How This 31 Year Old Woman Scammed JP Morgan: A Tale of Deception and Fraud

 In the world of startups and finance, the story of Charlie Javice stands out as a cautionary tale. Javice, the founder of a company called Frank, managed to deceive one of the world's largest banking institutions, JP Morgan, into acquiring her company by inflating its customer numbers. This blog post delves into the intricate web of lies, deceit, and flagrant exaggerations that eventually led to her downfall.

The Ingenious Deception

Charlie Javice, a young entrepreneur, was at the helm of Frank, a company that aimed to simplify the process of filling out the Free Application for Federal Student Aid (FAFSA). However, behind the scenes, Javice was orchestrating a grand deception. She claimed her company had over 4 million users when in reality, it had fewer than 300,000.

Javice's deception didn't stop there. She fabricated and manipulated data to make her company appear more successful than it actually was. She even went as far as to create over 4 million fake accounts using an algorithm that created new fake customer information based on real profiles.

This was not a simple task. Javice needed to figure something out and quickly. How was she going to get a customer database with more than 4 million customer emails? This is where her Chief Growth Officer, Olivia Amar, comes into the picture. Initially, Amar approached the company's top engineer to create the fake account, but the engineer smelt a rat and he questioned the legality of the request. Javice assured him that quote 'no one will end up in an orange jumpsuit' but the engineer knew better and he ultimately refused.

Having no other option, Charlie had a backup. She knew a guy, a professor in New York who specialized in quote 'Creative Solutions for data problems.' She would reach out to him for help. With the professor's assistants, they were able to create over 4 million fake accounts by using an algorithm. The algorithm created new fake customer information based on real profiles. After some tinkering, they scrape together a list. They held their breath and sent it off to JP Morgan. Surprisingly or unsurprisingly, the banking giant bought it. As a thank you, Javas paid the professor eighteen thousand dollars for his efforts and now they just had to wait for their payday.

The Acquisition and Its Aftermath

JPMorgan Chase, one of the largest banking institutions in the world, was duped into purchasing Frank for a whopping $175 million. Javice stood to gain over $45 million from the transaction, including $21 million for the sale of her equity stocks in Frank and a $20 million retention bonus from Chase.

However, the illusion of success was short-lived. A few months after the acquisition, JP Morgan began integrating Frank into its operations. They dispatched advertisement emails to Frank's supposed customers, only to discover that a mere 20% of emails were even delivered, and an even more minuscule one percent were opened.

The Downfall

The discovery led to an investigation, which revealed Javice's email exchange with a corrupt University professor who had helped her fabricate the fake accounts. Both Javice and her Chief Growth Officer, Olivia Amar, were suspended from their roles at JP Morgan. In December of 2022, JP Morgan filed charges against them.

Javice retaliated with a countersuit, arguing that her termination was unjust. However, the court found the evidence against her compelling. In April 2023, she was found guilty on four separate counts of having 'falsely and dramatically inflated Frank's customer numbers' and having 'fraudulentlyinduced JP Morgan to acquire her company.'

The Lessons Learned

Charlie Javice's story serves as a stark reminder of the dangers of the 'fake it till you make it' mentality. Her marketing prowess significantly outshone her actual management abilities, leading to a disastrous outcome. It's a vivid example of how unethical behavior can easily be overlooked during prosperous times, only to come crashing down when reality returns.

The story of Charlie Javice is not just a tale of deception and fraud, but also a lesson in the perils of unchecked ambition and the importance of ethical business practices. It serves as a stark reminder that in the world of business, integrity and honesty are not just moral imperatives, but also crucial for long-term success.

The Backstory

Charlie Javice was not a newcomer to the world of startups. She had a history of launching ventures that promised much but delivered little. Her first venture, Pover-up, a micro-lending platform for developing countries, was never officially registered as any type of company. There are no records of its existence and this is despite her bold claims of customers and partnership deals. Some of those partners have even come out and said, 'no, we don't know who this person is, we've never done a deal with Povera or Charlie Javas.' Despite telling Wharton magazine in 2013 that Pover-up raised three hundred thousand dollars from friends or family a former board member confirmed it didn't distribute a single loan.

The Aftermath

In the aftermath of the scandal, JP Morgan was left with a company that was worth a fraction of what they had paid for it. The bank's CEO, Jamie Dimon, called the acquisition of Frank a "huge mistake". The fallout from the scandal was not just financial. It also dealt a significant blow to the bank's reputation, raising questions about its due diligence processes.

For Javice, the consequences were even more severe. She was found guilty on four separate counts of having 'falsely and dramatically inflated Frank's customer numbers' and having 'fraudulently induced JP Morgan to acquire her company.' She now faces significant legal and financial repercussions.

Conclusion

The story of Charlie Javice and Frank serves as a cautionary tale for both entrepreneurs and investors. For entrepreneurs, it underscores the importance of building a business on a foundation of honesty and integrity. For investors, it serves as a reminder of the importance of thorough due diligence.

In the end, the story of Charlie Javice is a stark reminder that in the world of business, the truth always comes out in the end. No matter how cleverly one might try to disguise it, deception and fraud are always exposed eventually. And when they are, the consequences can be severe.