Former tech CEO being sued for defrauding JPMorgan has hit back with dramatic allegations

Charlie Javice, the 31-year-old charged with defrauding JPMorgan of $175 million with her student-aid startup Frank, is now arguing that the bank and Department of Justice have been working in tandem to kneecap her legal team’s criminal defense.

Back in April, the U.S. Attorney for New York’s Southern District charged Javice with conspiracy and three counts of fraud—wire, bank, and securities—for a “brazen plan” she’d allegedly hatched in 2021 to misrepresent the success, size, and market penetration of Frank, her company that had drawn good press for its platform designed to simplify FAFSA, the free federal student aid application.

Javice and a colleague now stand accused of paying a data scientist to create millions of fake accounts so that Frank could claim to have some 4.25 million users. (It reportedly had between 250,000 and 300,000 accounts at the time.) After JPMorgan’s massive nine-figure investment, Javice told followers on LinkedIn that Frank was already “serving over 5 million students at over 6,000 colleges.” She and the colleague have since pleaded not guilty, and deny all allegations of fraud.

Both the DOJ and Javice’s lawyer, Alex Spiro, who’s also represented Elon Musk, among others, have kept busy since her April arrest—the month of July saw a new proceeding, motion, or filing almost every other day—and Javice’s defense made a new round of serious allegations on Friday in a court filing that was reviewed by Fast Company. It contends that JPMorgan failed to produce “thousands” of “highly relevant, potentially exculpatory, readily available materials” during discovery that Javice’s team argues would help her defense. “The record demonstrates that these omissions are not incidental—they are strategic,” the filing argues.

Among the materials not shared, it contends, are internal communications discussing JPMorgan’s acquisition of Frank, and the due diligence that was conducted. Many of these communications (such as exchanges on Slack that “appear to span entire days”) could be exculpatory and don’t fall under attorney-client privilege.

Meanwhile, it adds, “Defendants have continued to identify glaring deficiencies in JPMC’s productions to the Government. The Government’s response has been deliberate inaction.”

JPMorgan is merely acting in this case as a third-party subpoena recipient, but Javice’s team claims that the bank has gone crazy asserting attorney-client privilege 13,000 times so far in order to not disclose certain information. However, some documents covered by JPMorgan’s supposed 13,000 claims of privilege appear unredacted elsewhere in other parties’ subpoenas, and Javice’s side claims to have noticed a pattern where “withheld documents are in fact not privileged.”

Spiro claims that prosecutors previously consented to him raising objections to JPMorgan’s privilege claims, but then did an about-face and argued Javice doesn’t have standing “at the eleventh-hour . . . conveniently only after [JPMorgan] itself made that exact same objection.”

When JPMorgan filed suit against Javice in December, arguing she’d sold the bank “a lie,” Spiro immediately recast Javice as the hero facing off against a billion-dollar bully: “After JPM rushed to acquire Charlie’s rocket ship business, JPM realized they couldn’t work around existing student privacy laws, committed misconduct, and then tried to retrade the deal. Charlie blew the whistle and then sued.”

Since then, Javice has leaned into the argument that JPMorgan wasn’t tricked when it bought Frank, and that it knew what it was getting all along. In August, however, a U.S. District judge delivered a setback when he ordered JPMorgan’s suit be put on pause until the criminal case was finished, so Javice couldn’t use pretrial exchanges from the civil case to bolster her criminal defense.

Friday’s filing goes a step further, alleging that the prosecution “seems content to rest its entire complaint (and theory of the case) on JPMC’s cherry-picked set of documents” that make the bank look good, and has been busy “willfully and intentionally burying its head in the sand to avoid identifying, let alone reviewing, documents that are material to the preparation of the defense that would undermine the Bank’s theory of the offense.”

Javice’s team argues that it believes the government is portraying JPMorgan as the “unwitting victim of fraudulent conduct,” when the global bank is actually “a remorseful buyer, vindictive advocate, and an obviously interested private party with a monetary stake in the outcome.”

https://www.fastcompany.com/90967868/charlie-javice-frank-jpmorgan-fraud-lawsuit-explained?partner=rss&utm_source=rss&utm_medium=feed&utm_campaign=rss+fastcompany&utm_content=rss