JPMorgan executives are expected to take the stand in coming days to testify about how the lender was allegedly defrauded out of $175 million by a 29-year-old entrepreneur, drawing fresh attention to how the biggest US bank vets its acquisitions.
At a trial that starts this week in Manhattan, federal prosecutors will seek to prove that Charlie Javice, the founder of college financial-planning startup Frank, and chief growth officer Olivier Amar committed fraud in order to get JPMorgan Chase & Co. to go through with the 2021 transaction — a deal Chief Executive Officer Jamie Dimon would later call a “huge mistake.”
According to the government, the pair hired a data scientist to create fake accounts showing 4.25 million customers, even though they knew it had fewer than 300,000. The implication for investors, whether the trial results in a conviction or acquittal, is how the massive Wall Street firm could have missed the warning signs, and whether its due diligence on other acquisitions was up to the task.
Javice and Amar are hoping the trial will focus on JPMorgan’s vetting process as well. They’ve suggested that they couldn’t have intended to defraud a highly sophisticated firm like the bank. The extent to which they’re allowed to point the finger at JPMorgan in front of jurors is up to US District Judge Alvin Hellerstein, a 91-year-old Bronx, New York, native.
Hellerstein is the judge who in November sentenced Archegos Capital Management’s Bill Hwang to 18 years in prison after a jury found him guilty of manipulative trading and lying to bank counterparties. In Hwang’s trial, the judge often sided with prosecutors in barring a “blame the victim” defense aimed at Archegos’ counterparty banks. He could similarly rule that evidence of JPMorgan’s failing is irrelevant to Javice’s or Amar’s guilt.
If the judge allows it this time, Javice will try to argue that the Wall Street behemoth’s due diligence failures show that JPMorgan was determined to close the deal quickly and didn’t rely on Frank’s user numbers.
Javice has said, for example, that the merger documents didn’t include promises about the company’s user base, and JPMorgan did little to scrutinize the operation. A “data validation exercise” conducted for the bank by an outside vendor, Acxiom LLC, was “surprisingly limited,” according to an expert hired by Amar. And the cost of that review — just $1,695 — was inconsistent with a serious attempt to assess Frank’s customer base, according to the expert.
Javice, now 32, and Amar, 50, both face prison if convicted. The most serious charge, bank fraud, carries a maximum penalty of 30 years. They’ve both pleaded not guilty.
Javice started Frank in 2017 and was named to Forbes’s “30 Under 30” list of promising young talents two years later. In 2023, the former rising star was moved to the magazine’s “Hall of Shame,” a list of “30 Under 30” picks it wished it could do over. She shares that distinction with FTX’s Sam Bankman-Fried and Martin Shkreli, the ex-con founder of Retrophin and one-time “Pharma Bro” convicted of securities fraud.
| Javice Among Forbes 30-Under-30 Founders to Face Criminal Charges | ||
|---|---|---|
| Name | Year | Case |
| Martin Shkreli | 2013 (Forbes Finance) | “Pharma Bro” who became notorious for jacking up the price of a drug to treat a rare disease, served a seven-year sentence after conviction for securities fraud. |
| Elizabeth Holmes | 2015 (Forbes Summit) | Convicted of making fraudulent claims at her blood-testing company, Theranos. She was sentenced to 11 years in prison, a conviction she has appealed. |
| Sam Bankman-Fried | 2021 (Forbes Finance) | Serving a 25-year prison sentence after conviction in a multibillion-dollar fraud at cryptocurrency exchange FTX. |
| Do Kwon | 2019 (Forbes Asia) | Terraform Labs co-founder extradited to the US to face charges of artificially inflating cryptocurrency and defrauding investors. He’s in custody, awaiting trial. |
| Obinwanne Okeke | 2016 (Forbes Africa) | Nigerian entrepreneur serving 10-year sentence after pleading guilty to an $11 million internet fraud. |
JPMorgan paid Javice $21 million for her equity stake in Frank and the promise of an additional $20 million retention bonus. She was also named a JPMorgan managing director at a salary of $300,000. But the relationship soured quickly. Even before the bank discovered the allegedly fraudulent user data, it opened an internal investigation into allegations that Javice misused corporate credit cards for personal expenses and other violations of JPMorgan rules. She was fired in November 2022.
In a separate civil suit, Javice claimed the Frank acquisition was part of an “aggressive campaign” by JPMorgan to acquire fintech companies starting in 2020. Her legal team said that Dimon told Javice in July 2021 that he thought JPMorgan should “get the deal done.” At the time, a competitor later identified in court as Capital One Financial Corp. was considering a transaction to land Frank.
Prosecutors say Javice and Amar created “the most explicitly fraudulent diligence documents” for use by Capital One, which they later provided to JPMorgan.
In addition to pointing the finger at JPMorgan, Amar may also be targeting his former boss. Last month, Javice claimed Amar plans to try to save himself by arguing to jurors that she “concealed information and deceived him.” The defense is turning Amar into a “second prosecutor,” Javice argued. The judge denied her request for separate trials.
JPMorgan quietly fired Javice and Amar in late 2022 after placing them on administrative leave earlier in the year. Any hopes of that being the end of it evaporated when Javice sued JPMorgan, alleging it launched an internal investigation of the Frank deal as pretext to fire her and deny her the $20 million bonus.
The bank responded with a suit of its own, claiming Javice and Amar defrauded it by vastly inflating the number of customers Frank had. A few months later, Javice was arrested at Newark Liberty International Airport and charged with defrauding JPMorgan. The verdict in the criminal trial could decide some of the central issues in those cases.
Prosecutors have provided the defendants with a list of 26 witnesses they may call to the stand, though their identities haven’t been made public. Jurors are expected to hear from as many as eight JPMorgan witnesses and at least one from LionTree, which advised Frank on the transaction.
The trial may also feature testimony from Frank’s former director of engineering, who allegedly refused to help Javice falsify user data and later recorded calls with her and Amar.
Jurors will be shown a small fraction of the more than one million pages turned over to the government by JPMorgan in response to grand jury subpoenas, including Slack chat exchanges, texts and emails involving Javice and Amar.
The case is US v Javice, 23-cr-251, US District Court, Southern District of New York (Manhattan).
