The largest bank in the United States, JPMorgan Chase & Co., has accused young Jewish entrepreneur Charlie Javice of tricking her into buying her company for $175 million by inventing millions of her alleged customers.
In a lawsuit filed by the bank last month, it accused the once-promising CEO, who was on the Forbes 30 under 30 list, of engaging in an elaborate plan to get the list of clients of her college financial planning startup Frank, that JPMorgan bought in September 2021.
The bank accused Javice and Frank’s former chief growth and acquisition officer, Olivier Amar, of shaming nearly four million customers and deceiving its due diligence team by hiring a data science expert to cover up its actions , and created millions of fake profiles on the platform.
“In order to benefit, Javice chose to lie, including lying about Frank’s success, Frank’s size, and the depth of Frank’s market penetration,” the lawsuit reads.
Javice’s attorneys, in turn, have denied the allegations against their client and have filed a lawsuit against JPMorgan for allegedly trying to avoid paying her.
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The now 30-year-old founded Frank in 2016 when she was just 24 years old. With a stated goal of helping college students submit financial aid forms and saving billions in college tuition, Frank and his young founder caught the world’s attention.
But according to JPMorgan, it was mostly a hoax, or at least an extremely overblown success story. The bank claims that instead of the 4.25 million college students Frank reportedly had as customers by the end of 2021, it never had more than 250,000.
Yes, the rich can be fooled. Call it greed. JP Morgan paid scammers, in this case a scammer, Charlie Javice, $175 million to acquire her college financial aid company. Turned out to be a total scam. Add them to the list of scam entrepreneurs. rich, right? pic.twitter.com/PURj9GWM2b
— Mr. Mustard ???????? ????????? ????????? ????????? (@pc_chicago) January 21, 2023
According to a report by The New York Times, despite repeated warning signs, Javice continued to receive sympathetic coverage from leading news outlets including Forbes, Fast Company Magazine, Medium and Insider.
The US Department of Education took notice of Frank soon after the company was founded. In its early days, the company offered college students financial aid for their tuition through a website called frankfafsa.com.
FAFSA, which stands for Free Application for Federal Student Aid, is a registered trademark used by Frank without permission, the ministry said at the time. As part of a 2018 settlement agreement, Frank handed over the web address to the department and switched to an alternative web address.
Around the same time, an Israeli co-founder of Frank, Adi Omesy, sued Javice for wage theft in Israel and received compensation.
But that didn’t stop her overwhelmingly positive media coverage.
In 2018, Business Insider published an article titled, “A 26-year-old founder has a solution to what Bill Gates calls an ‘unnecessary hurdle’ to college — and her startup is helping students save thousands in tuition.”
In the article, Javice claimed Frank saved his users an average of $28,000 in tuition.
However, in an article released by the outlet following JPMorgan’s lawsuit against Javice, it quoted student assistance expert Mark Kantrowitz as saying Frank was only simplifying the process of submitting the FAFSA form for students.
“Frank did nothing to affect the amount of help the students would have received if they had submitted the FAFSA themselves,” Kantrowitz told Insider. “That would not have led to a doubling of the funding.”
He added that Frank “randomly” invents numbers when describing the amount of help his users receive.
Javice’s close relationship with the media began in 2011 when she appeared on Fast Company’s 2011 list of the 100 Most Creative People for her role in a previous startup she founded called PoverUp.
Founded as a non-profit organization, PoverUp’s stated goal was to offer credit to entrepreneurs in poor countries and lift them out of poverty by using small contributions from college students.
However, an insider investigation found no evidence that PoverUp ever registered as a nonprofit. The outlet also quoted a former company board member as saying it never got much traction, contradicting Javice, who said in 2013 the company took out $300,000 in loans.
Javice soon abandoned the idea and went on to build Tapd, a company trying to connect young professionals to job opportunities via text messaging.
The company was later renamed Frank after financial difficulties forced Javice to lay off their entire team. Still, Javice managed to present the challenges as a learning moment and frame them as part of their ultimate success story.
In an email addressed to an online magazine in 2020 and leaked to Insiders, Frank’s PR rep described Frank’s story as “wonderful,” noting that Javice’s “first venture in 18 months fizzled out” and she nevertheless managed to “convince [investors] to fund your next company, Frank.”
Forbes 30 under 30:
– Charlie Javice: JP Morgan says it used millions of fake clients to dupe them into acquisition;
— Caroline Ellison: CEO, Alameda Research, money fraud;
— Elizabeth Holmes: CEO, Theranos, fraudsters convicted of biotechnology;
– Sam Bankman-Fried: You know him. pic.twitter.com/CUCjlUcEtw— Yuriy Gnatyuk ???????? (@ygnatyuk_) January 12, 2023
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