Charlie Javice, the founder of now-shuttered college financial planning platform Frank, has been arrested and criminally charged with defrauding JPMorgan Chase out of $175 million, the US Department of Justice said in a statement on Tuesday.
Javice was charged with "falsely and dramatically" inflating the number of customers of Frank to fraudulently induce JPMorgan to acquire the company for $175 million, the Department of Justice said.
It is alleged Javice created about 4 million fake customer accounts when in reality the number of users was less than 300,000.
The former CEO was charged with one count of conspiracy to commit bank and wire fraud, one count of wire fraud affecting a financial institution, and one count of bank fraud, each of which carries a maximum sentence of 30 years in prison, and one count of securities fraud, which carries a maximum sentence of 20 years in prison.
“As alleged, Javice engaged in a brazen scheme to defraud JPMC in the course of a $175 million acquisition deal,” US Attorney for the Southern District of New York Damian Williams said in a statement.
“She lied directly to JPMC and fabricated data to support those lies — all in order to make over $45 million from the sale of her company."
The US Securities and Exchange Commission (SEC) on Tuesday also charged Javice with fraud in connection with Frank’s sale to JPMorgan.
"Rather than help students, we allege that Ms Javice engaged in an old school fraud: she lied about Frank’s success in helping millions of students navigate the college financial aid process by making up data to support her claims, and then used that fake information to induce JPMC to enter into a $175 million transaction," Gurbir S Grewal, director of the SEC’s Division of Enforcement, said in a statement.
“Charlie denies the allegations,” a spokesperson for Javice's attorney, Alex Spiro, told CNBC.
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