The founder of Frank, a now-defunct college financial planning platform that was sold to JPMorgan Chase for $175 million, has been charged with fraud by the SEC.
The SEC’s complaint alleges that Charlie Javice, Frank’s founder and CEO, devised a scheme to mislead JPMC into believing that Frank had access to valuable data on 4.25 million students using the service, when the actual number was less than 300,000. During negotiations, JPMC requested data on Frank’s customers, and when Javice sought assistance from the company’s director of engineering to create synthetic data to support her claims, the director refused. Allegedly, Javice then paid a data science professor to fabricate the necessary data to finalize the deal with JPMC.
The SEC’s investigation revealed that Javice received $9.7 million directly in stock proceeds from the $175 million acquisition, along with additional millions through trusts, and secured a contract for a $20 million retention bonus as a new employee of JPMC.
“Rather than help students, we allege that Ms. Javice engaged in a classic fraud: she misrepresented Frank’s success in assisting millions of students with the college financial aid process by fabricating data to back her claims, and used that false information to persuade JPMC to enter into a $175 million transaction,” stated Gurbir S. Grewal, director of the SEC’s Division of Enforcement. “Even private, early-stage companies must be truthful in their representations, and when they do not, we will hold them accountable, as in this case.”
Additionally, JPMorgan Chase has filed a lawsuit against Javice over the alleged fraud, to which she has counterclaimed, seeking coverage for her legal fees. In a countersuit lodged against Chase in February, her attorneys accused the bank of engaging in a “massive ‘CYA’ effort” aimed at shifting the blame for a failed acquisition onto what they described as an “easy target: its young female founder.”