Charlie Javice, once celebrated as a rising star of the Tech World, will be tried this week in New York, accused of orchestrating a fraud of millions of dollars, which had sold her student financing startup, Frank, to JP Morgan Chase for $ 175 million (£ 141 million).
Javice, 31, joins the growing ranks of high-profile entrepreneurs who are infected by what some have called the “Forbes 30 Under 30 Curse”-one-a list of once promoting figures, including Martin Shkreli, Sam Bankman-Fried, and Caroline Ellison have confronted with legal problems after reaching early support.
The case, which carries Echos from Elizabeth Holmes and the Theranos scandal, focuses on accusations that Javice has blown up the number of student users of Frank to convince JP Morgan to acquire the company. Prosecutors claim that she has misunderstood data and claimed that the platform had 4.25 million users when it had less than 300,000.
The alleged deception unraveled when JP Morgan tried to contact Frank’s customers, just to receive a fraction of the expected answers. The bank fired Javice, joined Frank in early 2023 and sued her for fraud. She contradicted JP Morgan to sue legal costs and to terminate her before she could receive a $ 20 million retention bonus.
A test that can reform the start -up of due diligence
Javice, who founded Frank at the age of 24 to simplify applications of student loans, reportedly sought the help of her fellow suspect, Olivier Amar, to manufacture user data. According to the indictment, when Frank’s director Engineering expressed his concern about the legality of generating synthetic user data, Amar reassured them: “Yes, it is legal. We don’t want to end up in orange jumpsuits. “
JP Morgan CEO Jamie Dimon later admitted that the acquisition of Frank was a ‘big mistake’, and emphasized the failure of the bank to perform sufficient due diligence before he unsubscribed. Legal and governance experts claim that the process will raise uncomfortable questions about whether financial giants are too enthusiastic to acquire fast-growing startups without thorough screening.
Javice’s process is not only comparisons with Holmes, who is now serving an 11-year prison sentence, but also for the case of the British tycoon Mike Lynch, which was accused of fraud after Hewlett-Packard’s $ 11.1 billion takeover of His company, autonomy. Just like those cases, this process will investigate whether the deception was intentional or whether the buyer ignored red flags to pursue a lucrative deal.
Public Prosecutors have already scored an important advantage, in which Amar corresponds to testify against Javice. His testimony can be crucial to prove that she consciously misled JP Morgan. In the meantime, the defense argues that the case is one of ‘remorse from the buyer’, insisting that JP Morgan was well aware of the risks and failed to perform the correct due diligence.
In addition to the legal proceedings, the process will shed light on the aggressive growth pactics and the culture of Hype that the startup ecosystem have long fueled. Investors, including Apollo Global Management’s Marc Rowan and women -oriented investment firm Gingerbread Capital, apparently flowed in Frank, without detecting signs of fraud.
Before her downfall, Javice was the poster child for young entrepreneurship and split her time between Miami and New York, started her days with Pilates and ended with sunset yoga. In an interview from 2021 she advised aspiring entrepreneurs: “If you see a chance, don’t be afraid to jump.”
By November 2022 she was on the list of prestigious ’30 under 30 ‘from Forbes. A year later the magazine had placed her in his ‘Hall of Shame’.