Charlie Javice, founder of the student-aid startup Frank that JPMorgan Chase & Co. (NYSE: JPM) acquired in 2021 for $175 million, was sentenced Monday to just over seven years in prison for misleading the bank about her company's customer base.
Earlier this year, a jury convicted Javice and her Chief Growth Officer, Olivier Amar, on fraud and conspiracy charges, according to CNBC.
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Courtroom Statements
Javice, now 33, broke down while apologizing to the court, JPMorgan, employees, investors and her family.
She admitted regret and pleaded for mercy, promising to accept the punishment with humility.
Judge Alvin Hellerstein stressed that fraud must carry consequences and sentenced her to 85 months in prison, three years of supervised release, $22.36 million forfeiture and $287 million in restitution. She remains free during her appeal.
JPMorgan Acquisition and Fraud
JPMorgan had bought Frank to expand student-focused financial offerings, announcing at the time the platform had served over five million users.
Months later, the bank discovered the company had fewer than 300,000 genuine users, with the remainder being fabricated identities created under Javice's direction.
Frank staff had questioned the inflated numbers before the sale, and testimony revealed Javice joked about avoiding "an orange jumpsuit" when instructing an employee to create fake accounts.
Sentencing Debate
Her defense attorney argued that unlike Theranos founder Elizabeth Holmes, whose actions affected public health, Javice's fraud did not endanger lives, and her sentence should therefore be lighter.
Prosecutors countered that she acted out of greed and that JPMorgan had effectively purchased "a crime scene."
Impact on JPMorgan
The scandal proved humiliating for JPMorgan, which had been on a buying spree of smaller fintech firms to fend off competition from rivals.
In its eagerness to secure Frank, the bank overlooked red flags and failed to verify whether the startup truly had millions of users before paying $175 million.
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