SEC Charges Founder of Frank with Fraud in Connection with $175 million Sale of Student Loan Assistance Company

The founder of Frank, a student loan assistance company that has since been closed down, has been charged with fraud by the Securities and Exchange Commission (SEC). Charlie Javice is accused of deceiving JPMorgan Chase Bank, N.A. (JPMC) during the $175 million sale of Frank to the bank in 2021. The SEC alleges that Javice misled JPMC into believing that Frank had access to valuable data on 4.25 million students who had used its service, when in reality the number was less than 300,000.
According to the SEC, Javice made a number of false claims about Frank’s user base to attract JPMC’s interest. As negotiations progressed, JPMC requested the data associated with Frank’s customers, and Javice allegedly attempted to generate synthetic data with the help of Frank’s director of engineering, in order to make it appear as though the company had 4.25 million customers. When the director refused, Javice allegedly paid a data science professor to fabricate the data required to complete the deal with JPMC.
The SEC’s investigation found that Javice received $9.7 million in stock proceeds directly, as well as millions more indirectly through trusts, and a contract entitling her to a $20 million retention bonus as a new employee of JPMC, as a result of the sale of Frank.
The SEC’s Director of Enforcement, Gurbir S. Grewal, stated that Javice lied about Frank’s success in assisting millions of students with college financial aid, and used fabricated data to induce JPMC into the $175 million transaction. The complaint charges Javice with violating 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, as well as civil penalties.
The SEC’s investigation was conducted by Wesley Wintermyer and Lindsay S. Moilanen and supervised by Tejal D. Shah. The litigation is being handled by Nancy Brown, Mr. Wintermyer, and Ms. Moilanen. The SEC appreciated the assistance of the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation in the investigation.