The entrepreneur Charlie Javice, who while in her 20s founded the start-up company Frank, that sought to simplify college financial aid applications, and sold it to JP Morgan Chase for $175 million, was found guilty of bank fraud charges at a Manhattan federal courthouse on Friday.
“This text is damning proof of this case,” Assistant U.S. Attorney Nicholas Chiuchiolo had told the jury during his closing argument on Wednesday. He was referring to a text message Ms. Javice’s former chief growth and acquisition officer, Olivier Amar, had sent to her in August 2021.
The ‘damning’ text message was shown to the jury on a screen and read, “You’ll have 4.5m users today.” In the message Mr. Amar was indicating, the prosecutor alleged, that Ms. Javice would have a list of 4.5 million “people” she could falsely describe as customers at her start-up. The list was fake. In reality less than 300,000 people had signed up on Ms. Javice’s online platform. The jury also saw Ms. Javice’s reply: she texted back, “Perfect. Love you.”
The nation’s largest bank, JP Morgan Chase and Co., fell for the hoax and bought Ms. Javice’s company for $175 million. When the fraud came to light a year later, in 2022, JP Morgan Chase sued Ms. Javice. The government soon filed its own charges. Ms. Javice was arrested in April 2023 at Newark airport in New Jersey. She was later released on bail on a $2 million bond.
After a five-week long trial at the Southern District of New York, the jury found both Javice, 32, and her top executive, Mr. Amar, 50, guilty of bank fraud, wire fraud, securities fraud and conspiracy to commit wire and bank fraud. They each face up to 30 years behind bars, though legal experts say they are both likely to receive milder sentences.
It’s a steep fall for Javice, who founded her company in her mid-twenties and appeared on the prestigious Forbes’ “30 Under 30” list and on Crain’s New York’s 40 under 40. Raised in Westchester County, an affluent suburb north of New York City, by a father who worked at a hedge fund and a mother who is a life-coach and a former teacher, Ms. Javice attended a private French-American school and later graduated from the Wharton School of the University of Pennsylvania.
Her online platform, Frank, offered to guide students through the process of applying for financial aid by helping to fill out the Free Application for Federal Student Aid form, a government form, available free of charge and used by students all over the country to apply for financial aid for college or graduate school. The notoriously Byzantine financial aid application process has bedeviled families for decades, but Ms. Javice told Fox Business in 2017 that through her website, applicants would be able to fill out the form “in under 4 minutes,” and “on the phone.”
Ms. Javice secured funding from venture capitalists, such as the Israeli-American Michael Eisenberg, who led the investment for the website development platform Wix.com, and Apollo Management CEO Marc Rowan, one of New York’s financial titans, who was called to testify during the trial on her behalf.
When Ms. Javice looked to sell her company in 2021, prosecutors said, she began promoting that Frank had over 4 million users. JP Morgan Chase was interested in the purchase because it saw potential account and credit card holders and loan applicants in the young clientele.
When the executives wanted to verify the advertised 4 million users, prosecutors alleged, Ms. Javice asked the chief of engineering at her company, Patrick Vovor, to fabricate synthetic data to validate her claim. Mr. Vovor testified during the trial that he told her he would not “do anything illegal.” He added: “She said, ‘Don’t worry. I don’t want to end up in an orange jumpsuit.’” But Mr. Vovor refused to do it.
Ms. Javice’s lead defense attorney, Jose Baez, tried in vain to discredit the witness by exposing that Mr. Vovor had been interested in Javice romantically and that she had rejected him.
Prosecutors focused on the fraud. They alleged that Javice then hired an associate professor of mathematics at Queens College, part of the City University of New York, Adam Kapelner, and he that provided her with 4,265,085 rows of spreadsheet data.
“I found my genius,” Ms. Javice texted to Mr. Amar at the time and paid Mr. Kapelner $18,000. The jury saw documents that showed how Ms. Javice had tailored the invoice to exclude any specific details regarding Mr. Kapelner’s task.
The deal with JP Morgan Chase went through. Ms. Javice was paid $21 million on top of a half-million-dollar annual salary and a bonus package. Besides selling her company, she had been hired by JP Morgan Chase as a managing director for student solutions.
But Ms. Javice and Mr. Amar knew, prosecutors argued, that they needed to produce names and email addresses, because the bank would soon begin a marketing campaign targeting the 4 million promised users. So they bought data from commercial data providers for over $100,000, which included names, home and email addresses, and birthdays.
When bank executives started sending out emails, most of them didn’t go through, and Business Insider reported that only 10 people signed up for a Chase checking account. The fraud eventually came to light. Javice was fired and the bank sued.
“The defendants bought data to cover their tracks,” Mr. Chiuchiolo told the jury on Wednesday. “They bought 4.5 million records and would later claim they were Frank users.”
Defense attorneys painted a different picture. Mr. Baez argued that the bank “knew exactly what they were buying,” and even argued that the bank reimbursed Javice for the $100,000 data fee.
“Somebody robbed the bank!” Mr. Baez joked in his closing argument on Wednesday. “It was Charlie the Kid!”
He argued that prosecutors had “cherry picked” the documents they showed the jury. “This document was not put on display,” he said, and held up the merger agreement Ms. Javice signed with the bank. “The actual deal was not looked at.”
Mr. Baez said the 4 million users were not customers, but people visiting the website, and according to Google Analytics, that seemed to be true. The financial mandarin, Mr. Rowan, testified that it didn’t matter if a person was actually filling out a financial aid application or just browsing the website; what investors were mostly interested in were the “eyeballs” on the screen.
The defense attorney further argued that the bank was less concerned with user numbers than in the narrative of Ms. Javice herself – a young female CEO – and in the concept of her start-up, specifically her earned trust as a student company.
“With this face,” he said and pointed at his client, sitting behind him at the defense table, “the face of this company… Being able to take this concept and make it their own is what they bought.”
On Friday, after the conviction was handed down, the defense attorneys urged the judge to consider that the evidence presented by the prosecution did not merit the conviction. The judge agreed to hear arguments at a later time and scheduled the sentencing for July 23.
Ms. Javice will remain free on bond in Florida, where she relocated to during the Covid-19 pandemic, while she awaits her sentencing. Following the verdict, the defense and prosecution argued before the judge over whether Ms. Javice must wear an electronic monitoring ankle bracelet. The defense argued that she cannot wear the device since she now makes a living teaching pilates and can’t perform the exercises while wearing the bracelet. The prosecution objected, and the judge said he’ll decide the matter next week.
On the same day Javice was convicted, President Trump granted relief to two entrepreneurs who were also found guilty of defrauding investors with lies about their companies: Nikola’s founder and former chief executive, Trevor Milton, and a co-founder of the digital media company Ozy Media, Carlos Watson.
Mr. Trump pardoned Mr. Milton, a prominent donor to the Republican party, who was convicted in 2022 for defrauding investors in Nikola, his electric truck company. He was sentenced to four years in prison and fined $1 million, but had been free on bail awaiting the appeal of his conviction.
Mr. Watson, whose sentence the president commuted, had been about to report to prison to begin an almost 10 year prison sentence for misrepresenting his company’s finances and performance to investors and lenders. He was also ordered to pay $96 million in restitution and forfeiture.
The president, who himself was indicted by the Justice Department, has been steadily granting pardons to defendants in high profile prosecutions. In addition to offering relief to Messrs. Milton and Watson, Mr. Trump also pardoned Ross Ulbricht, the founder of the Silk Road dark web drug market who was serving a life sentence, as well as Devon Archer, Hunter Biden’s former best friend, and he ordered that corruption charges against Mayor Adams be dropped.
Perhaps the president will save Ms. Javice from serving prison time. It also remains to be seen how harshly the judge will sentence her.
(Except for the headline, this story has not been edited by PostX News and is published from a syndicated feed.)
