JPMorgan’s Jamie Dimon calls the acquisition of Javice’s College Financial Aid Startup “a big mistake.”
Charlie Javis, founder of student loan application startup Frank, was convicted of fraudulently inflating JPMorgan Chase by significantly inflating the number of customers before selling the company to a bank for $175 million.
After a five-week trial, the federal ju judge in New York returned the conviction Friday, convicted Javice and her top executive Olivier Amar on all charges. Javice, who pleaded not guilty, did not testify during the trial.
The verdict includes three frauds and one count of conspiracy to commit fraud, each serving a potential sentence of up to 30 years.
Havis founded Frank in 2017 after graduating from Wharton School at the University of Pennsylvania. The platform, sold as “FAFSA’s Turbotax,” has at least at that point committed to simplifying long-term, disruptive free applications for the Federal Student Aid (FAFSA) process, charging users with modest fees for the service.
JPMorgan Chase bought the startup in the summer of 2021, weeks after Javice first met with bank chief executive Jamie Dimon. In a presentation to bank executives, Javice painted a fascinating picture of the startup’s future. It was drawn by millions of users who could move to loyal customers for JPMorgan’s credit cards, loans and other financial products after graduating from university.
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The deal quickly deteriorated after JPMorgan discovered that Frank claimed less than 300,000 real users claimed less than 4.25 million Javice. The bank sued her in December 2022, and federal agents arrested her the following April at Newark Airport in New Jersey.
Dimon, one of the world’s most powerful bankers, later described the acquisition of the student finance platform as a “big mistake.”
Javice’s lawyers are expected to appeal the verdict. They tried to argue that her trial was inappropriate as Amal was trying to save herself by hiding the information and claiming that she misunderstood him.
The case draws a comparison of Terranos’ disgraceful founder, Elizabeth Holmes. Holmes is currently serving an 11-year sentence for fraudulent investors out of the hundreds of millions of dollars.
Meanwhile, one of Frank’s main selling points (silences the painful FAFSA process) is less relevant.
In 2020, near the end of his first term, President Donald Trump signed a law requiring a massive overhaul of the FAFSA system. The redesigned online application dramatically reduced the number of questions needed from 108 to about 50, allowing families to import tax information directly from the IRS database.
