Charlie Javice is accused of willfully misleading JP Morgan Chase into acquiring her student financial aid company, Frank.
Javice founded the company in 2016 after graduating from Wharton. It was meant to help American students seeking financial aid for loan applications by making it easier to file financial aid forms — and deliver billions in savings to those who needed money for college.
But her story didn’t add up right from the start. For one thing, Javice claimed the idea had come to her after she struggled with her own student loan applications. But, government financial aid is not typically available to someone from a wealthy family like Javice’s – which spent $40,000 per year on her private high school tuition.
And that’s just one of many outlandish claims made by the young entrepreneur at the centre of this fintech fraud scandal.
In 2019, Javice claimed that American college students left $40 billion in financial aid on the table every year, but respected student aid expert Mark Kantrowitz said this statement was woefully inaccurate.
He went on to say that, “Frank did nothing that would have affected the amount of aid the students would have received had they filed the FAFSA on their own.” Meanwhile, Javice continued to quote unsupported figures about the aid Frank users had received.
In 2020, Congress called on the Federal Trade Commission (FTC) to investigate what it labelled “deceptive practices” and issue a restraining order.
There were concerns that Frank was misleading and confusing students, and creating extra work for financial aid administrators. The FTC sent Frank a warning letter that its “purported assistance to students consists primarily of providing a form letter that may lack the information a student would need to apply for one of the grants from his or her school.”
The Department of Education also took notice and was not pleased at Frank’s use of FAFSA — a registered trademark — without authorization. The original website www.frankfafsa.com had to be shuttered, only to be replaced by a dot-org address that seemed to heighten its legitimacy.
A December 2017 opinion piece Javice wrote for The New York Times entitled “The 8 Most Confusing Things About FAFSA”, contained numerous errors about the FAFSA process that Frank ostensibly made less challenging, and required an 8-sentence correction.
Public statements about the number of Frank users seemed suspect. In November 2018, the site said it had helped 300,000 families access more than $7 billion in aid. Javice reiterated the 300,000 figure for a couple years before she started claiming, in January 2021, that Frank had assisted more than 4 million students.
Somehow these red flags were ignored and Javice continued to promote Frank, using her family’s wealth and connections to her advantage.
She was a media darling — able to make audacious claims that no one seemed to fact check. Some of her statements could’ve been easily dispelled, but it seems the whole story was too good to pass on…or to be true.
Javice sought out JP Morgan and pitched Frank to them in 2021 by highlighting the number of users, which the bank would undoubtedly see as potential future clients.
When JP Morgan asked for proof of Frank’s user base as part of their due diligence, Javice baulked, saying privacy violations prohibited her from divulging this information.
But, JP Morgan needed the user data before it would agree to any deal. So, she allegedly created a list of fake users, including names, addresses, dates of birth, and other personal information, for 4.265 million non-existent students.
She allegedly did so with the help of a data professor after an employee questioned - and refused – the data manipulation request originally directed their way.
After Javice produced the user data, Frank and JP Morgan reached a $175 million deal. Javice got $21 million for her equity stake, a position as Managing Director at JP Morgan, and a $20 million retention bonus.
But as soon as JP Morgan sent test marketing emails to 400,000 Frank customers, it was shocked to discover only 28% were deliverable. JP Morgan’s usual delivery success rate is 99%.
The bank quickly shut down the website and wrote off the entire investment.
JP Morgan accused Javice of fabricating the vast majority of the platform’s claimed users and declared that Frank likely only ever had 250,000 users. It also alleged Javice transferred millions of dollars to a shell company after they discovered the fraud.
Javice has pleaded not guilty to the criminal charges. She has been free on $2 million bail since her first court appearance. Her trial date has been set for October 2024. The JP Morgan suit has been put on hold while the criminal case moves forward.
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