Student loan startup founder Charlie Javice charged in $175M fraud case

Authorities on Monday arrested and charged Charlie Javice, former CEO of a student loan startup, accusing her of falsely portraying the size of her company in a $175 million fraud case.

Javice, 31, was charged with one count of conspiracy to commit bank and wire fraud, one count of bank fraud, one count of wire fraud and one count of securities fraud for “falsely and dramatically” increasing the number of customers at her startup company, Frank, according to the Justice Department. She inflated the number of customers so that she could attempt to persuade J.P. Morgan Chase (JPMC) to purchase the firm for $175 million, the department said, where she would have made $45 million from the fraud.

The count of conspiracy to commit bank and wire fraud, count of bank fraud and count of wire fraud each carry a prison sentence of up to 30 years in prison. The count in securities fraud carries up to 20 years, according to the Justice Department.

“As alleged, Javice engaged in a brazen scheme to defraud JPMC in the course of a $175 million acquisition deal,” U.S. Attorney Damian Williams said. “She lied directly to JPMC and fabricated data to support those lies — all in order to make over $45 million 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, and this Office will hold them accountable for putting their greed above the law,” Williams continued.

According to the complaint, Javice founded Frank around 2017 as a platform to help students in filling out the Free Application for Federal Student Aid. Two major banks, including JPMC, expressed interested in pursing an acquisition of the company in 2021, when Javice allegedly told the banks that Frank had 4.25 million customers or “users,” when in reality it had less than 300,000.

When JPMC wanted to verify the numbers, Javice fabricated a data set, according to the Justice Department.

“The allegations described in today’s criminal Complaint exemplify the many ways banks can be defrauded,” special agent in charge Patricia Tarasca said. “The FDIC-OIG remains committed to holding individuals accountable who threaten the integrity of financial institutions, and we thank our law enforcement partners for their diligence and dedication to investigating such crimes.”