The Securities and Exchange Commission has charged Charlie Javice, the founder of the former student loan assistance company Frank, with fraud in connection with the $175 million sale of the company to JPMorgan Chase Bank, N.A. (JPMC) in 2021. The SEC’s complainthttps://www.sec.gov/litigation/complaints/2023/comp-pr2023-74.pdf alleges that Javice orchestrated a scheme to deceive JPMC into believing that Frank had access to valuable data on 4.25 million students who used Frank’s service when in reality the number was less than 300,000.

The SEC’s complaint alleges Javice misrepresented Frank’s purported millions of users to entice JPMC. As negotiations progressed, JPMC pressed the Frank executives for the data associated with its customers. Javice allegedly sought the help of Frank’s director of engineering to generate synthetic data to make it appear that Frank had 4.25 million customers. When the director refused to comply, Javice allegedly paid a data science professor to manufacture the data required to close the deal with JPMC.

The SEC’s investigation shows that, due to the eventual $175 million acquisition of Frank, Javice received $9.7 million directly in stock proceeds, millions more indirectly through trusts, and a contract entitling her to a $20 million retention bonus as a new employee of JPMC.

The complaint, filed in U.S. District Court for the Southern District of New York, charges Javice with violating the antifraud provisions of the Securities Act of 1933 and Securities Exchange Act of 1934. The complaint also names trusts held by Javice as relief defendants. The SEC seeks injunctive relief, an officer and director bar, disgorgement and prejudgment interest, and civil penalties.

The SEC’s investigation was conducted by Wesley Wintermyer and Lindsay S. Moilanen and supervised by Tejal D. Shah. The litigation is handled by Nancy Brown, Mr. Wintermyer, and Ms. Moilanen. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, which announced a parallel criminal investigation today, and the Federal Bureau of Investigation.

Jeffrey Newman is a whistleblower lawyer who handles claims under the SEC whistleblower program, the CFTC whistleblower program as well as the False Claims Act (Qui Tam). He can be reached at Jeff@JeffNewmanLaw or 617-823-3217.