A Fake List, a Slack Trail, and Orange Jumpsuits: Tales from a Fintech Fraud

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Number of the Week: -65% (explanation below)

A Fake List, a Slack Trail, and Orange Jumpsuits: Tales from a Fintech Fraud

When a large corporate fraud is exposed, there are usually a couple of questions that are hard to satisfactorily answer, despite their systemic importance. First: “Is this type of behavior common, and it’s just a question of this company getting caught?” And second: “Aren’t there financial gatekeepers who are supposed to find this behavior before it reaches the stage of, say, criminal prosecution?”

These questions scream out in the case of Frank, the student-loan fintech company that entrepreneur Charlie Javice sold to JPMorgan Chase in 2021 for $175 million. Frank, founded in 2017, was a for-profit company that helped students through the cruel thicket of the American financial aid system. On its own terms, the deal made strategic sense: Frank wanted JPMC’s resources to grow and serve its customers better; JPMC wanted to use the startup to reach younger customers. In a September 2021 press release, Chase co-CEO Jennifer Piepszak said: “Together, we’ll be able to expand our capabilities for students and their families, helping them financially prepare for college and other major moments in their future.”

But the merger unwound quickly. The main undisputed fact is that when pitching to JPMC, Javice and her team said that the company had an eye-popping 4.25 million customers, when in reality there were only about 300,000. This discrepancy is now at the heart of at least three lawsuits: a Securities and Exchange Commission (SEC) complaint against Javice; a criminal indictment of Javice brought by the US Attorney for New York’s Southern District in May; and a suit filed by JPMC against Javice in December.

This week, evidence emerged which, at first glance, appears to be highly damaging to Javice.