Founder of student-aid website accused of fraud by SEC
Charlie Javice, the founder of the student aid website Frank, was accused of fraud by the Securities and Exchange Commission on Wednesday, in connection with its acquisition by JP Morgan. File photo by John Angelillo/UPI | License Photo
April 4 (UPI) -- Charlie Javice, the founder of defunct student loan assistance company Frank, was charged with fraud by the Securities and Exchange Commission on Tuesday.
Frank was sold to JP Morgan in 2021 for $175 million. However, the agency alleges that Javice falsely said that Frank had access to valuable data on more than 4 million students, when the actual number was less than 300,000.
Javice allegedly paid a data science professor to manufacture data to make it appear that Frank had 4.25 million customers, according to the SEC.
"She lied about Frank's success in helping millions of students navigate the college financial aid process by making up data to support her claims, and then used that fake information to induce JPMC to enter into a $175 million transaction," Gurbir S. Grewal, Director of the SEC's Division of Enforcement, said in a statement. "Even non-public, early stage companies must be truthful in their representations, and when they fall short we will hold them accountable as in this case."
RELATEDJP Morgan shuts down student-aid website over its user base claims
In January, JP Morgan shut down Frank and sued Javice, alleging that the company fabricated the amount of students it served.
A spokesperson for JP Morgan told CNBC that the organization believed it was helping Frank grow and "deepen" its relationship with borrowers, believing it was the "fastest-growing college financial planning platform."
Javice filed a countersuit against JP Morgan, accusing the financial giant of terminating her without cause and launching an undue investigation into her activities.
"After JPMC rushed to acquire Charlie's rocketship business, JPMC realized they couldn't work around existing student privacy laws, committed misconduct and then tried to retrade the deal," said Alex Spiro, an attorney for Javice.
Student aid startup founder arrested on fraud charges
By LARRY NEUMEISTER
By LARRY NEUMEISTER
TODAY
The Department of Justice emblem at the U.S. Attorney's Office for the Southern District of Florida in downtown Miami is pictured on Jan. 25, 2023. On Monday, April 3, Charlie Javice, the founder of Frank, a student loan assistance startup company that J.P. Morgan Chase acquired for $175 million two years ago, was arrested on charges that she duped the financial giant by dramatically inflating the number of customers her company had, authorities said Tuesday, April 4. (D.A. Varela/Miami Herald via AP, File)
NEW YORK (AP) — The founder of Frank, a student loan assistance startup company that J.P. Morgan Chase acquired for $175 million two years ago, has been arrested on charges that she duped the financial giant by dramatically inflating the number of customers her company had, authorities said Tuesday.
Charlie Javice, 31, of Miami Beach, Florida, was arrested Monday night in New Jersey on conspiracy, wire and bank fraud charges.
A charging document in Manhattan federal court said she claimed her company had over four million users when it had fewer than 300,000 customers.
Authorities said Javice, who appeared on the Forbes 2019 “30 Under 30” list, would have earned $45 million from the fraud.
A message seeking comment was sent to an attorney for Javice, who was expected to make an initial appearance in court later in the day.
In a release, U.S. Attorney Damian Williams said Javice “engaged in a brazen scheme” to defraud the acquiring financial company by fabricating data to support lies she told in a bid to make tens of millions of dollars from the sale of her company.
“This arrest should warn entrepreneurs who lie to advance their businesses that their lies will catch up to them,” he said.
According to a criminal complaint, Javice in 2017 founded TAPD Inc., which operated under the name Frank, to provide an online platform to simplify the process of filling out the Free Application for Federal Student Aid, a free federal government form used by students to apply for financial aid for college or graduate school.
In 2021, Javice sought to sell her company in her role as its chief executive to a large financial institution, the complaint said.
When JPMC sought to verify that her company had 4.25 million customers, Javice asked her company’s director of engineering to create an artificially generated data set, but the individual declined, it said.
She then hired an outside data scientist to create the synthetic data set as she purchased for $105,000 on the open market real information for over 4.25 million students, the complaint said. But it added that the data she purchased did not contain all of the information she had told JPMC was maintained by Frank.
In a civil complaint filed by the Securities and Exchange Commission, the regulatory agency alleged that Javice made numerous misrepresentations about Frank’s alleged millions of users to entice JPMC to purchase the now shuttered Frank.
Gurbir S. Grewal, director of the SEC’s Division of Enforcement, said in a release that “even non-public, early-stage companies must be truthful in their representations.”
He added: ““Rather than help students, we allege that Ms. Javice engaged in an old school fraud: she lied about Frank’s success in helping millions of students navigate the college financial aid process by making up data to support her claims, and then used that fake information to induce JPMC to enter into a $175 million transaction.”
The Department of Justice emblem at the U.S. Attorney's Office for the Southern District of Florida in downtown Miami is pictured on Jan. 25, 2023. On Monday, April 3, Charlie Javice, the founder of Frank, a student loan assistance startup company that J.P. Morgan Chase acquired for $175 million two years ago, was arrested on charges that she duped the financial giant by dramatically inflating the number of customers her company had, authorities said Tuesday, April 4. (D.A. Varela/Miami Herald via AP, File)
NEW YORK (AP) — The founder of Frank, a student loan assistance startup company that J.P. Morgan Chase acquired for $175 million two years ago, has been arrested on charges that she duped the financial giant by dramatically inflating the number of customers her company had, authorities said Tuesday.
Charlie Javice, 31, of Miami Beach, Florida, was arrested Monday night in New Jersey on conspiracy, wire and bank fraud charges.
A charging document in Manhattan federal court said she claimed her company had over four million users when it had fewer than 300,000 customers.
Authorities said Javice, who appeared on the Forbes 2019 “30 Under 30” list, would have earned $45 million from the fraud.
A message seeking comment was sent to an attorney for Javice, who was expected to make an initial appearance in court later in the day.
In a release, U.S. Attorney Damian Williams said Javice “engaged in a brazen scheme” to defraud the acquiring financial company by fabricating data to support lies she told in a bid to make tens of millions of dollars from the sale of her company.
“This arrest should warn entrepreneurs who lie to advance their businesses that their lies will catch up to them,” he said.
According to a criminal complaint, Javice in 2017 founded TAPD Inc., which operated under the name Frank, to provide an online platform to simplify the process of filling out the Free Application for Federal Student Aid, a free federal government form used by students to apply for financial aid for college or graduate school.
In 2021, Javice sought to sell her company in her role as its chief executive to a large financial institution, the complaint said.
When JPMC sought to verify that her company had 4.25 million customers, Javice asked her company’s director of engineering to create an artificially generated data set, but the individual declined, it said.
She then hired an outside data scientist to create the synthetic data set as she purchased for $105,000 on the open market real information for over 4.25 million students, the complaint said. But it added that the data she purchased did not contain all of the information she had told JPMC was maintained by Frank.
In a civil complaint filed by the Securities and Exchange Commission, the regulatory agency alleged that Javice made numerous misrepresentations about Frank’s alleged millions of users to entice JPMC to purchase the now shuttered Frank.
Gurbir S. Grewal, director of the SEC’s Division of Enforcement, said in a release that “even non-public, early-stage companies must be truthful in their representations.”
He added: ““Rather than help students, we allege that Ms. Javice engaged in an old school fraud: she lied about Frank’s success in helping millions of students navigate the college financial aid process by making up data to support her claims, and then used that fake information to induce JPMC to enter into a $175 million transaction.”
No comments:
Post a Comment