Charlie Javice Gets Seven Years For Defrauding JPMorgan

Charlie Javice was sentenced to 85 months behind bars for defrauding JPMorgan Chase & Co. in its $175 million acquisition of her student-finance startup, Frank.

US District Judge Alvin Hellerstein handed down the sentence Monday in Manhattan federal court. Prosecutors had asked that Javice, 33, be given a 12-year sentence, but the judge seemed to take into account testimony concerning her good character.

“You’re a good person,” Hellerstein told Javice. “You’ve done a bad thing, and I have to punish you.” In addition to prison time, he ordered her to forfeit $22.4 million and to pay $287.5 million in restitution to JPMorgan.

A New York jury convicted Javice in March, finding that the onetime entrepreneur had lied and faked user data to mislead the nation’s biggest bank into believing her site had more than 4.25 million users when it actually had fewer than 300,000. 

“I am deeply sorry, and I am asking with all my heart for forgiveness,” Javice said through tears before her sentencing. “If it were within my power, I would never make the same mistakes again, not for money, not for recognition, not for anything.” Family members in attendance in the front row of the courtroom also wept as Javice spoke.

Prosecutors asked Hellerstein in a court filing for a stiff sentence, calling the crime a “brazen fraud” that she undertook to get JPMorgan to pay far more for her company than it was worth in the September 2021 deal. Javice’s lawyers on Monday suggested a sentence “in the neighborhood of 18 months.” They had called her actions a “single lapse in judgment” and claimed the loss was “not consequential” to a bank as big as JPMorgan.

Javice’s lawyers and JPMorgan declined to comment on the sentence. The bank has separately sued Javice over the Frank deal. 

Elite Founders

A University of Pennsylvania Wharton School graduate whose company attracted investors like Apollo Global Management Chief Executive Officer Marc Rowan, Javice was one of several young startup founders with elite backgrounds convicted of fraud in recent years. The group includes FTX’s Sam Bankman-Fried and Theranos Inc.’s Elizabeth Holmes.

Rowan was among the scores of people who wrote Hellerstein seeking leniency for Javice. In a letter earlier this month, the private equity executive asked the judge to consider her “full character,” which he said was marked by passion, creativity, intelligence and empathy.

“I feel she will make many meaningful contributions to society moving forward,” wrote Rowan, who served on Frank’s board and also testified as a defense witness at Javice’s trial.

Frank, which JPMorgan shut down in early 2023, offered a tool to help students fill out their Free Application for Federal Student Aid, or Fafsa, which is required by most colleges in making financial aid decisions. 

‘Synthetic’ Users

JPMorgan executives testified at trial that they hoped to gain millions of new, young customers through the Frank Deal, which made Javice a managing director and head of student solutions at the bank. But the bank launched an internal investigation after an email marketing push to Frank users yielded only 10 new checking accounts, they said.

Jurors heard from a data scientist whom Javice paid $18,000 to create “synthetic” user data to provide to JPMorgan during her negotiations with the bank. Frank’s chief engineer testified that he had refused to create such data for Javice because he feared it might be illegal.

Javice’s defense team tried to focus attention on what it characterized as JPMorgan’s flawed and rushed due diligence. They also tried to suggest that the bank didn’t really care about Frank’s user numbers and was more concerned about buying the company before another bank did. 

A JPMorgan executive testified that the bank mistakenly thought Bank of America Corp. was also bidding for Frank. In reality, Capital One Financial Corp. withdrew a $125 million offer over regulatory, marketing and technological concerns on the same day JPMorgan made its bid for Javice’s company.

‘JPMorgan’s Stupidity’

On Monday, one of Javice’s lawyers, Ronald Sullivan, suggested that JPMorgan’s failings should be considered in the “background” of her sentencing. But Hellerstein indicated he wouldn’t be taking “JPMorgan’s very poor due diligence” into account.

“A fraud is a fraud, whether you outsmart someone who’s smart or someone who’s a fool,” the judge said, adding that he was focused on “her conduct, not JPMorgan’s stupidity.” 

Javice was convicted along with Frank’s former chief growth officer, Olivier Amar, who faces sentencing next month.

During trial, lawyers for Amar sought to distance him from Javice, pointing out that he was not part of many conversations she had. Javice had sought to be tried separately from Amar, but Hellerstein denied her request.

Javice has indicated the judge’s refusal to sever her trial from Amar’s will be one of the issues raised in her appeal. In court papers seeking bail while Javice challenges her conviction, her appellate lawyer, Alexandra Shapiro, said her client didn’t receive a fair trial because she faced “two prosecutors,” Amar and the government.

Shapiro said Javice will also contest Hellerstein’s evidentiary rulings and jury instructions. Hellerstein allowed her to remain free on bail while she appeals.

The case is US v. Javice, 23-cr-251, US District Court, Southern District of New York (Manhattan).