JPMorgan Chase is one step closer to deposing Charlie Javice, the millennial founder who allegedly used fake data to fool the bank into buying her startup for $175 million.
JPMorgan Chase has been unable to question Javice, the former CEO of financial aid startup Frank. In December, the bank sued the entrepreneur, and Olivier Amar, Frank’s chief growth officer, claiming that the executives committed securities fraud when they sold Frank to JPMorgan Chase in September 2021. The bank alleges that Javice hired an unnamed data scientist to create fake data that she used to trick JPMorgan into believing Frank had 4.25 million customers. Frank, in reality, had about 300,000. (Javice has continually maintained her innocence and has said the bank knew exactly what it was buying.)
In March, Amar filed a motion to dismiss the case against him. The executive claimed he wasn’t a party to the Frank sale transaction, that he attended only one meeting with JPMorgan Chase before the merger and that he “legitimately acquired” data that wasn’t used in the negotiation of the Frank sale, according to a March 1 court filing from Amar.
The big impact of Amar’s motion to dismiss was that it triggered a stay of discovery. This means JPMorgan Chase has been unable to question Javice, or Amar, as well as the data scientist who created the fake list, and any of Frank’s former employees. Javice herself has complained about the lack of discovery. The Frank founder has not had access to valuable evidence, including the documents and emails that JPMorgan Chase has publicized, that will exonerate her, according to court filings. Javice has alleged that JPMorgan Chase has “cherry-picked documents” and used them to vilify her in the press and with regulators, according to a June 1 court filing from Javice. Javice, however, had sought partial discovery while JPMorgan Chase wanted full discovery.
JPMorgan Chase may finally get its chance to confront Javice. A Delaware district court judge on July 13 denied Amar’s motion. Joshua Wolson, a Delaware District Court judge, said JPMorgan Chase’s complaint contained “myriad facts” that show Amar knew of the plan to trick the bank into thinking Frank had over 4.25 million users, and that Amar took acts in furtherance of that plan, a July 13 court filing said. While Amar didn’t hire the data science professor, he did buy a list of student data from ASL Marketing for $105,000 that he gave to JPMorgan Chase in January 2022, four months after the Frank sale closed, the filing said. The bank used the ASL data to test a marketing campaign targeting Frank’s customers. The marketing campaign failed, only 28% of emails were delivered and 1% were opened, according to JPMorgan Chase’s December complaint. This failure spurred the bank to begin investigating Frank, and led them to discover Javice’s and Amar’s lies, the fake customer list and the ASL list, the July 13 court filing said.
“Mr. Amar’s only argument is that JPMC doesn’t allege he engaged in any fraudulent conduct. I suggest he go back and read the Complaint in its entirety,” Judge Wolson said.
Javice, who founded Frank in 2017, faces litigation on several fronts. In addition to JPMorgan Chase’s complaint, the Department of Justice in April filed criminal charges against her, charging Javice with separate counts of conspiracy to commit wire and bank fraud, wire fraud, and bank fraud, each of which carries a maximum sentence of 30 years in prison, according to the lawsuit. The Securities and Exchange Commission has also sued Javice. She has pleaded not guilty and is free on $2 million bail.
Earlier this week, the DOJ indicted Amar and charged him with the same four counts. The SEC also added him as a defendant in their complaint against Javice, according to a July 12 filing. Amar has pleaded not guilty and is free on a $1 million bond.
Javice and Amar could not be reached for comment. Javice is seeking a trial in the JPMorgan Chase lawsuit but a date has not been set.
JPMorgan Chase, with many of its filings, provided several text messages that aim to show Javice’s guilt. The amended SEC complaint is no different and includes several WhatsApp texts between Javice and Amar. In one conversation, from August 2021, Javice texted Amar about her call to the data science professor. “I found my genius. He says it will take an hour[.],” she said, according to the SEC lawsuit.
Another text message from August 2021 details Amar’s efforts to secure the data list from ASL. He messages Javice: “You’ll have 4.5 million users today. Just closed it[.] 2.3 cents per user. [$]105k price.”
Javice responded: “[P]e[r]fect.”
The SEC complaint also provided more info on how much the executives made from the Frank sale. Javice received about $10 million directly from the Frank transaction as well as millions more indirectly, the SEC filing said. JPMorgan Chase hired her as a managing director and her employment agreement included a $20 million retention bonus, the SEC complaint said. By comparison, Amar got about $5 million in proceeds from the merger and his employment agreement included a $3 million retention bonus.
JPMorgan Chase plans to pursue discovery in its case against Javice, a person familiar with the litigation said. But before the parties can start pouring through the documents, the attorneys will hold a conference where they discuss what they will share and when, said Lynette Byrd, a criminal defense attorney with law firm Oberheiden, who is also a former federal prosecutor.
There is also a chance that the DOJ will file a motion to intervene and stay the JPMorgan lawsuit, the person said. Last month, the DOJ successfully stayed the SEC’s case against Javice, according to a July 23 filing from the DOJ.
Byrd doesn’t think that will happen. It’s more likely that Javice’s attorneys will file a separate motion to stay the civil case pending resolution of the criminal case, she said. Javice would then not have to defend herself in two separate cases, plus face discovery in the JPMorgan Chase’s lawsuit. “No. The DOJ would not seek to stay the civil case. It’s actually beneficial for them to see that discovery play out,” Byrd said.
One thing’s for sure: This saga is far from over.
Note: The headline of this piece has been updated to clarify that the texts were released as part of the new court filing.
This story was originally featured on Fortune.com
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