JPMorgan Ordered to Cover Legal Fees of Frank Founder in Fraud Case
JPMorgan Chase, one of the largest banks on Wall Street, has been ordered by a Delaware court to cover the legal fees of Charlie Javice, the founder of Frank, in her defence against a lawsuit filed by the bank. JPMorgan had accused Javice of defrauding the company when it acquired her financial aid start-up for $175 million. The court ruling states that JPMorgan is obligated to pay Javice’s legal expenses as part of the agreement for the sale of her company to the bank in 2021.
In December, JPMorgan filed a lawsuit against Javice, alleging that she provided false information about the number of customers her company had. The bank claimed that she misrepresented the customer base, stating there were 4.25 million customers when in reality, there were only 300,000. Subsequently, in April, Javice was charged with fraud by US prosecutors, who also accused her of falsifying user numbers during the sale. Additionally, she is facing a civil lawsuit from the Securities and Exchange Commission.
While the court ruling specifically pertains to JPMorgan’s lawsuit against Javice, her legal team has the option to request an expansion of the coverage to include her defence in the government cases as well. Frank, Javice’s start-up, provided assistance to college students in applying for financial aid for their education. JPMorgan’s acquisition of Frank was aimed at enhancing its access to younger customers, and the purchase was made through its Chase retail banking division. The bank had been actively making smaller acquisitions during that period.
Following the acquisition, Javice joined JPMorgan as a managing director. However, the bank terminated her contract in November for cause, citing reasons not specified in the available information. Prosecutors have alleged that Javice stood to gain $45 million from the sale of Frank, which she founded in 2016 with backing from Apollo Global Management’s Marc Rowan.
In response to JPMorgan’s lawsuit, Javice has denied the allegations of falsifying user data. As part of her release from custody, she has provided a $2 million bond secured by her Miami Beach apartment. Javice has been engaged in discussions with prosecutors regarding a potential resolution to the criminal case, according to court records.
A spokesperson for JPMorgan stated that the bank will continue to focus on addressing the fraud claims through the legal process, emphasizing the primary issue at hand. The outcome of this legal battle will have significant implications for both Javice and JPMorgan, as they navigate the complex landscape of allegations and counterclaims.
By: Alex Wu