Charlie Javice, 31, has been charged with conspiracy, bank fraud and wire fraud by the Securities and Exchange Commission. She was arrested for those white-collar crimes in New Jersey on Monday, April 3.
Javice, who was named to Forbes’s “30 Under 30” list of young business stars in 2019, denies the charges’ allegations.
The case involves a student loan assistance startup called Frank, which Javice founded in 2017. In 2021, as CEO, she sold it to JPMorgan Chase for $175 million.
As part of the deal, CBS News reported, Javice received a $9.7 million payout and a job as a managing partner at JPMorgan Chase, which came with a $20 million retention bonus. In all, she stood to gain $45 million from the sale.
Prosecutors claim that Javice duped the bank by wildly inflating her company’s user numbers and brazenly lying about them to seal the deal. They say Javice claimed Frank had 4.25 million users when it only had, at most, 300,000.
The Daily Mail said the alleged scheme was discovered when the bank sent marketing test emails to a list of Frank’s customers, and only 28% of the emails were delivered, according to the bank. The bank said it normally finds a delivery rate of 99% with similar email campaigns.
Accusing Javice of supplying a list of fake customer names, JPMorgan fired Javice in November and filed a civil lawsuit against her in the U.S. District Court in Delaware.
The SEC’s charges stem from alleged fraud during the sale of Javice’s company, also known as TADP Inc.
The startup purported to provide an online platform to simplify the process of filling out the form Free Application for Federal Student Aid (FAFSA), a form that students use to apply for federal financial aid for college or graduate school.
The SEC said JPMorgan Chase was eager to buy Frank because the company claimed to have contact information—including names, addresses, emails and phone numbers—for more than 4 million students, whom the bank wanted to contact as potential new customers.
But Frank only had data for about 300,000 actual students. Around 4.2 million others were allegedly created from an artificially generated data set, or “synthetic” data, devised by a data scientist outside the company.
Learn about the surprisingly harsh punishments for white-collar crimes in Texas.
SEC also files civil lawsuit
The SEC also filed a civil lawsuit on Tuesday, April 4, alleging that Javice made “numerous misrepresentations about Frank’s alleged millions of users” in order to entice JPMorgan into making the $175 million deal.
Trouble for the startup can also be traced to 2020, when members of Congress wrote a letter to the chairman of the Federal Trade Commission claiming that Frank’s standardized form for students to apply for federal relief funds was not viable. They said the company might have been using data collected from misled students simply to make a profit by selling the students’ data to 3rd-party advertisers.
Javice refutes fraud allegations, countersues
Javice has refuted the accusation that she created a fabricated list of users to deceive the bank. In fact, she is countersuing JPMorgan for damages and $27.9 million in compensation, which she says she’s owed in the deal. Her lawsuit accuses JPMorgan of permanently tarnishing her reputation.
Javice claims that JPMorgan was aware that the user number she provided the bank was based on synthetic data, not actual user data. She says JPMorgan had asked her to provide a “synthetic data set of users” that only reflected Frank’s actual customers as a way to audit her users and avoid privacy issues by not sharing their real names.
Fraud is a serious crime
Regardless of how this case turns out, fraud is a serious crime, and convictions for fraud can lead to high fines and prison sentences of many years.
For example, businesswoman Elizabeth Holmes was recently sentenced to 11 years and 3 months in prison for defrauding investors about the business dealings and technology of Theranos, a blood-testing startup that she founded and was later closed.
Yes, you can go to prison for a white-collar crime—even if you’re a celebrity. Read our top-10 list of celebrities sentenced to jail for white-collar crimes.
Texas white-collar crime laws, punishments
Texas laws on white-collar crimes hold that the theft of $20,000 to $100,000 is a 3rd-degree felony with punishments including 2 to 10 years in state prison and a fine of up to $10,000.
The theft of $100,000 to $200,000 is a 2nd-degree felony with possible punishments of 2 to 20 years in prison and a fine of up to $10,000.
As for the theft of $200,000 or more, that is a 1st-degree felony with possible punishments of 5 to 99 years in state prison and a fine of up to $10,000.
Fraud and theft can also violate laws on the federal level. The U.S. Department of Justice has begun cracking down on white-collar and corporate crimes with investigations and arrests.
Find out how crimes are classified in Texas and the potential punishments for each type.
Defenses against white-collar crime charges
But not everyone who is accused or charged with a white-collar crime is guilty of such an offense. An experienced and knowledgeable white-collar crime defense lawyer can fight for their rights with skilled defenses against a criminal charge.
Houston’s award-winning Neal Davis Law firm handles a wide range of criminal defense cases, and the firm is often noted for white-collar crime defense work, having received many awards and honors for its handling of white-collar cases in Texas.
For his part, Davis has helped clients avoid prison sentences on white-collar crime charges.
One Davis client was the only person among 21 defendants to get probation—rather than prison—in a federal telemarketing fraud case concerning $300 million.
Though the other 20 defendants were all sentenced to prison, with sentences of as much as 20 years, Davis’s client was spared prison and, instead, received only 3 years of probation, also known as community supervision.
Another Davis client was given 2 years of probation—rather than prison—for the theft of public money after he pocketed almost $290,000 in military pension checks sent to his uncle for 20 years after the man’s death. Davis was successful in defending his client as a contrite family man who was ready to pay restitution.
Two brothers in Georgia and Florida have been sentenced to prison for a $1.6 million COVID-19 fraud scheme.
Get the best white-collar defense attorney you can find
Persons who face a claim, accusation or charge of a white-collar crime such as fraud, theft, embezzlement, money laundering or other non-violent offenses must secure the best white-collar defense lawyer they can find.