JPMorgan Expressed 'Buyer's Remorse' as Trial of Startup Founder Begins

Lawyer Defends Charlie Javice Amid Fraud Allegations in High-Stakes Case / Reuters

The highly publicized criminal trial of Charlie Javice, accused of defrauding JPMorgan Chase into acquiring her college financial aid startup, Frank, commenced with her lawyer asserting that there was no fraud involved, instead suggesting that JPMorgan merely experienced "buyer's remorse." Javice, who is 32 years old, has pleaded not guilty to charges that include securities fraud, wire fraud, bank fraud, and conspiracy, stemming from JPMorgan's $175 million purchase of Frank in July 2021.

Prosecutors allege that Javice misled the financial institution by claiming that Frank had 4.25 million customers, while in reality, the number was closer to 300,000. This discrepancy came to light when JPMorgan attempted to reach out to these supposed customers to market their products, only to receive significantly fewer responses than anticipated.

During the opening arguments in Manhattan federal court, Javice's attorney, Jose Baez, emphasized that JPMorgan conducted thorough due diligence prior to the acquisition and was aware of the actual customer count before finalizing the deal. He contended that JPMorgan's claims of being deceived were merely a cover for its inability to navigate changes in financial aid regulations, which allowed them to retract from the sale agreement.

Prosecutor Rushmi Bhaskaran countered this narrative, stating that Javice resorted to gathering fictitious names and addresses from a college acquaintance to meet JPMorgan's data requirements. Bhaskaran further claimed that Olivier Amar, Javice's co-defendant and Frank's chief growth officer, purchased fraudulent lists of student information from third-party sources to falsely represent as customers of Frank. She asserted that the deceitful actions of Javice and Amar led to their significant financial gains.

Amar's defense attorney, Jonathan Cogan, defended his client by claiming that Amar was not involved in the discussions with JPMorgan and was largely unaware of the negotiations taking place. Javice, who resides in Florida and studied at the Wharton School of the University of Pennsylvania, has previously been recognized in Forbes magazine's "30 Under 30" list in 2019.

The trial is presided over by U.S. District Judge Alvin Hellerstein, who oversaw the jury selection process earlier in the day. Notably, JPMorgan CEO Jamie Dimon has publicly described the acquisition of Frank as a "huge mistake," reflecting the bank's internal regrets regarding the deal. As the trial unfolds, JPMorgan has opted not to comment on the ongoing legal proceedings.

Founded in 2017, Frank aimed to streamline the college financial aid process for students and their families. Prior to engaging with JPMorgan, Javice had also explored a transaction with another financial institution, Capital One, according to statements made by Amar's lawyer. This trial highlights the complexities and potential pitfalls of mergers and acquisitions in the fast-paced financial tech landscape.