2023-08-11 20:09:23
After launching his start-up to help students finance their studies, Charlie Javice sold it to JPMorgan for 175 million dollars. The bank accuses him of having lied by inflating his clientele. Charged with fraud, she pleaded not guilty.
“A big mistake”. These are the words that Jamie DimonCEO of JPMorgan Chase, uses today to describe its September 2021 transaction with Charlie Javice. For 175 million dollars, the largest banking group in the United States had redeemed Frankthe young entrepreneur’s start-up, which aimed to help students obtain loans and financial aid.
On paper, the project was promising. Frank billed itself as the “fastest growing” student financial planning platform. It allowed them to quickly apply for all kinds of public aid and scholarships, while offering other academic and financial services. For Chase, the retail bank of the American giant, the deal was to be a springboard to this young clientele, which is hard to reach. Problem: Most of Frank’s 5 million student customers didn’t exist.
“Fake it till you make it”
Charlie Javice a always showed some confidence. Born in the early 1990s, she grew up in wealthy Westchester County, north of New York, and studied at the Franco-American Lycée. His father then worked in a hedge fund, and his mother was a “life coach”. She then pursued a double degree in finance and law at the Wharton School of the University of Pennsylvania. A classmate of hers would reveal years later that she had a tendency to “name drop” (i.e. quoting known names to impress his interlocutors), and to exaggerate the facts to his advantage.
Charlie Javice’s first business, PoverUp, is a kind of social network aimed at bringing together students who wanted to create microfinance clubs to help disadvantaged people around the world start their own businesses.
In 2011, while still a student, she created PowerUpa kind of social network aimed at bringing together students who wish to create microfinance clubs to help underprivileged people around the world start their own business. Startup magazine Inc. included PoverUp in its list of the “11 Coolest Student Startups,” while Fast Company named Charlie Javice one of the “100 Most Creative People in Business of 2011.”
She claims to have won the bourse Thiel in 2012. This scholarship of 100,000 dollars, offered by the billionaire Peter Thielco-founder of Paypal and of Palantir, aims to help young people to launch their business following leaving university. However, Charlie Javice would have refused this scholarship to continue his studies. According to a source close to Peter Thiel’s organization, she would never actually have won the scholarshipPoverUp being an idea that never really took off.
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Frank, that “trustworthy” uncle or cousin
After graduating from Wharton in 2013, Charlie Javice begins to develop his EdTech company. Several ideas follow one another. She first considers a job search platform, then looks at an alternative to “credit scores” given to American borrowers, named tapd. The project was finally abandoned and its collaborators were fired. The entrepreneur attributes the failure to cumbersome administrative procedures to get her product approved, but former employees will reveal that she simply ran out of money and stopped paying them.
According to Charlie Javice, Platform Frank should be seen as a trustworthy uncle or cousin to turn to for advice.
In 2017, she launched her new business, Frank. Objective: to help students obtain loans and make college more accessible in the United States. Charlie Javice describes Frank as a trustworthy uncle or cousin one can turn to for advice.
In an interview, she then puts forward the side “honest” et “transparent“of service, which she humbly hoped to see become”the Amazon of higher education“. This vision earned him the support of Marc Rowanthe CEO of the private equity giant Apollofrom the Israeli venture capital fund Alephfrom the EdTech group Chegg and even a certain Silicon Valley Bank…
Regulators had Frank in their sights
The first tile falls shortly following Frank’s throw. The US Department of Education accuses him of using the trademark FAFSA (Free Application for Federal Student Aid), named following the program used to determine a student’s eligibility for grants and loans. An amicable arrangement is found the following year. In 2018, it is also the subject of a lawsuit in Israel, where Frank co-founder Adi Omesy accuses him of stealing his salaryfor which he will be compensated.
28.000
dollars
In an interview, Charlie Javice highlights the 28,000 dollars that she manages to save on average for students thanks to Frank, who nevertheless only lists existing aid and facilitates requests.
Despite everything, Charlie Javice continues to be acclaimed in the press. Business Insider notably praises him in an article, where she highlights the average of $28,000 she manages to save students thanks to Frank, who nevertheless only lists existing aid and facilitates requests. At the end of 2018, she affirms having helped 300,000 students to get assists, which allows him to land in the Forbes rankings “30 under 30” from 2019.
In 2020, a committee of the United States Congress examines Frank and requests an investigation from the Federal Trade Commission (FTC). Elected officials are concerned regarding the dubious practices of the platform, which “creates false hope and confusion among students“by promising them aid to which they would not always be entitled, and by using their data to make profit on their backs.
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A $175 million math lesson
The pinnacle of the company is reached in 2021. On September 21, Charlie Javice and JPMorgan announce that the banking group acquired Frank for $175 million. She thus obtains, in addition to 10 million dollars, a high-ranking position within the bank, now at the head of its products intended for students. Frank is then supposed to have helped “more than 5 million customers”.
It all came crashing down a year later when JPMorgan makes the decision, in January 2023, to deactivate the platform. The bank reveals that a few months following the acquisition, it had learned the truth regarding Frank. Following the sending of promotional e-mails to a group of 400,000 of the 5 million users whose contact details it held, 70% were unsuccessful.
After buying Frank, JPMorgan realizes that the platform does not have 4 or 5 million users, but less than 300,000.
The group announces that it has initiated legal proceedings once morest Charlie Javice at the end of 2022, accusing him of having lied regarding the size of his clientele. According to the complaint, with supporting evidence, she would have hired a data expert to create millions of fake accounts in exchange for 18,000 dollars, while claiming during acquisition talks that Frank had more than 4 million users. The reality, according to JPMorgan, is that the platform had less than 300,000.
“Charlie Javice always chose to lie”
“In all aspects of his interactions with JPMorgan Chase, Charlie Javice had a choice between revealing the truth regarding his startup and accepting Frank’s true value, and lying to inflate Frank’s value and reap the rewards,” the lawyers say. in the complaint. “Charlie Javice chose to lie every timeand the evidence shows that each time she multiplied the frauds to deceive JPMorgan Chase.”
For his part, Charlie Javice defends himself through the voice of his lawyers. According to her, JPMorgan was actually looking for an excuse to fire her and not pay her the millions of dollars to which she was entitled. She is also taking the bank to court, among other things for unfair dismissal.
At the beginning of April, the fallen entrepreneur is indicted by the US Department of Justice for fraud once morest JPMorgan Chase. She was arrested on April 3 in New Jersey and was also sued by the Securities and Exchange Commission (SEC). The indictment made public in May accuses him, among other things, of securities fraud and criminal association. She pleaded not guilty and indicated that internal documents of the bank (to which she tried in vain to have access to include them in the lawsuit) would prove her right.
Where is Charlie today? Released on bail, she is awaiting her trial (the date of which has not yet been set) from her Miami residence, purchased in 2021 for $1.4 million, with a mortgage obtained… from JPMorgan Chase.
The “30 under 30” of Forbes, a reflection of a cult of youth?
As Elizabeth Holmes (Theranos), Trevor Milton (Nikola) et al Sam Bankman-Fried (FTX), Charlie Javice had made the list of “30 under 30” (or other similar rankings) of the American magazine Forbeswhich celebrates the success of young entrepreneurs in multiple sectors.
Highly followed by the business world, the members of this list have collectively raised $5.3 billion with investors (for the 2023 edition). A figure that compares to over $18.5 billion in fraud and scams for which a handful of them have been arrested over the past few years.
For Arwa Mahdawi, author and columnist at the Guardian, “the problem is not Forbes, the problem is this vision of success, which contains a fetishization of youth“. The Forbes ranking is, according to her, not just a list, but also a form of mentalitywhich pushes you to accomplish great things as early as possible in your life, before it’s too late.
‘Shortcuts are encouraged, and millennials grow up following the adage’Fake it till you make it‘. Exaggerating a little isn’t cheating, it’s resourcefulness! Until the day when justice comes knocking at the door.“
Summer Series | Young, rich and cheaters
They were young, had ambitious ideas, and had succeeded in convincing even the highest political and economic spheres with their projects. Present everywhere in the financial press, they were acclaimed for making a fortune in record time.
It was only the tip of the iceberg. Because everyone was hiding a secretwhich, once discovered and brought to light by whistleblowers, caused their downfall, once more faster than their ascent.
The time of a summer series, L’Echo retraces the journey of these young fraudstersfrom their beginnings in the business world to their collapse, between beautiful promises and scams.
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