission accused Javice on Tuesday of knowingly concealing the number of customers that her New York-based company, Frank, had secured as JPMorgan prepared to acquire the fintech in an attempt to expand in the student financial services industry.
Javice wrongfully received approximately $9.7 million as a result of the transaction as well as "millions more indirectly," according to a complaint filed by the SEC in the U.S. District Court for the Southern District of New York.
The Department of Justice and the Federal Deposit Insurance Corporation also filed criminal charges against Javice after her arrest last night in New Jersey, accusing the Frank founder of making more than $45 million from the fraudulently negotiated deal, according to a separate statement released on Tuesday.
A spokesperson for Javice's attorney said in an email that the Frank founder denied the government's allegations and that her lawyer declined to comment.
The fintech founder allegedly exaggerated the amount of Frank's 300,000 student loan customers in the months leading up to JPMorgan's acquisition of the company in September 2021, according to the SEC's complaint.
Gurbir S. Grewal, director of the SEC's Division of Enforcement, said in a statement that Javice "lied about Frank's success" to induce JPMorgan into making a deal.
"Even nonpublic, early-stage companies must be truthful in their representations," Grewal said.
After launching Frank in 2017 as an online service helping potential and current college students apply for federally disbursed financial aid, the regulator alleged, Javice promoted on the fintech's website and in deal negotiations throughout 2021 that the company had attracted 4.25 million customers.
After JPMorgan agreed to purchase the fintech, the SEC accused Javice and a high-ranking Frank executive of working together to pay $105,000 and $75,000 to third-party data providers to augment an enlarged list of the company's customers.
JPMorgan Chase alleges in a lawsuit that the college-planning website Frank provided misleading information before the bank bought it. Experts say there were plenty of red flags from the beginning.
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A lawyer for Amar did not respond to a request for comment. A spokesperson for JPMorgan declined to comment.
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