Charlie Javice, the founder of startup Frank which aimed to simplify the process of filling out the Free Application for Federal Student Aid (FAFSA), was found guilty of fraud in federal court. Javice quickly rose to fame and became a prominent figure in discussions about paying for college after founding Frank in 2016. However, trouble arose when Javice sold Frank to JPMorgan and the bank found discrepancies in the customer list provided. An internal investigation revealed that Javice and Olivier Amar, Frank’s chief growth and acquisition officer, had falsified much of the customer list, leading to Javice’s arrest at Newark Airport and subsequent legal proceedings.
During the trial, JPMorgan executives testified that one of the appeals of the acquisition of Frank was its promise of a customer list of over four million people with detailed contact information. However, it was later discovered that the list had been manipulated using synthetic data to inflate the number of customers. Professor Adam Kapelner, who was asked by Javice to create a list of over four million customers using synthetic data, testified that she was evasive about the reasons for this request, indicating a deliberate attempt to deceive. This manipulation of data was done to potentially attract customers to Chase accounts.
The prosecution presented evidence of text message exchanges between Javice and Amar discussing the creation of fake customer lists in a rush job to avoid detection, further indicating a deliberate attempt to deceive investors and customers. Javice asked for specifics to be removed from invoices related to the purchase of real names and emails from commercial data providers, showing an attempt to cover up the fraudulent activity. Assistant U.S. attorney Micah Fergenson argued that the falsification of customer lists was evidence of deceit by Javice, questioning the motives behind creating fake lists if there was no intention to deceive.
Javice now faces the possibility of decades in prison for her role in the fraud, as well as JPMorgan’s civil lawsuit to recover their investment in Frank. The bank had conducted tests on Frank’s customer list which yielded poor results, leading to suspicions of falsification. The trial revealed the extent of the deception carried out by Javice and Amar, ultimately resulting in legal action by both JPMorgan and the federal government.
The case highlights the risks and consequences of fraudulent activities in the business world, particularly in the tech startup industry where promises of large customer bases and potential for growth can attract significant investment. Javice’s fall from grace serves as a cautionary tale for entrepreneurs and investors alike, emphasizing the importance of transparency and honesty in business dealings. The verdict handed down in the federal court case demonstrates the serious legal ramifications that can result from engaging in fraudulent activities, regardless of initial success or reputation.
