In addition to prison time, judge Hellerstein ordered Javice to forfeit US$22.4mil and to pay US$287.5mil in restitution to JPMorgan. — Bloomberg
NEW YORK: Charlie Javice was sentenced to 85 months behind bars for defrauding JPMorgan Chase & Co in its US$175mil acquisition of her student-finance startup, Frank.
US District Judge Alvin Hellerstein handed down the sentence Monday in Manhattan federal court.
Prosecutors had asked that Javice, 33, be given a 12-year sentence, but the judge seemed to take into account testimony concerning her good character.
“You’re a good person,” Hellerstein told Javice. “You’ve done a bad thing, and I have to punish you.”
In addition to prison time, he ordered her to forfeit US$22.4mil and to pay US$287.5mil in restitution to JPMorgan.
A New York jury convicted Javice in March, finding that the onetime entrepreneur had lied and faked user data to mislead the nation’s biggest bank into believing her site had more than 4.25 million users when it actually had fewer than 300,000.
“I am deeply sorry, and I am asking with all my heart for forgiveness,” Javice said through tears before her sentencing.
“If it were within my power, I would never make the same mistakes again, not for money, not for recognition, not for anything.” Family members in attendance in the front row of the courtroom also wept as Javice spoke.
Prosecutors asked Hellerstein in a court filing for a stiff sentence, calling the crime a “brazen fraud” that she undertook to get JPMorgan to pay far more for her company than it was worth in the September 2021 deal. Javice’s lawyers suggested a sentence “in the neighborhood of 18 months.”
They had called her actions a “single lapse in judgment” and claimed the loss was “not consequential” to a bank as big as JPMorgan.
Javice’s lawyers and JPMorgan declined to comment on the sentence. The bank has separately sued Javice over the Frank deal.
A University of Pennsylvania Wharton School graduate whose company attracted investors like Apollo Global Management chief executive officer Marc Rowan, Javice was one of several young startup founders with elite backgrounds convicted of fraud in recent years.
The group includes FTX’s Sam Bankman-Fried and Theranos Inc’s Elizabeth Holmes.
Rowan was among the scores of people who wrote Hellerstein seeking leniency for Javice. In a letter earlier this month, the private equity executive asked the judge to consider her “full character,” which he said was marked by passion, creativity, intelligence and empathy.
“I feel she will make many meaningful contributions to society moving forward,” wrote Rowan, who served on Frank’s board and also testified as a defence witness at Javice’s trial.
Frank, which JPMorgan shut down in early 2023, offered a tool to help students fill out their Free Application for Federal Student Aid, or Fafsa, which is required by most colleges in making financial aid decisions.
JPMorgan executives testified at trial that they hoped to gain millions of new, young customers through the Frank deal, which made Javice a managing director and head of student solutions at the bank.
But the bank launched an internal investigation after an email marketing push to Frank users yielded only 10 new checking accounts, they said.
Jurors heard from a data scientist whom Javice paid US$18,000 to create “synthetic” user data to provide to JPMorgan during her negotiations with the bank.
Frank’s chief engineer testified that he had refused to create such data for Javice because he feared it might be illegal.
Javice’s defence team tried to focus attention on what it characterised as JPMorgan’s flawed and rushed due diligence.
They also tried to suggest that the bank didn’t really care about Frank’s user numbers and was more concerned about buying the company before another bank did.
A JPMorgan executive testified that the bank mistakenly thought Bank of America Corp was also bidding for Frank. — Bloomberg
