When Faking It ‘Til You Make It Goes Wrong: Frank vs. J. P. Morgan

For many aspiring entrepreneurs, Forbes’ 30 under 30 is a symbol of success for all of their hard work. But, for others, it’s a mark of trouble, with a few individuals finding themselves behind bars or in trouble for fraud. Notable imprisoned alumni from the Forbes 30 under 30 list include Elizabeth Holmes (infamous biotech startup Theranos’ founder), Sam Bankman-Fried (failed cryptocurrency exchange FTX’s founder), and Martin Shrekli (the “Pharma Bro” who faced a 7-year sentence for securities fraud). Now, Charlie Javice joined the growing list of Forbes alums who have committed fraud with her ed-tech startup, Frank, which was dubbed as the “Amazon for higher education.” As a startup that allegedly served more than 5 million students at over 6,000 universities in the U.S., Frank had caught J. P. Morgan’s attention and became acquired by Chase—J. P. Morgan’s consumer and commercial banking business—for a $175 million USD. Following the acquisition, J. P. Morgan (JPMC) soon found out that Javice had fabricated data and actively deceived them about Frank’s operations from their user base to the actual FAFSA application. The bank’s ensuing lawsuit unveiled the reality of Javice’s curated image as an impressive entrepreneur with the right connections and education, resorting to hiring external help to generate a false customer base and having a track record of deception. Her fall from grace serves as a stark reminder that even the most promising success stories can crumble under the weight of dishonesty and deception.

After J. P. Morgan’s admission of Javice’s duplicity and consequent closure of Frank’s website, many companies associated with Frank quickly scrambled to ensure that they remained unscathed from the public by various means. LionTree, the investment bank involved in the entire sale, had removed an episode of its podcast featuring Javice. The venture capital company that brought attention to Frank as “both its first investment and its first exit,” Ground Up Ventures, rapidly removed any mention or feature of Frank, including a Medium postexplaining its rationale behind its investment in Frank. Meanwhile, former associates of billionaire Peter Thiel’s Thiel Foundation, made it clear that Javice “have not been awarded and turned down” the famous Thiel Fellowship. These associations were only a glimpse of the extent to which Javice portrayed herself as an up-and-coming star in the ed-tech (educational technology) space with a determined mindset. Beyond being featured by companies who backed her, she also did media tours on platforms such as CBS New York and her alma mater, the University of Pennsylvania’s Wharton School, to promote Frank as the go-to solution to navigating financial aid for college applicants. 

From a glance, Javice was the ideal entrepreneur with her private school education, experience in ed-tech, and knowing all the right people. She was born in an affluent area of New York, having the luxury of riding horses and attending the French-American School of New York with tuition going upwards to $41,000 annually. Her father worked at a hedge fund while her brother was the chief digital officer at Popeyes. For college, Javice attended the University of Pennsylvania’s Wharton School with a degree in finance and law within 3 years. A former classmate characterized her as someone who was “actually really nice,” but often would be “name dropping and trying to present a much bigger picture than it was.” Within her freshman year at Penn, Javice had created PoverUp, “a student microfinance and social business action platform” that offered global research fellowships and internships to students. According to Javice’s LinkedIn, PoverUp was a grassroots student movement that strove “to end poverty with the click of a mouse.” The organization resorted to seeking out donations and relationships with notable organizations and investors like “Harvard and Chicago Booth.” Furthermore, PoverUp’s internal correspondence boasted about Javice’s meetings with industry figures such as impact investor Bobby Turner, First Round Capital’s Josh Kopelman, and the Harvard Leadership Institute. 

Beyond the connections, a key talking point for Javice was the Thiel Fellowship she allegedly rejected from the international recognition PoverUp garnered. Created by billionaire Peter Thiel, the Thiel Fellowship provides $100,000, guidance, and various forms of support for 20-25 fellows to drop out of school and pursue life-changing initiatives. Notable Thiel Fellows included Figma founder Dylan Field, Scale AI’s co-founder Lucy Guo, and Ethereum founder Vitalik Buterin. Aleph, an Israeli venture capital firm, has featured Javice from the successful acquisition of Frank and claimed that “she was selected to be a Thiel Fellow but turned it down.” However, Michael Gibson, the person behind the grants in the Thiel Foundation, adamantly rejected that claim as “[Javice’s] personality” indicated that she “could [not] get started in a real way.” Gibson further added that, “She’s pretending to know more inside baseball about the tech industry.”  

Despite her star-studded accolades and press, her downfall was not that surprising to many. One person familiar with the situation and Javice, stated, “This is exactly what she had been doing, what she has been doing all along, and now [she] has gotten caught for it.” Another anonymous source, fearing repercussions, corroborated the first source’s account: “We’d all start looking at each other like: This is insanity. You can’t be saying these things… We all understand the art of the sale, but some of the things that were being said were just inexcusably inaccurate.” 

According to Javice herself, her optimism comes from “being a founder” and admitted that “there were definitely times where [she] painted a rosier picture than things truly were.” An example of this could be seen in the anonymous source’s account of meeting Javice in early investor meetings with no product where she had spoken about the false thousands of users who had signed up as potential investors. To add, an organization that PoverUp claimed to be a partner of theirs stated that “they have not received any funding from PoverUp or Charlie Javice”whatsoever. Even the lawyer behind PoverUp realized that Javice failed to execute PoverUp as it “was a very grandiose idea, and it didn’t really get that far off the ground.” 

Following her graduation from Wharton, she created Tap’d, a credit-scoring solution company, which aimed to aid lenders in determining loan amounts to potential borrowers. However, Javice found out that her startup was futile as it did not meet industry obligations and required “more than the $10 million in seed money,” leaving her the option to restructure her company into a credit union. At the same time, this meant that she made the decision to fire all employees, letting go of a cofounder and nearly a dozen people in June 2016. This decision came with the restructuring of Tap’d into Frank, now focusing on college students as their clients instead of banking clients. Javice publicly discussed “navigating being $500,000 in the red and needing to manage how to pay people” on the ‘Persistence 360’ podcast, weighing the delicate balance between the two. However, according to people familiar with Frank, Tap’d had “ran out of money” and Javice simply “stopped paying her staffers.” Adi Omesy, an Israel-based and chief technology officer (CTO), joined Frank in 2016 but within a year, he had decided to sue Javice and Frank for their failure to pay his salary and “award him 10% of the equity in Frank after he joined.” Eventually, an Israeli court determined that Frank and Javice had to pay Omesy $35,000 in June 2021.

Frank materialized in 2017, aiming to aid college applicants in navigating the student loan application process and “making college more affordable.” In selecting “Frank” as the name for her latest venture, Javice said: “There aren’t many good actors in the space, and we just wanted to stand for something that was honest, that was transparent, and where people can really feel as if they have someone who’s got their back… Frank kind of represented that as a name because it just meant ‘honest.’” 

Javice’s marketing of Frank as a “TurboTax but for financial aid” gained the backing of billionaire Apollo Global Management CEO Mark Rowan, U.S-Israeli venture capital fund Aleph, and various other firms. Frank had even won over ed-tech company Chegg, Reach Capital, and Gingerbread Capital. Aleph’s general partner, Michael Eisenberg, remarked that Javice had “blown [him] away” since their first meeting and praised J. P. Morgan’s acquisition of Frank—calling it “a trusted financial brand” that “made waves with the U.S. Department of Education that resulted in key policy changes for American families, and scaled the company fearlessly against all odds.”Michael’s reference to the U.S. Department of Education is another measure of building up Javice’s credibility, connecting her to the government for her work at Frank. However, the Department of Education formally filed a complaint against Frank for its misleading marketing tactics in 2017. According to the Department of Education, Frank has violated the Department’s trademark on FAFSA—the Free Application for Federal Student Aid—which is a form filed by college applicants and their families to help them pay for higher education. Javice’s Frank service offered expensive packages for optimizing students’ chances of navigating financial aid for higher education, using FAFSA as a baseline guide. The Department of Education sent Frank a cease-and-desist letter, stating that Frank was not a recognized “FAFSA preparer” in any capacity. Frank’s online presence such as its website handle, frankfafsa.com, and its occasional use of “Frank’s FAFSA” was “likely to confuse consumers” as well. Following Frank’s settlement with the U.S. Department of Education, Frank had to add disclaimers regarding it not being affiliated with the Department of Education and go by another website handle, withfrank.org. Javice’s lawyer had spun the Department of Education’s complaint as a “trademark dispute over a trade name,” instead of an underlying legal issue with Frank’s operations. 

Despite the matter with the Department of Education being settled, Frank’s run-ins with the U.S. government did not stop there. Members from both the Democratic and Republican Party wrote to the FTC (Federal Trade Commission) regarding Frank’s marketing tactics in 2020, “misrepresent[ing]” the actual financial aid process for American college applicants. The letter also entailed Frank’s false advertising where using its services will help students get “up to $5,000” and promoting the idea of aid being “first come first served.” Due to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) have given more than $14 billion to students and universities where students can receive direct financial aid by their schools. However, this aid is only done at the discretion of their school, rather than any other entity, and typically meets 75-100% of their allocated funds for more than half of aid requests. Written by various Congress members, Frank’s service “does not provide any actual [financial aid] application” and instead gives students a generic letter to submit to their schools, failing to assist in receiving financial aid. On the school administrators’ end, Frank’s letter is simply unprompted and “creates additional work… that do not align with the application process established by the institution for CARES emergency grants.” From Frank’s misleading advertisements and marketing, this should have been an indication of Javice’s fraud as her product has complicated the financial aid process even more.

Some in the education industry also raised their eyebrows at Frank’s marketing tactics, noting Javice’s insistence of Frank’s ability to “complete the FAFSA in 4-5 minutes” to be too simplistic. One college financing expert, Mark Kantrowitz, stated that Frank’s claim stemmed from its removal of certain important questions that determined some students’ eligibility. Kantrowitz further called out the uselessness of a particular paid service of Frank’s, the financial aid appeal service, where it had “generic information about students.” Even financial aid administrators said that the letters generated from Frank’s financial aid appeal were “ridiculous” as they were not “real appeal[s].”

Javice connected the difficulty of receiving financial aid to her own experiences applying for financial aid at Penn, claiming to have first-hand experiences with paying for college in her university newspaper. She allegedly saw her mother “cry[ing] while talking to financial aid officers,” recounting that the financial aid appeal process at her university had taken “the entire semester to settle, repeatedly.” However, there were holes in her narrative of finding the financial aid process confusing alongside her family once she was listed on Fast Company’s 100 most creative people list in 2011 for her work in PoverUp. Her father had experience on Wall Street for over 35 years, 11 years at Goldman Sachs and 3 at Merrill Lynch. When asked by the New York Times regarding how Javice landed on being on financial aid, they did not respond for comment. The inconsistency in Javice’s financial aid process at Penn continued as a school representative noted appeals taking an entire semester are “highly unusual,” typically taking “4 to 6 weeks” instead of Javice’s claim of 3-4 months. Regardless, Javice had created this riveting narrative of financial aid as an obstacle to students’ success and pitched it to various angel investors and venture capitalists who were not familiar with the actual financial aid. After all, Frank had the markings of revolutionizing the ed-tech space while contributing to the betterment of society.

In an unpublished Forbes 30 under 30 interview, Javice recalled investor Mark Rowan characterizing Frank as “the future of personal finance” before noting that “[Frank] haven’t seen fraud yet.” Javice further discussed Frank at length in her interview with Forbes, delving into how Frank had helped 300,000 students get $7 billion of aid by 2018. The statistics for how many students Frank have worked with kept changing, going from 350,000 to 4.25 million in 2021. When J. P. Morgan announced its acquisition of Frank in 2021, Javice inflated the number to “over 5 million students at over 6,000 colleges” in her announcement on LinkedIn. These numbers would be a part of the legal basis for the bank’s litigation against Javice as well as Frank’s chief growth officer, Olivier Amar. As a part of the acquisition, J. P. Morgan had welcomed Amar and other Frank staff as employees to continue their work on Frank, while Javice was now as J. P. Morgan’s Head of Student Solutions on the bank’s Digital Products team. In fact, J. P. Morgan was going to pay Javice a “$20 million retention fee if she stuck around for a stretch of time after the merger closed.”

Things took a turn when J. P. Morgan publicly announced that it was conned by Javice, a move that many did not expect from America’s biggest bank. The bank’s lawsuit against the young entrepreneur detailed an elaborate scheme with falsified information such as its “success,” “size,” and “market penetration.” With Frank in its ownership, J. P. Morgan had hoped to get access to a growing market of young adults that will be loyal to them aside from its Chase student finance tools. Before agreeing to buy a business, the company will undergo a due diligence process where the business will have to demonstrate that it is not a fraudulent business via its financial records and client rosters. According to Fortune Magazine, J. P. Morgan took several weeks of due diligence that ranged from examining Frank’s financial records to conducting meetings with Frank’s staffers. On Javice’s end, she had insisted that Frank had “at least 4.25 million customers” and uploaded an Excel spreadsheet with over 4.2 million students’ Frank accounts to J. P. Morgan’s chase. J. P. Morgan’s lawsuit stated that prior to this, Javice had “corrected mislabeled data in a different diligence spreadsheet” which later prompted another bidder to “drop out of the auction.”

And so, J. P. Morgan’s head of corporate development requested Javice for a list of Frank’s customer accounts in an email to ensure the veracity of Frank’s claims regarding its user base, including students’ emails, names, birthdays, and addresses. Javice reacted strongly against this request, citing that she could not provide the list out of “privacy concerns.” However, J. P. Morgan alleged in its lawsuit that Javice and Amar went to Frank’s director of engineering to generate fake data to which the director declined due to the legality of their request. After J. P. Morgan’s demands, she did submit the Frank customer list to the bank which J. P. Morgan characterized to be made “out of whole cloth.” Frank’s customer information was allegedly created by a “data science professor at a New York City area college” with upwards of 4.3 million customers. Both of them—the data science professor and Javice—were fully aware of the data being fake, according to various email exchanges. In exchange for his services, Javice had given him around $18,000. With the newly generated list, Javice did not follow the exact format J. P. Morgan asked for as she submitted the remaining information aside from emails and addresses, again due to privacy concerns. Instead, she had replaced such information with “unique IDs” to ensure safe customer information. Then, J. P. Morgan proceeded to send Javice’s list of Frank accounts to a third-party, Acxiom, to fact-check Frank’s information “and avoid the supposed privacy issues.” After 3 days, J. P. Morgan agreed to purchase Frank for $175 million and closed the deal on September 14, 2021.

When testing the quality of Frank’s customer list on January 2022, J. P. Morgan found out that Javice’s list was fake with only 28% emails delivered and a mere 1.1% opened. However, people within the industry remained skeptical of the bank’s actual due diligence. “It would be very odd to me to go through a $175 million transaction without testing the email accounts. Frank didn’t do anything terribly sophisticated,” stated Publicis Sapient’s David Donovan. Another red flag is the $175 million price-tag for Frank, a company who claimed that it had ¼ of the college market, which is “relatively small.” For reference, Chegg, an online education company, claims 36% of the student market” with a $10.9 billion market capitalization in September 2021. As 2021 was a strong year for M&A, the COVID-19 pandemic had contributed to the total of $20.1 billion in global venture funding in the ed-tech space alone. And so, Aaron Michel, partner at 1984 Ventures and former CEO of PathSource (an exited ed-tech company), noted that Frank’s sale “sold for a fraction of what it should’ve if it really owned 25% of the market.”

The fallout from the lawsuit has been focused more on the embarrassment J. P. Morgan Chase experienced rather than the financial toll Frank had taken them. Javice had countersued the bank, arguing that she was “due legal fees and expenses under Frank’s merger agreement.” Javice’s attorney further stated that after JPMC rushed the process of buying Frank, the bank “realized they couldn’t work around existing student privacy laws, committed misconduct and then tried to retrade the deal.” Amar also filed a similar lawsuit against JPMC, demanding that the bank pay for his legal fees. Jamie Dimon, JMPC’s famed CEO, publicly admitted to its Frank acquisition as “a huge mistake” at a quarterly earnings call. He further elaborated in defense of JMPC’s mistake: “Obviously when you are getting up to bat 300 times a year you will have errors, and we don’t want our company to be terrified of errors and not do anything.”

However, Javice also must face the fraud charges filed by the SEC (U.S. Securities and Exchange Commission) as well as the U.S. DOJ (Department of Justice). In the SEC’s press release, Javice “made numerous misrepresentations about Frank’s purported millions of users to entice JPMC. The SEC alleged that Javice failed to help students by “l[ying] 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 use that fake information to induce JPMC to enter into a $175 million transaction.” Meanwhile, the DOJ conducted a parallel investigation with the U.S. Attorney’s Office for the Southern District of New York announcing that Javice faced “one count of conspiracy to commit bank and wire fraud; one count of wire fraud affecting a financial institution; one count of bank fraud; and one count of securities fraud.” The total maximum sentence of these charges is 110 years of imprisonment with the investigations underway.

As for the current updates on Frank, Javice and Amar were fired from JPMC. However, Javice was arrestedin April, pocketing $45 million from the acquisition. Prosecutors are currently delaying JMPC’s lawsuit with Javice by requesting “a federal judge to halt pre-trial information exchanges until she has been tried on criminal charges.” This particular pause will aid prosecutors in the paused discovery part of JMPC’s Delaware-based lawsuit, limiting Javice from “gather[ing] information that would help bolster her criminal defense.” Considering that both the U.S. government and J. P. Morgan’s cases rely on the same set of information, prosecutors state the delay in pre-trial information will not jeopardize Amar or Javice’s rights whatsoever. These recent developments underscore the intricate legal challenges in the ongoing fraud case, with a focus on ensuring a fair trial for all parties involved.

In light of these developments, the case involving Charlie Javice and her ed-tech startup, Frank, has taken a complex and legal turn. Javice’s arrest, the delayed lawsuit with J. P. Morgan Chase (JMPC), and the ongoing investigations by the SEC and the DOJ highlight the intricate legal challenges surrounding the alleged fraud. Despite the twists and turns, the focus remains on ensuring a fair trial for all parties involved and upholding the integrity of the legal process. These events serve as a stark reminder that even high-profile success stories can unravel when deception and dishonesty come to light. The legal saga continues, and further developments in this intriguing case are eagerly anticipated.