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Founder of Frank charged over alleged $200 million fraud of JP Morgan Chase

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Charlie Javice, the founder of a student loan assistance company previously known as Frank, has been charged by The Security and Exchange Commission over an alleged $200 million fraud of JP Morgan Chase.

The charges are over the $175 million sale of the company to JPMorgan Chase Bank NA (JPMC) in 2021.

SEC believes Charlie Javice tricked JPMC into believing Frank had access to 4.35 million students' data.

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However, the number was not even close and was actually under 300,000.

The SEC alleges Javice made numerous misrepresentations about Frank's purported millions of users to lure JPMC into buying the company.

The SEC says JPMC pressed the executives of Frank for the students' data, which led to Javice working with Frank's director of engineering to generate false data and make it appear that the company didn't have fewer than 300,000 customers but 4.25 million.

When the director refused to comply, it is alleged Javice paid a data science professor to manufacture the data required to close the deal with JPMC.

SEC'S investigation shows Charlie Javice received $9.7 million of Frank's eventual $175 million sale, directly in stock proceeds.

It is also claimed she received millions more indirectly too, though trusts and a contract entitling her to a $20 million retention bonus as a new employee of JPMC.

Gurbir S. Grewal, Director of the SEC's Division of Enforcement, said: "Rather than help students, we allege that Ms Javice engaged in an old school fraud: she lied about Frank's success in helping millions of students navigate the college financial aid process by making up data to support her claims, and then used that fake information to induce JPMC to enter into a $175 million transaction.

"Even non-public, early-stage companies must be truthful in their representations, and when they fall short we will hold them accountable as in this case."

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The complaint, filed in the U.S. District Court for the Southern District of New York, charges Charlie Javice with violating the antifraud provisions of the Securities Act of 1933 and Securities Exchange Act of 1934.

The complaint also names trusts held by Javice as relief defendants, the same trusts she would indirectly receive money from.

The SEC seeks injunctive relief, an officer and director bar, disgorgement and prejudgment interest thereon, and civil penalties.

SEC's investigation was conducted by Wesley Wintermyer and Lindsay S. Moilanen and supervised by Tejal D. Shah.

The conduct of the lawsuit is being handled by Nancy Brown, Mr Wintermyer, and Ms Moilanen.

The U.S. Attorney's Office for the Southern District of New York is also assisting the SEC, which announced a parallel criminal investigation today, and the Federal Bureau of Investigation.

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