Charlie Javice, the 33-year-old founder of the startup Frank, has been sentenced to seven years in prison for what federal prosecutors describe as a $175 million fraud against JPMorgan Chase.
Javice was convicted in March for misrepresenting the scale of her financial aid startup’s operations. Frank, founded in 2017, claimed to simplify the process for students applying for federal aid. However, Javice falsely reported that the company had 4 million users when, in reality, it had only several hundred thousand.
Judge Alvin Hellerstein, presiding over the case, referred to the fraud as “biblical” in nature, invoking the commandment of just weights and measures. The prosecution had sought a 12-year sentence, but the court settled on a shorter term.
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This case raises important questions about due diligence in corporate acquisitions and the potential for deception in the startup world. JPMorgan Chase, which acquired Frank in 2021, stated that had they known the true user numbers, they would not have proceeded with the purchase.
The defense portrayed Javice’s actions as a “singular lapse in judgment” and highlighted her contributions to helping underprivileged students access higher education. They presented letters from over 100 supporters attesting to her character. The prosecution, however, maintained that the fraud’s sole purpose was to inflate Frank’s value artificially.
The significance of this should not be overlooked. As the tech startup landscape continues to evolve, this case may serve as a cautionary tale for both entrepreneurs and investors.
