Charlie Javice, the founder of a startup company that sought to dramatically improve how students apply for financial aid, was sentenced Monday to more than seven years in prison for cheating JPMorgan Chase out of $175 million by greatly exaggerating how many students it served.<\/p>\n
Javice, 33, was sentenced in Manhattan federal court for her March conviction by Judge Alvin K. Hellerstein, who said she committed \u201ca large fraud\u201d by duping the bank giant in the summer of 2021. She made false records that made it seem the company, called Frank, had over 4 million customers when it had fewer than 300,000, Hellerstein found.<\/p>\n
The judge said Javice had assembled a \u201cvery powerful list\u201d of her charitable acts, which included organizing soup kitchens for the homeless when she was 7 years old and designing career programs for formerly incarcerated women.<\/p>\n
In court papers, defense lawyers noted that Javice has faced extraordinary public scrutiny, reputational destruction and professional exile, \u201cmaking her a household name\u201d in the same way Elizabeth Holmes became synonymous with her blood-testing company, Theranos.<\/p>\n
Defense attorney Ronald Sullivan told Hellerstein that his client was very different from Holmes because what she created actually worked, unlike Holmes, \u201cwho did not have a real company\u201d and whose product \u201cin fact endangered patients.\u201d<\/p>\n
In seeking a 12-year prison sentence for Javice, prosecutors cited a 2022 text Javice sent to a colleague in which she called it \u201cridiculous\u201d that Holmes got over 11 years in prison.<\/p>\n
Hellerstein largely dismissed arguments that he should be lenient because the acquisition pitted \u201ca 28-year-old versus 300 investment bankers from the largest bank in the world,\u201d as Sullivan put it.<\/p>\n
Still, the judge criticized the bank, saying \u201cthey have a lot to blame themselves\u201d after failing to do adequate due diligence. He quickly added, though, that he was \u201cpunishing her conduct and not JPMorgan\u2019s stupidity.\u201d<\/p>\n
Sullivan said the bank rushed its negotiations because it feared another bank would acquire Frank first.<\/p>\n
A prosecutor, Micah Fergenson, though, said JPMorgan \u201cdidn\u2019t get a functioning business\u201d in exchange for its investment. \u201cThey acquired a crime scene.\u201d<\/p>\n
Fergenson said Javice was driven by greed when she saw that she could pocket $29 million from the sale of her company.<\/p>\n
\u201cMs. Javice had it dangling in front of her and she lied to get it,\u201d he said.<\/p>\n
Given a chance to speak, Javice said she was \u201chaunted that my failure has transformed something meaningful into something infamous.\u201d She said she \u201cmade a choice that I will spend my entire life regretting.\u201d<\/p>\n
Javice, sometimes speaking through tears, apologized and sought forgiveness from \u201call the people touched or tarnished by my actions,\u201d including JPMorgan shareholders, Frank employees and investors, along with her family.<\/p>\n
Javice, who lives in Florida, has been free on $2 million bail since her 2023 arrest.<\/p>\n
At trial, Javice, a graduate of the University of Pennsylvania\u2019s Wharton School of Business, was convicted of conspiracy, bank fraud and wire fraud charges. Her lawyers had argued that JPMorgan went after Javice because it had buyer\u2019s remorse.<\/p>\n
In her mid-20s, Javice founded Frank, a company with software that promised to simplify the arduous process of filling out the Free Application for Federal Student Aid, a complex government form used by students to apply for aid for college or graduate school.<\/p>\n
Frank\u2019s backers included venture capitalist Michael Eisenberg. The company said its offering, akin to online tax preparation software, could help students maximize financial aid while making the application process less painful.<\/p>\n
The company promoted itself as a way for financially needy students to obtain more aid faster, in return for a few hundred dollars in fees. Javice appeared regularly on cable news programs to boost Frank\u2019s profile, once appearing on Forbes\u2019 \u201c30 Under 30\u201d list before JPMorgan bought the startup in 2021.<\/p>\n
Javice was among a number of young tech executives who vaulted to fame with supposedly disruptive or transformative companies, only to see them collapse amid questions about whether they had engaged in puffery and fraud while dealing with investors.<\/p>\n
In their pre-sentence submission, prosecutors wrote that they were requesting a lengthy prison sentence to send a message that fraud in the sale of startup companies is \u201cno less blameworthy than other types of fraud and will be punished accordingly.\u201d<\/p>\n
Prosecutors added that the message was \u201cdesperately needed\u201d because of \u201can alarming trend of founders and executives of small startup companies engaging in fraud, including making misrepresentations about their companies\u2019 core products or services, in order to make their companies attractive targets for investors and\/or buyers.\u201d<\/p>\n<\/p>\n
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