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November 29, 2023

Frank founder accused of defrauding JPMorgan says government’s scheduling request puts her at disadvantage

Frank founder accused of defrauding JPMorgan says government’s scheduling request puts her at disadvantage

The financial aid startup founder accused of defrauding JPMorgan Chase during its $175 million acquisition of her company says the federal government’s effort to pause a civil lawsuit against her would give prosecutors an advantage over her in their criminal case.

Charlie Javice, who once made the Forbes “30 Under 30” list with her now-shuttered company, Frank, was charged last month on federal fraud counts. She also faces multiple lawsuits from the Securities and Exchange Commission and JPMorgan Chase.

She’s accused of grossly inflating the number of Frank customers to “fraudulently induce” the bank to buy the company in 2021.

The Justice Department said Javice fabricated Frank’s user data to make it appear as though the startup had 4.25 million student customers. It had fewer than 300,000, the officials say.

She has denied wrongdoing.

On Wednesday, Javice’s attorney Alex Spiro objected to the government’s request to pause the SEC’s civil lawsuit, which would allow Javice to be tried first in the criminal case, according to the court documents. 

“The Government makes no effort to conceal the fact that its application is expressly designed to gain advantage in the criminal action,” Spiro said, adding the move would “enable the SEC and the Government to play hide-the-ball with Ms. Javice as she fights for her liberty and livelihood.”

“This is nothing less than a coordinated governmental effort to deprive Ms. Javice of exculpatory evidence critical to her defense and necessary to exonerate her,” he wrote in his filing.

But the government said its request was “appropriate” because “any exchange of discovery in the SEC Case would be asymmetrical and would allow the defendants to circumvent the criminal discovery rules and improperly tailor their defenses in the Criminal Case,” according to a May court filing.

“Were discovery in the SEC Case to proceed, there would be a risk of significant interference with the Criminal Case,” the Justice Department said, adding that pausing the civil case would also “preserve” the court’s resources, because “many of the issues presented by the civil action will be resolved in the Criminal Case.”

The SEC said it doesn’t take a position on the government’s efforts, court documents show.  

Last year, JPMorgan sued Javice in federal court in Delaware alleging fraud, accusing her of having lied about Frank’s size and success to “cash in,” according to the lawsuit.

The bank learned of the discrepancy when it sent an email campaign to a list of people Javice said were customers but got only a few responses, the SEC complaint said.

Javice has denied the bank’s accusations and filed a counterclaim, saying the bank “cannot prove its outlandish claims” and “compromised her reputation.”

Chloe Atkins

Chloe Atkins reports for the NBC News Investigative Unit, based in New York. She frequently covers crime and courts, as well as the intersection of reproductive health, politics and policy.

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