From Forbes Cover to Federal Indictment-- The Charlie Javice Fraud Scandal Unveiled

We explore the breaking scandal that is set for trial this Winter.

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Chapters

• 0:00 Intro & background
• 0:43 The start of Frank and Fraud beginnings
• 2:24 The Buy Out and Fraud Investigation
• 4:03 The Frank Fraud
• 5:06 Indictment and upcoming trial of Charlie Jarvis

Transcript

Dino Mauro (00:07.31)
Come join us as we go behind the scenes of today's most notorious cybercrime, translating cybersecurity into everyday language that's practical and easy to understand. appreciate you making this an award-winning podcast by downloading our episodes on Apple and Spotify and subscribing to our YouTube channel. This is Cybercrime Junkies, and now the show.

Dino Mauro (00:51.406)
Hey everyone, welcome to a quick episode. I wanted to get awareness for this story for a few reasons. First, she sounds like Elizabeth Holmes who caused one of the largest frauds in history with her Theranos scam. We have several episodes on that incredible story on our Cybercrime Junkies YouTube channel. Yep. And here is another example of a Silicon Valley technology.

disaster. And a Forbes cover page of 30 under 30 disaster. Exactly. So walk us through it all. Imagine a world where a 24 year old could convince the largest bank in the US to shell out $175 million for a startup. Well, that's exactly what happened with Charlie Javis and her company, Frank. But here's the kicker. It was all built on a house of cards. Wow.

What exactly are we talking about here? We're diving into the story of Charlie Javits and her startup Frank, which promise to simplify the complex world of student financial aid. It's a tale that has all the elements of the Silicon Valley thriller, a young charismatic founder, big money and allegations of massive fraud. Hmm. Sounds intriguing. Can you give us some background on how this all started? Sure. So...

But Charlie Javis founded Frank in 2016 when she was just 24. She quickly became a darling of the tech world, landing on Forbes' 30 under 30 list and being hailed as the voice of a microfinance generation. Her pitch was compelling. She argued that the financial aid system was broken and too difficult for low to moderate income students to navigate. That does sound like a problem worth solving.

I can see why investors might have been interested. Exactly. And interested they were. Frank managed to raise millions of venture capital funding. But the real windfall came in 2021 when JPMorgan Chase agreed to acquire Frank for a whopping $175 million. At the time, JPMorgan saw Frank as a unique opportunity to engage with students and expand their services. Hold on $175 million. That's an incredible amount.

Dino Mauro (03:18.346)
startup in the education finance space. What made Frank so valuable in Jake Horton's eyes? Well, that's where things get interesting and problematic. According to prosecutors, while Frank claimed to have more than 4.5 million users, it actually had fewer than 300,000 customers. That's a pretty significant discrepancy to say the least. wow, that's not just a small exaggeration.

We're talking about inflating numbers by over 1400%. How did they think they'd get away with this? It's hard to say, but the allegations go even further. Prosecutors claim that when JPMorgan Chase asked for verification of Frank's user base, Javis went to extraordinary lengths to cover up the deception. According to court documents, she allegedly hired a data science professor for $18,000 to create a list of fake names and addresses. That's...

incredibly brazen. What were the consequences of these actions? Well, the consequences are severe. Javis is facing counts of securities fraud, wire fraud, bank fraud, and conspiracy. Each of these charges can carry up to 30 years in prison. It's a stark reminder of how seriously these kinds of financial crimes are taken. 30 years. That's essentially a life sentence.

it really drives home the gravity of the situation. But I can't help wondering, how did J.P. Morgan Chase, one of the largest and most sophisticated financial institutions in the world, fall for this? That's a great question. It's one that's been puzzling many in the financial world. As one analyst put it, this incident raises to the fore questions about whether J.P. Morgan is spending too much too fast. It seems like in their rush to acquire promising fintech startups,

they may have overlooked some red flags. Mm-hmm. That's concerning. Were there any warning signs before this that Frank might not have been on the up and up? Interestingly, yes. Back in 2017, the U.S. Department of Education accused Frank of potentially misleading customers to believe it was affiliated with the U.S. government. They had to change their website from frankfafsa.com to frank.com as a result.

Dino Mauro (05:41.07)
So there were warning signs even before the Jake Morgan Chase acquisition. That makes the lack of due diligence seem even more egregious. What do you think this means for the broader fintech industry? Well, I think this case could have far-reaching implications. It's likely to lead to increased scrutiny of fintech startups, particularly those dealing with sensitive financial information or claiming rapid user growth.

We might see regulators pushing for more stringent reporting requirements or more thorough audits of user data. That makes sense. It's a delicate balance between encouraging innovation and ensuring adequate safeguards, isn't it? Absolutely. And cases like this one with Frank and Charlie Javis highlight just how challenging it can be to get that balance right. It's a conversation that I'm sure will continue in boardrooms,

regulatory agencies and startup incubators for years to come. Well this has certainly been an eye-opening discussion. Any final thoughts for our listeners? I think the key takeaway here is to always be critical and do your due diligence. Whether you're an investor looking at a potential acquisition, a student considering financial aid options, or just someone reading about the latest revolutionary start. If something seems too good to be true, it very well might be.

And remember, real success and innovation come from actually solving problems and providing value, not from hyping up numbers or making grandiose claims. That's great advice. And on that note, we'll wrap up this episode of the $175 million deception inside the Frank scandal. Thanks for joining us for this deep dive into the Frank scandal. Yep. Thank you all for listening. Until next time, this is Cybercrime Junkies.

Thanks for listening.

Dino Mauro (07:45.646)
Well that wraps this up. Thank you for joining us. We hope you enjoyed our episode. The next one is coming right up. We appreciate you making this an award winning podcast and downloading on Apple and Spotify and subscribing to our YouTube channel. This is Cyber Crime Junkies and we thank you for watching.