SEC and DOJ Charge Founder of Frank with "Brazen Scheme" to Defraud JPMorgan

SEC Charges Founder of Frank with Fraud in Connection with $175 million Sale of Student Loan Assistance CompanyThe Securities and Exchange Commission today charged Charlie Javice, the founder of the now shuttered student loan assistance company previously known as Frank, with fraud in connection with the $175 million sale of the company to JPMorgan Chase Bank, N.A., (JPMC) in 2021. The SEC’s complaint alleges that Javice orchestrated a scheme to deceive JPMC into believing that Frank had access to valuable data on 4.25 million students who used Frank’s service when in reality the number was less than 300,000.

The SEC’s complaint alleges that Javice made numerous misrepresentations about Frank’s purported millions of users to entice JPMC. As negotiations progressed, JPMC pressed the Frank executives for the data associated with its customers, and Javice allegedly sought the help of Frank’s director of engineering to generate synthetic data to make it appear as if Frank had 4.25 million customers. When the director refused to comply, Javice allegedly paid a data science professor to manufacture the data required to close the deal with JPMC.

The SEC’s investigation shows that, as a result of the eventual $175 million acquisition of Frank, Javice received $9.7 million directly in stock proceeds, millions more indirectly through trusts, and a contract entitling her to a $20 million retention bonus as a new employee of JPMC.

Former Start-Up Founder Charged by Prosecutors for Defrauding JPMorgan Chase

Charlie Javice, the 31-year-old start-up founder who JPMorgan Chase accused in a December lawsuit of lying to the bank as it prepared to acquire her company, is now facing criminal charges as well.

On Tuesday, the U.S. attorney’s office for the Southern District of New York charged her with wire, bank and securities fraud. It said that she “falsely and dramatically” exaggerated the number of customers that Frank, her now shuttered college financial planning company, actually had in a scheme to “fraudulently induce J.P. Morgan Chase to acquire” her start-up for $175 million.

‘Shark Tank’ Star Kevin O’Leary Calls Litigating Your Crypto Regulator ‘Really Stupid’

Venture capitalist and “Shark Tank” star Kevin O’Leary said that crypto exchanges shouldn’t be taking legal action against regulators.

“Litigating your regulator, in my opinion, is a really stupid idea,” he told CoinDesk TV’s “First Mover” on Tuesday in reference to Coinbase (COIN), the largest U.S. crypto exchange by trading volume. Coinbase may face regulatory action from the Securities and Exchange Commission (SEC).

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“If the crypto community and crypto investors like me want to fit into the existing global financial services system, we have to tuck under the regulator,” he said. “I no longer have any interest in going to war with regulators, litigating regulators and suing regulators. That is not the future of crypto.”

Dismissal Granted in Peloton COVID-Related Securities Suit

Since the initial outbreak of COVID-19 in the U.S. in March 2020, there have been scores of COVID-related securities suit filed. However, as the pandemic itself progressed, the nature of the lawsuits being filed also changed. Over time, the plaintiffs’ lawyers began targeting companies that had initially prospered at the outset of the pandemic, but whose fortunes flagged as circumstances changed. The prototypical example of a COVID-19-related securities suit involving a company that experienced this particular sequence of events is the lawsuit filed against exercise equipment company Peloton, whose equipment sold briskly at the outset of the pandemic but whose sales slackened as government shutdown orders lapsed and people began returning to work. However, in a March 30, 2023 order (here), the court granted the defendants’ motion to dismiss in the Peloton case, albeit without prejudice, in a decision that does not bode well in these kinds of change-of-fortune pandemic-related securities suits.

Binance Compliance Chief Calls His Job One of the ‘Most Challenging’

Mr. Perlman, speaking at a crypto industry conference on Tuesday, said it has been difficult to navigate the often opaque rules governing the crypto industry without being on the wrong side of the regulators.

One reason, said Mr. Perlman, who joined Binance in January after a monthslong search by the exchange, is the “regulation by enforcement” approach taken in the U.S. He contrasted the process in crypto with working at traditional financial institutions, where compliance is difficult but there are rulebooks and track records to guide a compliance officer’s work.

SEC Recovers Over $800 Million After Decade-Long Ponzi Case

A court-appointed receiver has finished recovering and redistributing assets to investors defrauded by Rex Venture Group LLC between January 2011 and August 2012.

Judge Graham C. Mullen of the US District Court for the Western District of North Carolina entered final judgment against RVG on Monday. The judgment accounts for over $817 million, representing about $548.5 million in investors’ losses plus about $269 million in interest accrued since the SEC’s original filing.