Today’s topic is the business founder who defrauded JPMorgan, one of the most renowned financial organizations in the world, of a stunning $175 million. What was her secret? using four million fake clients. When Charlie Javice, the woman at the center of this narrative, established Frank in 2017, she had just turned 24.
Frank- A website
Frank was a website dedicated to streamlining the student loan application process and lowering the cost of attending college. Most significantly, the online platform provided users with a mechanism to expedite the Free Application for Federal Student Aid (FAFSA), a step that is typically time-consuming for students applying for grants and loans and must be completed. Javice’s business was a success, attracting thousands of customers and landing her a spot on Forbes’ 2019 30-under-30 list.
Charlie Javice decided to destroy the entire venture despite having a sound business model and a promising future.
JPMorgan’s staff claims in a civil action brought against the Ivy League alum: “To cash in, Javice decided to lie.” This statement should give you some idea of how this story will turn out.
False statement about Frank’s success
She made false statements about Frank’s success, the company’s level of market penetration, and, most importantly, the amount of its clientele. Javice appeared to have the solution when she went to the bank in 2021 because, at the time, they were searching for student data, and she had the key. The company wanted to expand in this market, attract students as potential lifelong clients, and sell its products to them. You can only imagine how thrilled the crew was when Javice reached them and claimed to have the names, surnames, email addresses, and phone numbers of a whopping 4.25 million Frank members. In truth? Less than 300,000 customer accounts were under her care.
Charlie Javice sent the JPMorgan representatives a spreadsheet of 4.265 million students who she said had begun a FAFSA form with Frank during a meeting regarding the partnership.
She also distributed a different sheet that stated that just in 2020, more than 34 million visitors visited Frank’s website.
JPMorgan wanted to be sure the acquisition was worthwhile, so as part of its due diligence, it requested a variety of documents from Charlie Javice, including a list of Frank’s customer accounts that contained crucial information.
Formal Complaint
Yet, as stated in the formal complaint: “When JPMC requested it, Frank was over four million client accounts short of what it had promised.
“Javice initially refused JPMC’s request, claiming that she could not provide her customer list due to privacy issues rather than telling the truth. Charlie Javice decided to create several million fake Frank client accounts after JPMC pushed on it. To begin their strategy, she and her chief growth officer Olivier Amar first requested that the director of engineering at Frank construct bogus customer information using “synthetic data,” or fictitious data produced by computer algorithms. The engineer declined the work, citing worries that it would have been against the law.
Instead of telling the truth, they made the same request of a data science professor at a college in the New York City region.
He started working on the list, but there were a few *ahem* hiccups along the way, as seen by the emails he and Javice exchanged.
Residents of same town and state
At one point, the professor noted that many of the consumers on the list resided in the same town and state and attended high school and college there, which he claimed would “look fishy.”
There were several problems with the email addresses, as well as duplicate phone numbers. Amar also made a separate call to ASL Marketing, a marketing firm that asserts to have extensive data on high school and college students, throughout all of this.
Amar utilized Frank’s funds to purchase a list of 4.5 million pupils from ASL for a respectable $105,000 on the same day Charlie Javice sent the fictitious client list to the third-party vendor for validation.
Frank and JPMorgan’s Transaction
Frank and JPMorgan made a transaction in August 2021 for the sum of $175 million, which was consummated just over a month later, relying on shady lists and additional information from Enformion, another third-party vendor. And this is when things start to mess up. In January 2022, the bank’s marketing department decided to put some of the student data to the test. A final list of 4.265 million fictitious clients was obtained from ASL and Information was delivered by Frank’s team.
The complaint continues, “Unsurprisingly, the outcomes of the marketing test effort were terrible.”
“To be more precise, JPMC sent test emails for marketing to what it thought were 400,000 distinct Frank customers.
“Just 28% of the emails sent to the contacts were received, compared to a delivery rate of 99% for similar campaigns at JPMC.
Only 1.1% of the distributed emails were opened, compared to 30% for a normal JPMC campaign.
Wrapping Up
Due to JPMorgan’s additional inquiries into Frank following the unsuccessful campaign, Javice’s web of deceit eventually came to light. The bank has now filed a lawsuit against Javice and Amar, claiming that their deception “materially damaged JPMC in an amount to be proven at trial, but not less than $175 million.” Charlie Javice later filed a countersuit, claiming that JPMorgan is responsible for the legal costs she accrued as a result of an internal inquiry last year. One thing is certain, however: “fake it till you make it” is not always the ideal strategy. The fate of this legal dispute is still unknown.
