The SEC has filed a complaint against Charlie Javice, the founder of the student loan assistance company Frank. The complaint alleges that Javice committed fraud in connection with the $175 million sale of Frank to JPMorgan Chase Bank, N.A., in 2021. The SEC claims that Javice misled JPMorgan Chase by making false claims about the number of users on the Frank platform.
Misrepresentations about Frank’s Users
According to the SEC’s complaint, Javice falsely claimed that Frank had access to valuable data on 4.25 million students who used Frank’s service. However, the SEC’s investigation revealed that the number of users was less than 300,000. The complaint alleges that Javice made these misrepresentations to entice JPMorgan Chase to acquire Frank.
Generating Synthetic Data
As negotiations progressed, JPMorgan Chase requested data associated with Frank’s customers. Javice allegedly sought the help of Frank’s director of engineering to generate synthetic data to make it appear as if Frank had 4.25 million customers. However, the director refused to comply. Javice then allegedly paid a data science professor to manufacture the data required to close the deal with JPMorgan Chase.
Fraudulent Scheme
The SEC’s complaint alleges that Javice engaged in a fraudulent scheme to deceive JPMorgan Chase. Javice’s actions resulted in a $175 million acquisition of Frank, from which Javice received $9.7 million directly in stock proceeds and millions more indirectly through trusts. Javice also received a contract entitling her to a $20 million retention bonus as a new employee of JPMorgan Chase.
SEC’s Actions
The SEC’s complaint charges Javice with violating the antifraud provisions of the Securities Act of 1933 and Securities Exchange Act of 1934. The complaint also names trusts held by Javice as relief defendants. The SEC is seeking injunctive relief, an officer and director bar, disgorgement and prejudgment interest thereon, and civil penalties.
Have a securities law question? Call New York Securities Lawyers at 212-509-6544.
Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.
He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page - SECLaw.com, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.
