Startup founder Charlie Javice pleads not guilty to fraud over sale to JPMorgan

ByMiles Cohen ABCNews logo
Tuesday, May 23, 2023

An entrepreneur accused of grossly exaggerating the value of her college financial planning startup, ahead of its sale to JPMorgan Chase, pleaded not guilty to federal fraud charges on Monday in Manhattan, a spokesperson for the U.S. Attorney's Office told ABC News.

Charlie Javice, 31, who once made the prestigious Forbes "30 Under 30" list of "big money" entrepreneurs, sold her now defunct tech startup to the bank in 2021 for $175 million - millions of dollars more than the company was worth, federal prosecutors said last month after Javice was arrested.

She was indicted on May 18 on securities fraud, wire fraud, bank fraud, and conspiracy charges.

U.S. Attorney Damian Williams said last month following Javice's arrest that this should be a warning to "entrepreneurs who lie to advance their businesses [and] that their lies will catch up to them."

Her spokesperson denied the allegations. Her lawyer, Alex Spiro, could not be reached for comment.

JPMorgan Chase began talks with Javice in 2021 about acquiring her startup, named Frank, which promised to simplify the financial aid process for college applicants.

Representatives for the financial institution were intrigued by its model: Frank's software would allow students to apply for federal financial aid in under seven minutes, according to company documents cited in the complaint. With Javice's technology, the complicated FAFSA (Free Application for Federal Student Aid) process, would be streamlined. Once the form had been complete, it would only take a click, the company boasted.

Javice told the bank ahead of the deal that about four million people had already created an account with Frank. But the startup had far fewer users, argued prosecutors, who said Frank had less than 300,000 accounts at the time.

Before JPMorgan Chase agreed to purchase Frank, the bank requested data to verify its number of users. It was then that Javice turned to her director of engineering and asked him to fabricate a data set, prosecutors said.

When he declined, she hired outside help from a data scientist to create a spreadsheet with about four million rows - one to represent each account, prosecutors said. The rows included the names and emails of those who the company claimed had signed up.

JPMorgan Chase went ahead with the acquisition, paying Javice $21 million for her equity stake in Frank - and $175 million in total. Following the transaction, Javice was retained to work at JPMorgan Chase for another $20 million.

During her tenure at the company prosecutors say Javice successfully purchased another data set of information, but this time containing names of real students. But when JPMorgan Chase sought to launch a marketing campaign to those who they believed to have signed up for Frank, they found some data points missing, prosecutors said.

In Nov. 2022, following an internal investigation, Javice was fired by the company. In April, she was arrested.

Javice's plea comes just a week before fellow startup founder Elizabeth Holmes, 39, will report to prison to serve an over 11-year sentence. Holmes was convicted in 2022 for defrauding investors about her blood testing technology, which she said could run any test with a single drop of blood.

Javice, who is out on $2 million bail, is scheduled to have her next court appearance on June 6.