Charlie Javice, the 31-year-old founder of financial aid startup Frank, has been arrested and charged by federal prosecutors with fraud after allegations were made by JP Morgan Chase & Co. that Javice had faked millions of customers to convince the bank to buy her company for $175 million.
Javice was taken into custody on Monday night in New Jersey and is facing charges including wire fraud affecting a financial institution, securities fraud, bank fraud and conspiracy. The Securities and Exchange Commission (SEC) also filed civil fraud charges against her on Tuesday.
JP Morgan alleges that Charlie Javice inflated Frank's customer count to deceive them about the scale and success of the business before it was sold last year. An Insider investigation found that Javice has a pattern of exaggerating her success, leaving many questions unanswered about how Frank could have accomplished some of what it claimed to do on behalf of students.
The case is being led by the office's Complex Frauds and Cybercrime Unit with U.S. Magistrate Judge Barbara Moses presiding over proceedings.
While criminal charges carry a maximum sentence of 30 years, defendants in federal fraud cases are typically sentenced to much less than the maximum sentence.
Separately from these charges brought forward by federal authorities now, JP Morgan Chase sued Charlie Javice last year alleging similar claims; however she countersued at that time.
Frank appears now as a shuttered student loan software company following this scandal which could mean severe consequences for its founder if convicted in court.