Have you heard about the website, Frank? It helped students apply for Federal student aid in under five minutes, usually taking hours, and the process has always been notoriously tricky.
It turns out the whole scheme was a fraud, and Frank founder Charlie Javice, 31, is now facing 100 years of prison time after being sued by JPMorgan, the banking giant she sold the business to for $175 million in 2021.
Javice was arrested on April 3 of this year but has been free on $2 million bail since her first court appearance on April 4. Last month, as per court records, she pleaded not guilty to bank fraud, securities and wire fraud, and conspiracy charges.
A grand jury indicted her on May 18 after prosecutors signalled they were engaging with her defence lawyers "regarding a possible disposition of this case."
JPMorgan CEO Jamie Dimon has described the acquisition of Frank as a "huge mistake." The global investment bank shut down the company in January.
How It All Started
Javice came from an affluent New York family and attended a private French-American school. Her entrepreneurial spirit has been evident since her teenage years. She had already figured out her first venture during a trip to Thailand. She was still in high school.
Javice quickly understood that people in developing nations lacked access to credit, and when she returned from her overseas trip, she planned to start a microfinance product. Her solution was to provide small, low-interest, secure debt to the underprivileged, and the venture was called PoverUp.
The online platform positioned itself as a non-profit that leveraged microfinance for social good "to end poverty with the click of a mouse." The idea was to harness small student contributions to create and disburse loans. However, the reality was much different, which we'll come to soon.
After high school, Javice pursued an undergraduate degree in finance and law at Wharton. Simultaneously, her venture started making headlines, eventually landing her a feature in the Ink magazine.
Right around then, Fast Company also listed her as one of the 100 most creative people, marking the first time Javice garnered significant media attention. Soon after, her rapidly growing popularity caught the attention of the Peter Thiel Foundation, which offered students $100,000 to leave college and pursue their entrepreneurial dreams.
However, according to a Tumbler post, Javice withdrew from the competition to stay in school. Despite missing out on the money, the scholarship bid earned her significant media attention, much more than before.
After graduating from Wharton, Javice explored market gaps, and after evaluating multiple business ideas, she finally discovered the free application for federal student aid (FAFSA).
Under FAFSA, the Federal Student Aid Office disburses more than $249 billion annually in federal aid to 13 million students. Still, the complex application process was the big issue, which caused students to leave billions of dollars unclaimed annually.
To Javice, this was an untapped market, and she decided to assist students with a solution to trim the whole process into a five-minute application or less. She had told CBSNewYork before that "it's totally free. That's really important to us, for all students to benefit from. So, a student takes a picture of their tax returns, then we do all the tax math for you. So math errors can put you into a very complicated verification."
Javice's online platform, founded in 2016, helped students see how much aid they were eligible for. After that, the student could go to school, see what the bill is, and then figure out the financial gap to be bridged. This approach became the core idea of Frank, which she described "as a name because it just meant honest."
She was able to leverage her rising entrepreneur status and connections as a result of media exposure to easily secure funding for her projects. The Frank platform had raised over $20 million and amassed over 300,000 users.
The company appeared to be a big success, with Javice seizing every opportunity to promote herself as an emerging star of the startup world.
She reflected on her thoughts to Insider in 2021. "I built a business and raised funds out of college, turning down a finance job even though I was told I would fail because I didn't have business experience," Javice had said.
In 2017, major red flags emerged. The US Department of Education issued a cease and desist letter, citing that Frank might mislead students into thinking it is associated with the government's official website. After the incident, Frank swiftly changed its marketing approach to clarify that it had no affiliation with the US government.
In December of the same year, Javice wrote an opinion piece for the New York Times titled "The 8 Most Confusing Things About FAFSA." The article later underwent a significant correction, citing inaccuracies about the aid process.
So, how did the CEO of a company specialising in FAFSA get so many things wrong? Although the general masses didn't pay much heed because Javice was on a media tour, she frequently appeared in articles and on podcasts, so much that it culminated in her inclusion in the Forbes prestigious 30 under 30 list in 2019.
Scamming JPMorgan
By 2021, Javice was exploring the possibility of selling her venture, and she was able to secure a meeting with none other than JPMorgan. The banking giant viewed Frank as an opportunity to grow their presence in the fast-growing niche of student financial products.
During the meetings, Javice held nothing back and pitched her company as an "acquisition machine," amassing over 4.25 million customers in 4 years. She also claimed that her company knew "more about [their] students than any lender, college, or employer."
The pitch was a success, and after multiple meetings, she finally convinced JPMorgan to purchase her company for a massive $175 million. However, closing the deal meant the bank would carry out its due diligence on Javice's claims, and they naturally started by verifying that the 4.25 million customers Javice claimed had signed up.
This is because the bulk of the company's price had to do with the quality of its customer base. However, something strange happened when JPMorgan requested the list of the millions of students. Javice refused to provide the list, citing privacy concerns! What came to light later on was that there weren't 4 million users, but fewer than 300,000.
In July 2021, Charlie had to present the data for the deal to proceed. Stuck in a tough spot, she had to decide between sharing the actual figures and risking losing a profitable deal or fabricating the numbers to complete the acquisition.
A previous bidder backed out of negotiations after seeing the real numbers. Fearing the loss of another potential suitor, she chose to falsify the data, hoping to pull it off. Creating a customer base with millions of fake emails is fraud on a grand scale, but that didn't deter Javice or her chief growth officer, Olivier Amar, from proceeding with the plan.
Initially, Amar approached the company's top engineer to create the fake accounts, but sensing danger, the engineer questioned the legality of the request. Despite Javice assuring him that "no one would end up in an orange jumpsuit," the engineer stood his ground and refused to comply.
Javice's backup was a professor in New York who specialised in "creative solutions" for data problems. With the professor's help, they created over 4 million fake accounts by using an algorithm that generated new fake customer information based on real profiles.
They scraped together a list and sent it to JPMorgan, and the banking giant bought it. Javice paid the professor $18,000 for his efforts and was waiting for her payday. However, they still had to cover their tracks.
Javice ordered the destruction of the fake customer list shortly after a third party completed their analysis. Meanwhile, Amar shelled out an extra $105,000 to acquire a separate dataset of 4.5 million students as a contingency plan if the other dataset didn't work out.
Once the deal closed, Javice received $10 million and was eligible for an additional $20 million retention bonus as a managing director at JPMorgan. Amar was also offered the post of executive director at the bank and received $5 million alongside a $3 million retention bonus.
Around that time, Javice went onto social media to boast that "it's not every day that an entrepreneur gets her fairy-tale new beginning (not ending)." This illusion of glory ended almost as quickly as it began for her.
Months later, JPMorgan was busy integrating Frank and its team into their operations and was preparing to utilise the vast customer base they had acquired. The bank sent advertisement emails to 400,000 Frank customers to realise something was wrong. Only 20% of the emails were delivered, and only 1% were opened, which led to a deeper investigation.
In the process, JPMorgan came across the email exchange with the New York professor that led to the suspension of both Amar and Javice from their JPMorgan roles. The bank filed charges against them in December 2022.
Javice did retaliate and counter-sue, arguing that her termination was not just. However, the court found evidence against her compelling. In April 2023, she was found guilty on four separate accounts of having "falsely and dramatically inflated the number of customers of the company and fraudulently inducing JPMorgan to acquire her company."
Legal documents also stated that "Javice chose each time to lie, and time and again she layered fraud upon fraud to deceive JPMorgan."
Fraud From The Beginning
Her squeaky clean image was just an illusion, as a person familiar with her would later comment: "This is exactly what she had been doing, what she has been doing all along, and now, [she] has gotten caught for it."
Remember her micro-lending venture PoverUp? The company was never officially registered, with no records of its existence despite her claims of customers and partnership deals. Several partners she claimed to have collaborated with have said they don't know who Javice is and haven't signed any agreement with PoverUp.
Furthermore, she told Wharton magazine in 2013 that PoverUp raised $300,000 from friends or family, but a former board member confirmed that the company disbursed no loans.
The Peter Thiel scholarship was another story Javice cooked up. She claimed to have supposedly turned it down, but Michael Gibson, who oversaw the grants, stated in a Forbes article that "she was never offered a fellowship, and it bothers me that she is going around saying that."
"Because of her personality, we didn't trust that she could get started in a real way," he had added. Reportedly, her team cheated during a scavenger hunt challenge for the scholarship trials. Gibson said, "The funny thing is, cheating in a scavenger hunt is a pretty small thing. But it's weird that now she's accused of something on a much greater, grander scale."
Despite these failures, she went ahead with Frank. It was initially a job search website that would connect young workers with job opportunities. Then, it became a credit score website before positioning itself as a place to help students with aid program applications.
According to Insider, it was a tough start initially. The venture ran out of cash, compelling Javice to stop paying her employees. Things turned worse when a person present at the first investor meeting at Frank reportedly said that Javice promoted the product by claiming they had thousands of signups when they had none.
When some of the people at the meeting confronted her about the claims, Javice had reportedly responded: "Listen, these old people don't understand; this is how it works; you fake it till you make it."
For over a decade, she carefully crafted an image and changed narratives to deflect almost all controversies. Charlie Javice's story reveals how her marketing prowess outshone her management abilities. She faked her way to the top but bit off more than she could chew. When she scammed JPMorgan, her short-lived success finally ended with it.
