By Jill Evers // Business // EEW Magazine Online

Making your business a success is hard work. It can be tempting to cut corners and employ deceptive practices to get ahead. But as a rule of thumb, heed the advice of Leviticus 19:11: “You shall not steal, nor deal falsely, nor lie to one another” (NASB). Failure to obey these words can lead to devastating consequences for both the fraudster and the defrauded.

A fitting example is found in the details of what happened to 31-year-old, ambitious startup founder, Charlie Javice. Once considered an inspirational figure, she now serves as a cautionary tale for entrepreneurs considering an illegal scheme as a means to earn big money.

The Justice Department on Tuesday criminally charged the founder of Frank, a college financial-planning platform, with defrauding JPMorgan Chase out of $175 million. 

So, how did she do it?

The once rising tech star is accused of “falsely and dramatically” inflating the number of customers Frank had to “fraudulently induce” the bank to acquire the startup in 2021, federal prosecutors in Manhattan said.

She was on track to gain a whopping $45 million from the alleged deception.

Javice, once named one of Forbes’ 30 Under 30, was arrested Monday night in New Jersey. She faces four counts: one count of conspiracy to commit bank and wire fraud; one count of wire fraud affecting a financial institution; one count of bank fraud; and one count of securities fraud. Three of the charges each carry a maximum sentence of 30 years in prison. 

“This arrest should warn entrepreneurs who lie to advance their businesses that their lies will catch up to them, and this Office will hold them accountable for putting their greed above the law,” Damian Williams, U.S. Attorney for the Southern District of New York, said in a statement.

The Securities and Exchange Commission also sued Javice for fraud in connection with the alleged scheme. But, according to her legal representatives, she denies the allegations.

The damning charges come months after JPMorgan filed a lawsuit against Javice alleging that she swindled the bank into believing Frank had more than 4 million customers, when the startup had fewer than 300,000. 

The bank further alleges that Javice used a data science professor to invent millions of fake accounts after JPMorgan pressed for confirmation of Frank’s customer base. According to a CNBC report, the lawsuit revealed emails between the professor and Javice, including one communication wherein the entrepreneur asked, “Will the fake emails look real with an eye check or better to use unique ID?” 

JPMorgan reportedly became aware that there was a problem when 70% of emails sent to a batch of about 400,000 Frank customers bounced back. The bank shut down the startup in January.

Javice filed a counterclaim, saying it was “implausible” that JPMorgan “was led to believe Frank had 4.25 million registered users when its website publicly claimed the company had helped more than 350,000 people access financial aid.”

Despite her counterclaim, the government confirms that Javice was intimately involved in falsifying a list of customers by acquiring names, contact information and other data from third-party companies. She then passed those names along to JPMorgan as its existing customers.

“Even nonpublic, early-stage companies must be truthful in their representations,” Gurbir S. Grewal, director of the S.E.C.’s division of enforcement, said in a statement. “And when they fall short, we will hold them accountable as in this case.”