Most people, when they hear someone, someone was pitch “Amazon for Higher Education” would stare blankly in response and perhaps murmur “angry.” But not the megabank JP Morgan! When its executives learned that Charlie Javice, founder of financial aid startup Frank, was planning to start an “Amazon for Higher Education,” they eagerly committed $175 million. But it turns out they should have gone the “anger” route… because they are now Sue Javice for fraud.
Javice, a 2019 recipient of the highest honor a twenty-something can hope for (a spot on the forbes “30 Under 30” list), seems poised to join the illustrious ranks of young founders who overextended themselves a bit and one day woke up a scammer (your Elizabeth Holmeses, your Sam Bankman-Frieds).
JP Morgan claims that their Frank company, which allegedly guided college applicants through the FAFSA application process, “made up several million Frank customer accounts from scratch.” forbes reported late Wednesday. “In every aspect of her interactions with JPMC, Javice had a choice between revealing the truth about her startup and accepting Frank’s actual worth, or lying to inflate Frank’s worth,” the lawsuit reads. “Javice has chosen to lie every single time and the evidence shows she has consistently used scam after scam to fool JPMC.” Damn.
In July 2021, JP Morgan requested Frank’s user list as part of its due diligence process before purchasing the company. Javice pushed back, saying it would be an invasion of privacy to share. Behind the scenes, she and Frank’s chief growth officer, Olivier Amar, asked the company’s chief technical officer to create fake accounts to increase their numbers. This guy, smart asked if that was even legal.
So Javice and Amar reached out to a data science professor who happened to be based in New York City and paid him $18,000 to help create the fake accounts. In their correspondence, Javice asked if “the fake emails [will] look real with an eye check,” to which the data professor actually replied, “they will look fake.” Hm. He added that if he checked the fabricated list he made, it would “look fishy” to him. According to legal action, the entries showed that users lived in the same state, went to high school and attended college. Javice’s quick fix for getting rid of that “fishy” smell was to just have the professor erase all evidence of his work after he was done with it.
But the professor took his own sweet time creating 4.265 million fake users, and in the meantime, Amar got nervous and decided to splurge on 4.5 million random (real) student dates from the company ASL Marketing. Ultimately, high on the promise of “Amazon for higher education,” JP Morgan readily accepted the names Javice and Omar, which were eventually flipped.
I would have paused for a moment and asked if I really thought that millions of teenagers were responsible enough to download and use a FAFSA app. (Around 20 million students to complete the FAFSA each year; It would be a banana if 20 percent of them used a startup app without much support!) But the financial world is full of weird nerds, and maybe they just assumed the TikTok generation was obsessed with a FAFSA app would be , and the deal went ahead.
A few months later, the bank approached Javice and asked for user data so they could start marketing. (That’s what this is about, baby! Growing that sweet, sweet customer base.) When the bank sent out a test email to 400,000 college students, the results were “catastrophic.” More than 70% of emails were not delivered and only 1.1 perfect ones were actually opened – an alarmingly low number compared to the bank’s other marketing campaigns. It was only then that the bank discovered that the user lists Javice provided to them were fake.
This wasn’t the first time suspicions had been leveled at Frank. In 2020, members of Congress asked the Federal Trade Commission to investigate the company’s practices. “We are concerned that Frank is creating false hope and confusion among students while contributing to unnecessary extra work for grant administrators,” they said in a Letter. “We also suspect that the company may be using data collected from misled students to generate revenue by selling data to third-party advertisers,” the company said letter read. Getting bipartisan shadows under 30 is an achievement in itself! But Frank only got away with a warning from the FTC.
Days before JP Morgan filed its lawsuit, Javice sued the bank, claiming that she was in fact the whistleblower of this whole ordeal and that she was “owed millions of dollars for expenses incurred defending herself against internal investigations that began last spring.” Are you expecting a fraud lawsuit from your employer as a preventive measure? #Girlboss just moves!
Today, Frank’s home page simply states that it is “no longer available” and that you should “visit StudentAid.gov” to submit your FAFSA. What an ingeniously simple suggestion.
While this scam is not pretty much As delicious as Elizabeth Holmes and Theranos, it’s reassuring to see the tradition of startup scammers stretching into the New Year. And now Javice is on another, more exclusive list: Forbes Prodigies Who’ve (allegedly) Committed Fraud Before 35.
https://jezebel.com/jp-morgan-charlie-javice-frank-alleged-fraud-1849980215 Charlie Javice joins list of Forbes ’30 Under 30′ alumni who have (allegedly) committed fraud