Charlie Javice, the founder of the student loan application startup Frank, was found guilty of defrauding JPMorgan by inflating the customer count of her company. After a five-week trial, a jury convicted Javice on Friday, agreeing with prosecutors’ claims that she fabricated the vast majority of Frank’s customer list to deceive the bank into acquiring her startup for $175 million in 2021.
When JPMorgan purchased Frank, the bank believed the startup had 4 million customers. However, JPMorgan discovered the truth when it sent test marketing emails to the alleged Frank users. Roughly 70% of those emails bounced back, revealing the actual number of customers was only about 300,000. This stark discrepancy led to an investigation into the legitimacy of Frank’s customer base.
Prosecutors allege that Javice hired a math professor to create fake customer data, which she then submitted to JPMorgan during the acquisition process. This false data helped convince the bank to buy Frank at a much higher value than it should have been worth. Javice’s defense attorneys argued that the lawsuit stemmed from JPMorgan’s buyer’s remorse, partly influenced by a change in the way financial aid forms are filled out. Despite these arguments, Javice pleaded not guilty and chose not to testify during the trial.
Javice, now 32 years old, faces up to decades in prison for her actions. Sentencing is expected to occur in August, according to a CNBC report. She founded Frank in 2017, and by 2019, she was recognized on Forbes’ 30 Under 30 list for her achievements in the financial technology space. However, this conviction has significantly marred her entrepreneurial career, highlighting the risks of deception in startup valuations and acquisitions.
This case serves as a reminder of the importance of transparency and honesty in business dealings, especially in high-stakes acquisitions.
