JPMorgan Chase is set to remove Charlie Javice, the millennial founder who allegedly used fake data to trick the bank into buying his startup for $175 million.
JPMorgan Chase was unable to interview Javice, the former CEO of financial aid startup Frank. In December, the bank sued the entrepreneur and Olivier Amar, Frank’s chief growth officer, claiming the executives committed securities fraud when they sold Frank to JPMorgan Chase in September 2021. The bank alleges that Javice hired an anonymous data scientist to create fake data. that she used to trick JPMorgan into thinking Frank had 4.25 million customers. Frank, in reality, had about 300,000. (Javice has always maintained his innocence and said the bank knew exactly what it was buying.)
In March, Amar filed a motion to dismiss the charges against him. The executive claimed he was not a party to Frank’s sale transaction, only attended one meeting with JPMorgan Chase before the merger, and “legitimately acquired” data that had not been used in the negotiation of Frank’s sale, according to a March 1 court filing from Amar.
The big impact of Amar’s motion to dismiss was that it triggered a stay of investigation. This means that JPMorgan Chase was unable to interview Javice or Amar, as well as the data scientist who created the fake list, and any of Frank’s former employees. Javice herself complained about the lack of discovery. Frank’s founder was denied access to valuable evidence, including documents and emails that JPMorgan Chase made public, which will exonerate her, according to court documents. Javice alleged that JPMorgan Chase had “handpicked documents” and used them to defame her in the press and with regulators, according to a June 1 court filing from Javice. Javice, however, had requested a partial discovery while JPMorgan Chase wanted a full discovery.
JPMorgan Chase might finally get their chance to take on Javice. A Delaware District Court judge on July 13 denied Amar’s motion. Joshua Wolson, a Delaware District Court judge, said JPMorgan Chase’s complaint contained “a myriad of facts” that show Amar was aware of the plan to trick the bank into believing Frank had more of 4.25 million users, and that Amar had taken steps in pursuit of that plan, a July 13 court filing said. Although Amar did not hire the data science professor, he purchased a list of student data from ASL Marketing for $105,000 which he turned over to JPMorgan Chase in January 2022, four months after the closing. of Frank’s sale, according to the record. The bank used the ASL data to test a marketing campaign targeting Frank’s customers. The marketing campaign failed, with only 28% of emails delivered and 1% opened, according to JPMorgan Chase’s December complaint. That failure prompted the bank to begin investigating Frank and led them to uncover Javice and Amar’s lies, the fake client list and the ASL list, according to the July 13 court filing.
“Mr. Amar’s only argument is that JPMC is not alleging he engaged in fraudulent conduct. I suggest he go back and read the complaint in its entirety,” Judge Wolson said. .
Javice, who founded Frank in 2017, faces litigation on multiple fronts. In addition to JPMorgan Chase’s complaint, the Justice Department filed criminal charges against it in April, charging Javice with separate counts of conspiracy to commit wire and bank fraud, wire fraud, and fraud. bank, each carrying a maximum sentence of 30 years. in prison, according to the lawsuit. The Securities and Exchange Commission also sued Javice. She pleaded not guilty and is released on $2 million bond.
Earlier this week, the DOJ indicted Amar and charged him with the same four counts. The SEC also added him as a defendant in its lawsuit against Javice, according to a July 12 filing. Amar has pleaded not guilty and is free on $1 million bond.
Javice and Amar could not be reached for comment. Javice is seeking trial in the JPMorgan Chase lawsuit, but no date has been set.
JPMorgan Chase, along with many of its filings, provided several text messages aimed at showing Javice’s guilt. The amended SEC complaint is no different and includes multiple WhatsApp texts between Javice and Amar. In a conversation, from August 2021, Javice texted Amar about his appeal to the data science professor. “I found my genius. He says it’ll take an hour[.]she said, according to the SEC lawsuit.
Another text message from August 2021 details Amar’s efforts to secure ASL’s data list. He sends a message to Javice: “You will have 4.5 million users today. I just closed it[.] 2.3 cents per user. [$]Price 105k.
Javice replied: “[P]e[r]fect.
The SEC’s complaint also provided more information about how much executives made from the sale of Frank. Javice received about $10 million directly from the Frank transaction as well as millions more indirectly, according to the SEC filing. JPMorgan Chase hired her as chief executive and her employment contract included a retention bonus of $20 million, according to the SEC complaint. By comparison, Amar got around $5 million in merger proceeds, and his employment contract included a retention bonus of $3 million.
JPMorgan Chase plans to pursue discovery in its case against Javice, a person familiar with the litigation said. But before the parties can start going through the documents, the lawyers will hold a conference where they will discuss what they will share and when, said Lynette Byrd, a criminal defense attorney at law firm Oberheiden, who is also a former federal prosecutor.
It’s also possible the DOJ will file a motion to intervene and stay the JPMorgan lawsuit, the person said. Last month, the DOJ successfully suspended the SEC’s case against Javice, according to a July 23 DOJ filing.
Byrd doesn’t think that will happen. Javice’s attorneys are more likely to file a separate motion to stay the civil case pending resolution of the criminal case, she said. Javice would then not have to defend himself in two separate cases, in addition to facing discovery in the JPMorgan Chase lawsuit. “No. The DOJ would not seek to stay the civil case. It’s actually good for them to see this discovery come to fruition,” Byrd said.
One thing is certain: this saga is far from over.
Note: The title of this article has been updated to clarify that the texts were published as part of the new court filing.
This story was originally featured on Fortune.com
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