The founder of a student aid startup has received a prison sentence. Consequently, this concludes a significant corporate fraud case. Charlie Javice committed a massive Frank founder fraud. She deliberately misled JPMorgan Chase. Ultimately, the bank bought her company for $175 million. She falsely inflated her customer numbers dramatically.
A federal judge sentenced Javice to 85 months in prison. This sentencing occurred on Monday, September 29. The court found her guilty of multiple felonies. Specifically, these included conspiracy and wire fraud. Additionally, she was convicted of bank fraud and securities fraud.
Javice originally founded Frank in 2017. The company aimed to help students. It simplified the financial aid application process. However, she later pursued a sale to JPMorgan. Prosecutors said she began a deliberate deception. She repeatedly claimed Frank had 4.25 million users. In reality, the platform had only about 300,000 customers.
“Javice perpetrated a $175 million fraud,” said prosecutor Amanda Houle. Furthermore, she “repeatedly lied about her startup’s success.” Houle also revealed a shocking detail. Javice even hired a data scientist. This was done to create completely fake data. The fake data supported her lies to the bank.
JPMorgan naturally wanted to verify her claims. Therefore, they requested proof of the user base. Javice then allegedly created a synthetic data set. This fake list invented millions of customers. She then directed a third-party vendor. She had them send the phony spreadsheet to the bank.
The Frank founder fraud was ultimately successful at first. JPMorgan completed the acquisition in 2021. As a result, Javice received over $21 million. This was for selling her personal equity stake. She was also scheduled for a similar retention bonus.
However, the scheme quickly unraveled. An assistant U.S. attorney called the acquisition “a crime scene.” The bank discovered the truth about Frank’s real size. They then alerted federal authorities.
Javice spoke in court before her sentencing. The 31-year-old expressed deep regret. She said she is “haunted that my failure transformed something meaningful.” Also, she stated, “Not a day goes by that I do not replay my mistakes.” She feels “profound remorse” for her actions.
Judge Alvin Hellerstein acknowledged her comments. He told Javice he did not think she would re-offend. He believes she will devote her life to service. However, he emphasized the need for deterrence. Others must learn from this severe punishment.
This case serves as a stark warning. It highlights the perils of startup culture and exaggeration. The Frank founder fraud demonstrates that white-collar crime has severe consequences. Javice was once celebrated on the Forbes “30 Under 30” list. She will now spend over seven years in federal prison.
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