Frank founder faces fraud charges

Charlie Javice, the founder of financial planning platform Frank, has been criminally charged by the Justice Department for defrauding JPMorgan Chase of $175m. Javice, who stood to gain $45m from the alleged deception, is accused of inflating the number of customers Frank had in a scheme to induce the bank to acquire the start-up. The fraud charges include conspiracy to commit bank and wire fraud, wire fraud affecting a financial institution, bank fraud, and securities fraud. The first three charges carry a maximum sentence of 30 years in prison.

The one-time rising tech star was arrested on Monday night in New Jersey and is expected to appear in Manhattan federal court. The Securities and Exchange Commission also sued Javice for fraud in connection with the alleged scheme. JPMorgan filed a lawsuit against Javice earlier this year, alleging that she duped the bank into believing Frank had more than four million customers when, in reality, the startup had fewer than 300,000.

The bank claimed that Javice used a data science professor to invent millions of fake accounts after JPMorgan pressed for confirmation of Frank’s customer base. JPMorgan only discovered the discrepancy when 70% of emails sent to a batch of about 400,000 Frank customers bounced back, according to the bank. It shut down the startup in January. Javice filed a counterclaim in February, stating that it was implausible that JPMorgan was led to believe Frank had 4.25 million registered users when its website publicly claimed the company had helped more than 350,000 people access financial aid.

Damian Williams, U.S. attorney for the Southern District of New York, said in a statement that this arrest should warn entrepreneurs who lie to advance their businesses that their lies will catch up with them, and the Office will hold them accountable for putting their greed above the law. JPMorgan’s CEO, Jamie Dimon, called the acquisition of Frank a “huge mistake” earlier this year.

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