SEC v. Charlie Javice; Charlie Javice 2021 Irrevocable Trust #1; and Charlie Javice 2021 Irrevocable Trust #2, No. 1:23-cv-02795, Southern District of New York (Apr. 4, 2023) — Complaint
raw: CHARLIE JAVICE, in her capacity as Trustee :
CHARLIE JAVICE, in her capacity as Trustee :, No. 1:23-cv-02795 (Apr. 4, 2023)
summary
Charlie Javice, founder and CEO of Frank, committed securities fraud by fabricating a user base of 4.25 million student customers—when only ~300,000 existed—to deceive JPMorgan Chase into paying $175 million for her company, resulting in SEC charges under Sections 17(a) and 10(b) and Rule 10b-5, with demands for disgorgement, penalties, and recovery of funds transferred to her trusts.
paragraph
Charlie Javice misled JPMorgan Chase into acquiring her company, Frank, for $175 million by falsely claiming it had 4.25 million students with identifiable data, when in reality it had only about 300,000. To conceal the fraud, she paid $180,000 to third parties for real student data and hired a university professor to generate 4.265 million synthetic records, which were then validated and presented to JPMC as authentic. The SEC charges Javice with violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act, along with Rule 10b-5, seeking disgorgement of her $21 million in proceeds, civil penalties, a permanent bar from serving as an officer or director, and recovery of funds transferred to two irrevocable trusts.
narrative
Charlie Javice, founder and CEO of Frank (TAPD, Inc.), orchestrated a sophisticated securities fraud to inflate her company’s purported user base from approximately 300,000 students to 4.25 million in order to secure a $175 million acquisition by JPMorgan Chase in 2021. Knowing JPMC was primarily interested in student identity data, Javice paid $105,000 to one data compiler for real in-college student records and an additional $75,000 to another to augment the list with email and phone numbers, while also commissioning a university professor to generate 4.265 million synthetic records with fabricated personal details. She then submitted these falsified datasets to a third-party validator, which provided JPMC with a false attestation of legitimacy. After the merger closed, JPMC’s marketing campaign targeting the supposed student base failed dramatically, triggering an internal investigation that uncovered the deception. Javice personally received over $21 million from the deal, including a $20 million retention bonus and direct transfers to two irrevocable trusts she controlled. The SEC has charged her with violating Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act, along with Rule 10b-5, and is seeking disgorgement of all ill-gotten gains, prejudgment interest, civil penalties, a permanent bar from serving as a public company officer or director, and the return of funds held in the trusts.
Classified financial-fraud(confidence 95%). EDGAR detection: forms 10-K/10-Q/8-K/NT 10-K· recall 67% / precision 23%. detection rule →
Statutes
15 U.S.C. § 77q(a)15 U.S.C. § 78j(b)15 U.S.C. § 78u(d)15 U.S.C. § 77t(d)15 U.S.C. § 77t(e)15 U.S.C. § 77v(a)15 U.S.C. § 78aa17 C.F.R. § 240.10b-5Section 17(a) of the Securities ActSection 10(b) of the Securities Exchange ActSections 20(b) and 20(d) of the Securities ActSections 20(b) and 20(d) of the Securities ActSection 20(e) of the Securities ActSection 22(a) of the Securities ActRule 10b-5
Parties
Securities and Exchange CommissionCharlie Javice 2021 Irrevocable Trust #1Charlie JaviceCharlie Javice 2021 Irrevocable Trust #2
Keywords
javicefrankdatajpmcfrank executivedata compilerdata sciencescience professordocument pagemillionjavice frankjavice trustexecutivestudentsinformation
Extracted insights
Dollar amounts 11
- $175.00M $175 million $100M–$1B
- $20.00M $20 million $10M–$100M
- $9.70M $9.7 million $1M–$10M
- $7.13M $7,133,805 $1M–$10M
- $7.00M $6,999,999 $1M–$10M
- $4.70M $4,700,000 $1M–$10M
- $105K $105,000 $100K–$1M
- $75K $75,000 $10K–$100K
- $18K $18,000 $10K–$100K
- $13K $13,300 $10K–$100K
- $175 $175 <$10K
Entities 8
- person Charlie Javice
- company Charlie Javice 2021 Irrevocable Trust #1
- company Charlie Javice 2021 Irrevocable Trust #2
- person fake data
- person fraudulent scheme
- person identity information
- agency Securities and Exchange Commission
- person university professor
Triples 11
- Javice sold Frank
- Javice sold Frank for $175 Million
- Javice sold Frank to JPMC
- JPMC was eager to acquire Identity Information
- Javice claimed Frank collected 4.25 Million Customers
- Javice embarked on Fraudulent Scheme
- Javice touted 4.25 Million Customers
- Javice paid University Professor
- University Professor created Fake Data
- Javice provided List of 4.25 Million Data Entries
- SEC alleges Fraudulent Conduct by Javice
Text layers
Extracted body text (45,867c)
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Case 1:23-cv-02795 Document 1 Filed 04/04/23 Page 1 of 23
ANTONIA M. APPS
REGIONAL DIRECTOR
Tejal D. Shah
Lindsay S. Moilanen
Nancy A. Brown
Wesley Wintermyer
Attorneys for the Plaintiff
SECURITIES AND EXCHANGE COMMISSION
New York Regional Office
100 Pearl Street, Suite 20-100
New York, New York 10004
(212) 336-1021 (Moilanen)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-------------------------------------------------------------- x
SECURITIES AND EXCHANGE :
COMMISSION, :
:
Plaintiff, : 23 Civ. ( )
:
v. :
: COMPLAINT AND
CHARLIE JAVICE, : JURY DEMAND
:
Defendant, :
:
-and- :
:
CHARLIE JAVICE, in her capacity as Trustee :
for the CHARLIE JAVICE 2021 :
IRREVOCABLE TRUST #1, and CHARLIE :
JAVICE 2021 IRREVOCABLE TRUST #2, :
:
Relief Defendants. :
---------------------------------------------------------------x
Plaintiff Securities and Exchange Commission (“Commission”), for its Complaint against
Defendant Charlie Javice (“Javice”), and Javice in her capacity as Trustee for Relief Defendants
Charlie Javice 2021 Irrevocable Trust #1 and Charlie Javice 2021 Irrevocable Trust #2
(collectively, “Relief Defendants”) alleges as follows:
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Case 1:23-cv-02795 Document 1 Filed 04/04/23 Page 2 of 23
SUMMARY
1. In the summer of 2021, Javice sold the company she founded, Frank,1 for $175
million to JPMorgan Chase Bank, N.A. (“JPMC”). Through the deal, JPMC was eager to
acquire the identity information of the 4.25 million customers—purportedly students looking to
finance their educations—that Javice repeatedly claimed Frank had collected. JPMC had been
seeking to expand its market share for financial services and products to the largely untapped
student segment of the population and hoped to use Frank’s customer information to target those
prospects.
2. But, as Javice knew, Frank did not have 4.25 million student customers or their
identifying information. Javice, Frank’s CEO, understood that Frank’s customer data was the
asset that JPMC wanted, and that JPMC would not pursue an acquisition if it knew the truth:
that Frank in fact had identifying data for only about 300,000 students. Therefore, to ensure that
JPMC went forward with the transaction, Javice embarked on a fraudulent scheme to (1) hide the
fact that Frank had identifying data for only about 300,000 students; and (2) fabricate data to
falsely support Javice’s claims.
3. Prior to the acquisition (which was documented as a merger), Javice repeatedly
touted that Frank had 4.25 million customers, and explained in one-on-one meetings with JPMC
employees that those 4.25 million customers were students who had provided a first name, last
name, email address, and phone number to Frank. When JPMC asked to review the customer
data, Javice paid a university professor to create fake data appearing to represent 4.25 million
customers. Javice then provided that list of 4.25 million data entries to a third-party validator,
who in turn reported it to JPMC.
1
The legal name for the company was TAPD, Inc. “Frank” was a doing-business-as alias.
2
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Case 1:23-cv-02795 Document 1 Filed 04/04/23 Page 3 of 23
4. Knowing that JPMC would have access to Frank’s real and much more limited
student data after the close of the acquisition, Javice and another high-ranking Frank executive
(the “Frank Executive”) began an effort to create a list of real names that they could pass off as
Frank’s customers. To that end, the Frank Executive arranged for Frank to pay $105,000 to a
third party data compiler for its in-college student data. Javice arranged for Frank to pay
$75,000 to a different data compiler to augment the list the Frank Executive bought with email
and phone number data.
5. But, after the merger when JPMC used those sham lists to test a marketing
campaign for its financial services to a sample of what it thought were Frank’s customers, its
campaign reached few of the intended recipients, and its marketing email was opened by a
fraction of those it did reach.
6. JPMC conducted an internal investigation through which it learned that Frank had
no list of 4.25 million legitimate users and that Javice had engaged in a months-long scheme to
fabricate the data that she knew JPMC was paying $175 million to acquire.
VIOLATIONS
7. By virtue of the conduct alleged herein, Javice has violated, directly or indirectly,
singly or in concert, Section 17(a) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C.
§ 77q(a)], and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) [15
U.S.C. § 78j(b)], and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
8. Unless Javice is restrained and enjoined, she will engage in the acts, practices,
transactions and courses of business set forth in this Complaint, or in acts, practices, transactions,
and courses of business of similar type and object.
3
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Case 1:23-cv-02795 Document 1 Filed 04/04/23 Page 4 of 23
NATURE OF THE PROCEEDINGS AND RELIEF SOUGHT
9. The Commission brings this action pursuant to the authority conferred upon it by
Sections 20(b) and 20(d) of the Securities Act [15 U.S.C. §§ 77t(b) and 77t(d)], and Sections
21(d) of the Exchange Act [15 U.S.C. § 78u(d)], seeking a final judgment: (a) permanently
enjoining Defendant from engaging in the acts, practices and courses of business alleged against
them herein; (b) ordering Defendant to disgorge all ill-gotten gains and to pay prejudgment
interest on those amounts pursuant to Exchange Act Sections 21(d)(3), 21(d)(5), and 21(d)(7) [15
U.S.C. §§ 78u(d)(3), 78u(d)(5), and 78u(d)(7)]; (c) ordering Defendant to pay civil money
penalties pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section
21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)]; (d) permanently prohibiting Defendant
from acting as an officer or director of a public company pursuant to Section 20(e) of the
Securities Act [15 U.S.C. § 77t(e)] and Section 21(d)(2) of the Exchange Act [15 U.S.C.
§ 78u(d)(2)]; (e) ordering Relief Defendants to pay, with prejudgment interest, all ill-gotten gains
by which they were unjustly enriched, pursuant to Sections 21(d)(3), 21(d)(5), and 21(d)(7) of
the Exchange Act [15 U.S.C. §§ 78u(d)(3), 78u(d)(5) and 78u(d)(7)]; and (f) ordering such other
and further relief the Court may deem just and proper.
JURISDICTION AND VENUE
10. This Court has jurisdiction over this action pursuant to Section 22(a) of the
Securities Act [15. U.S.C. § 77v(a)] and Section 27 of the Exchange Act [15. U.S .C. § 78aa].
11. Defendant, directly and indirectly, has made use of the means or instrumentalities
of interstate commerce, or of the mails, or of a facility of a national securities exchange, in
connection with the transactions, acts, practices, or courses of business alleged herein.
12. Venue lies in this District under Securities Act Section 22(a) [15 U.S.C. § 77v(a)],
4
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Case 1:23-cv-02795 Document 1 Filed 04/04/23 Page 5 of 23
and Exchange Act Section 27 [15 U.S.C. § 78aa]. Certain of the acts, practices, transactions and
courses of business alleged in this Complaint occurred within this District, including that
employees of JPMC involved in the Frank acquisition worked from JPMC’s Manhattan offices,
Frank was represented in the acquisition negotiations by investment bankers located in
Manhattan, and negotiations over the terms of the acquisition, including at least two in-person
meetings involving Defendant, took place here.
DEFENDANT
13. Javice, age 31, resides in Miami Beach, Florida. At all times relevant here,
Javice was the founder, CEO and a stockholder of TAPD, Inc., a for-profit company,
incorporated in Delaware in 2013, which began doing business as “Frank” in 2017. As founder
and CEO, at all relevant times, Javice was the public face of Frank, and was the chief negotiator
on behalf of Frank in its acquisition discussions with JPMC. Javice signed the merger agreement
with JPMC on behalf of TAPD, Inc. At the time of Frank’s acquisition, Javice controlled 8
million shares of TAPD, Inc. common stock and 2.5 million common stock warrants. She
received approximately $9.7 million directly in proceeds from the merger, and millions more
indirectly, through the amounts JPMC paid to the Relief Defendants for Javice’s benefit. As part
of the acquisition, JPMC appointed Javice to a managing director position at JPMC and gave her
an employment agreement that included a $20 million retention bonus.
RELIEF DEFENDANTS
14. Charlie Javice 2021 Irrevocable Trust #1 (“Javice Trust 1”) is a Nevada trust
for which Javice acts as Trustee. Javice formed the Javice Trust 1 in September 2021. Pursuant
to the merger agreement by which JPMC acquired Frank (the “Merger Agreement”), JPMC
directed $4,700,000.11 of the merger consideration (minus amounts charged as selling expenses
5
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Case 1:23-cv-02795 Document 1 Filed 04/04/23 Page 6 of 23
and amounts escrowed as holdbacks) to Javice Trust 1.
15. Charlie Javice 2021 Irrevocable Trust #2 (“Javice Trust 2”) is a Nevada trust
for which Javice acts as Trustee. Javice formed the Javice Trust 2 in September 2021. Pursuant
to the Merger Agreement, JPMC directed $6,999,999.96 of the merger consideration (minus
amounts charged as selling expenses and amounts escrowed as holdbacks) to Javice Trust 2.2
RELEVANT ENTITIES
16. Frank was the doing-business-as name of TAPD, Inc., a Delaware corporation,
with its principal place of business in New York, New York. Javice founded Frank in 2017.
Javice sought to make Frank a trusted online source to help students navigate every aspect of the
college financial aid process. Frank offered students a tool to expedite completion of the Free
Application for Federal Student Aid (“FAFSA”), a time-consuming task required of students
seeking federal grants and loans. As it grew, Frank also provided students with information on
scholarships, financial aid appeals, and college courses.3
17. JPMC is a large financial institution, headquartered in Columbus, Ohio. It
acquired Frank in a merger transaction for $175 million in mid-September 2021.
18. Investment Bank is a boutique investment and merchant bank that Javice hired to
help Frank find additional investors or to identify a possible acquirer and advise it on any
resulting transaction. Javice was the primary source for the information that Frank’s Investment
Bank offered potential investors and acquirers.
2
Charlie Javice 2021 Irrevocable Trust #3 (“Javice Trust 3”) (also a Nevada trust for
which Javice acts as Trustee), was similarly set to receive merger proceeds pursuant to the
Merger Agreement. However, all of the $7,133,805.83 consideration to be paid to the Javice
Trust 3 was held in escrow and has not been paid out to Javice Trust 3.
3
JPMC ceased operating the Frank website in January 2023.
6
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Case 1:23-cv-02795 Document 1 Filed 04/04/23 Page 7 of 23
FACTS
19. By 2021, Frank had grown to an online resource for pre-college and college-
interested students across the country.
20. Frank’s primary offering was its automated tool for quick completion and
submission of the FAFSA, which attracted students looking for financial aid to finance their
educations. Frank claimed that its automated tool allowed students to complete the FAFSA in a
fraction of the time that it typically took to enter the required data manually.
21. By 2021, Frank had expanded into other areas of interest to these students. It
offered information on available scholarships, resources for pursuing financial aid appeals, and a
market place for available online college courses offered by third parties.
22. In presentations Frank made to potential acquirers in 2021, Frank claimed that it
was “the trusted financial coach for students” and that its mission was “helping [students]
navigate finances from A-Z.”
23. In 2021, Frank’s website claimed that “4.25 million students choose Frank.”
Frank’s Efforts to Sell Itself
24. Since inception, Frank had financed its operations and growth primarily through
money raised in private placements of its common and preferred stock.
25. On January 25, 2021, Frank’s General Counsel (the “General Counsel”), signed
an engagement letter with the Investment Bank on behalf of Frank (the “IB Agreement”).
Pursuant to that agreement, the Investment Bank was to act as Frank’s “exclusive financial
advisor” in connection with any possible transaction by which Frank would merge with or sell
itself to a third party.
26. Under the terms of the IB Agreement, Frank agreed that it would be “solely
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Case 1:23-cv-02795 Document 1 Filed 04/04/23 Page 8 of 23
responsible for the accuracy and completeness of the Offering Materials and represents and
warrants that the Offering Materials will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated . . . or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not misleading.”
27. Javice read and approved the IB Agreement.
28. Over the next few months, Investment Bank employees worked with Javice, the
Frank Executive, and the General Counsel to create pitch decks describing Frank’s products and
market reach (including data related to the number of users), its financials and anticipated
growth, potential new product offerings, and the status and pipeline of its contracts with third-
parties for cross-marketing partnerships.
29. The Investment Bank also worked with Javice, the Frank Executive, and the
General Counsel to populate a virtual data room with Frank data purporting to support the
information in the pitch decks; the data room would be opened to prospective acquirers for their
review.
30. Javice reviewed and approved all pitch decks sent to potential acquirers.
31. By May 2021, Frank had entered into acquisition negotiations with one financial
institution, and Javice presented a pitch deck to that institution touting that there were “4.25mm
Frank Students & Growing.” The large financial institution considered acquiring Frank in order
to market its financial products to what it believed was Frank’s user base of 4.25 million
students; ultimately, however, the financial institution decided not to acquire Frank.
32. In early 2021, a Frank board member approached JPMC about a possible
acquisition of Frank. At this time, JPMC was focused on growing its market share of student
customers and was interested in the leads that Frank offered in that market segment given its
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Case 1:23-cv-02795 Document 1 Filed 04/04/23 Page 9 of 23
touted engagement with over 4 million college-age or college-ready students.
33. Frank’s pitch deck, provided in early July 2021 to JPMC and approved by Javice,
included a slide that represented that Frank had “4.25mm Students and Growing.” The 4.25
million student figure was repeated on five additional slides in the pitch deck.
34. After JPMC signed a non-disclosure agreement with Frank, Frank and the
Investment Bank opened Frank’s data room to JPMC on July 6, 2021.
35. Several documents concerning customer data were uploaded to the data room
with Javice’s approval. One spreadsheet included a column labeled “FAFSA in Process”
purporting to show 4,265,085 customers who had started to fill out a FAFSA form using Frank’s
online tool. The spreadsheet showed that 2.1 million students had fully completed a FAFSA
through Frank.
36. In later meetings, Javice explained that to begin the FAFSA process through
Frank, a user would first open an account and submit his or her name, email address, and phone
number.
37. On July 12 and July 13, 2021, JPMC employees met with Frank representatives,
including Javice and the Frank Executive, in Manhattan to discuss the information in the data
room and to gain a better understanding of Frank’s products and customer base. During both all-
day meetings, Javice fielded most of the questions on behalf of Frank.
38. At those meetings, Javice knowingly or recklessly confirmed the false statements
in the data room and the substance of her public statements about the size and nature of Frank’s
“users”: she claimed that Frank had 4.25 million users.
39. As Javice defined it at those meetings, a “user” was a Frank website visitor who
created a Frank account by submitting their first name, last name, email address, and phone
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Case 1:23-cv-02795 Document 1 Filed 04/04/23 Page 10 of 23
number to Frank. She differentiated “user” from “visitor,” explaining that Frank had more than
35 million visitors to its website, but that those visitors would be counted as “users” only when
they submitted their name, email, and phone number information.
40. The kinds of identifying information that had purportedly been provided by Frank
users were valuable to JPMC in its efforts to market to and attract new customers in the student
population because it would allow JPMC to target those students already familiar with Frank and
its financial aid services with marketing materials about JPMC’s broader array of financial
products and services.
41. Javice understood that the student identifying information that Javice claimed
Frank had collected was important to JPMC.
42. As Javice knew, or was reckless in not knowing, the 4.25 million user number
was false. In fact, Frank had the name, email address, and phone number information for only a
fraction—approximately 300,000—of those students.
43. Javice presented the false number of users to JPMC repeatedly in multiple due
diligence meetings and calls with JPMC.
44. On July 14, 2021, JPMC submitted a non-binding indication of interest to acquire
Frank’s outstanding stock for $175 million, subject to confirmatory due diligence. Frank agreed
to grant JPMC a 14-day period of exclusivity, during which JPMC conducted additional due
diligence, including additional in-person meetings on July 19 and July 20, 2021.
45. As part of its due diligence and follow-up requests, JPMC asked Javice to provide
a list of Frank’s customer accounts that included the identifying information Javice had
represented Frank possessed. Javice attempted to dodge requests for specific details to support
her “user” claims, citing privacy concerns over sharing such personal identifying information
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with a third party. But JPMC insisted.
46. In an August 1, 2021 email, JPMC employees asked: “How many customer
accounts have 100% of the below data?,” referring to first names, last names, dates of birth,
phone numbers, mailing addresses, and email addresses. The email also requested the following
information: “How many customer accounts have partial information? Of partial records, what
% include each data field below?”
47. Later that day, JPMC stressed that these were “critical confirmatory due diligence
requests” that were “conditions to closing the transaction.”
Javice and the Frank Executive Arranged for Fabricated Data to Be Supplied to JPMC
to Support Javice’s False User Representations
48. With the exclusivity period at an end, both JPMC and Javice and the Frank
Executive worked to resolve the conflict between JPMC’s desire to verify Frank’s user claims
and Frank’s stated privacy concerns.
49. JPMC proposed and Javice accepted the use of a third-party validator (the
“Validator”). Pursuant to a data services and non-disclosure agreement with the Validator, Frank
would provide the Validator with “up to 4 million records of customer data,” without certain
personal identifiable information, and the Validator would “validate the coverage of the attribute
data” and “then provide a written report regarding the coverage of the attribute data” to JPMC
without disclosing any of the actual data Frank supplied. Specifically, the validation report
would report to JPMC “[h]ow many UNIQUE customer accounts exist.”
50. Javice and the Frank Executive recognized that they would have to fabricate data
to supply to the Validator to hide the fact that Frank actually had identifying information for only
a fraction of the 4.25 million users that Javice had claimed.
51. Javice and the Frank Executive agreed that they should ask Frank’s Director of
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Engineering (the “Engineering Director”) to supply the missing users by creating “synthetic
data” of the users’ existence and identifying information.
52. On August 1, 2021, Javice emailed the Frank Executive and the Engineering
Director a spreadsheet that purported to show that Frank had 4,265,085 website visitors with a
“FAFSA in Process.” The spreadsheet contained certain general demographic data regarding
these visitors on a cumulative basis, such as their geographic location and degree interest.
However, the spreadsheet did not contain their names, email addresses, phone numbers, or other
identifying information.
53. On August 2, 2021, Javice emailed the Engineering Director a link to a website
that described how to “generate synthetic data that is similar to the actual data in terms of
statistics and demographics.”
54. In a Zoom call later on August 2, 2021—among the Engineering Director, Javice,
and the Frank Executive—the Frank Executive explained to the Engineering Director that he and
Javice wanted him to take the information available on the 4.265 million visitors and use
synthetic data techniques to generate identifying information (e.g., names, email address, and
phone numbers) for those visitors, using the same demographics present in the real data (e.g.,
geographic location and degree interest).
55. Previously, in connection with due diligence meetings with JPMC attended by the
Engineering Director, Javice had directed the Engineering Director not to discuss Frank’s user
metrics in terms of actual numbers with JPMC.
56. During the call with the Frank Executive and Javice, the Engineering Director
was uneasy with their request. Fearing that the synthetic data mimicking actual user data that
they were asking him to create might be used to attract investors, the Engineering Director asked
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the Frank Executive and Javice whether creating such synthetic data was legal. Javice assured
him that it was and responded that no one would end up in “orange jumpsuits.”
57. The Engineering Director refused to comply with Javice’s and the Frank
Executive’s request to create synthetic data. Instead, on August 2, 2021, the Engineering
Director forwarded Javice a link to the data of Frank’s actual users for whom it had identifying
information. As the Engineering Director explained to Javice in a separate message, the data
showed “142K” individuals who had “applications at least started.” Javice directed the
Engineering Director also “to count users who don[’]t have an application.” The Engineering
Director responded: “if [I] count users with no fafsa [sic] applications, we get ~293192 records.”
Javice responded: “Exactly.”
58. Unable to obtain the fabricated data from the Engineering Director, Javice then
turned outside Frank for help. On the same day the Engineering Director declined Javice’s and
the Frank Executive’s request, Javice reached out to a data science professor at a local university
whom she had met in college (the “Data Science Professor”).
59. On August 3, 2021, Javice provided the Data Science Professor with the list of the
fewer than 300,000 users that Frank had actually acquired, and retained him to use “synthetic
data” to create 4.265 million customer names, addresses, email addresses, birthdays, and other
identifying information requested by JPMC.
60. Thereafter, in a series of messages, Javice guided the Data Science Professor in
creating a list of fake user data, answering questions from him about how the data should look.
61. For example, Javice confirmed that the Data Science Professor would “sample
first name and last name independently and then ensure none of the sampled names are real.”
62. For address information, Javice and the Data Science Professor agreed that while
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real addresses would not be used, street names would match actual street names located in the
state for that address.
63. The Data Science Professor warned that because the information he was
supplying indicated that many of the “students” were living, and attending high school and
college in the same town and state, it “would look fishy” if someone “were to audit it.”
64. When the Data Science Professor advised that it would be difficult to create real-
looking email addresses, Javice suggested that he instead insert a “unique ID.” Unique IDs are
commonly used to share sensitive real information by replacing the real data with a unique, and
random, alphanumeric string. But Javice was suggesting their use to conceal the obviously fake
data, and to create the misimpression that real, but sensitive, data was being protected.
65. On August 4, 2021, Javice provided the Data Science Professor with a draft data
validation “report [that they] would need to make sure matches” to the data that the Data Science
Professor was working to generate. The report was already preloaded with counts showing that
Frank had 4,265,085 unique customer accounts with a first name, last name, email address, and
phone number.
66. On August 5, 2021, the Data Science Professor finished generating a list of
exactly 4,265,085 “user” accounts with a first name, last name, email address (provided as a
Unique ID), and phone number, along with varying degrees of other identifying information.
67. That same day, Javice directed the Data Science Professor to submit his list of
4.265 million synthetically-generated users to the Validator.
68. After its review of the data, the Validator advised Javice in an August 5, 2021
email that it had validated that certain fields were “populated versus null/blank.” The Validator
attached its “Validation” report that reflected that 100% of the 4,265,085 entries it reviewed had
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data in the first name, last name, email address, and phone fields.
69. Javice authorized the Validator to release the report to JPMC, but asked that it
“not share additional background” with JPMC.
70. After the report was delivered to JPMC, Javice requested that the Validator delete
the data that Frank had provided through the Data Science Professor.
71. With their fabricated data now successfully “validated,” Javice paid the Data
Science Professor for his services. On August 5, 2021, and in response to his invoice for
$13,300, which detailed the work he performed creating the synthetic data, Javice told the Data
Science Professor to send back an invoice for $18,000, giving him a bonus. To avoid creating
written evidence of the fabrication, she also requested that he prepare a new invoice containing
“just one line item for data analysis.”
In Anticipation of JPMC’s Access to the Data Post-merger, Javice and the Frank
Executive Bought Data to Cover Up their Earlier Deceptions
72. On August 8, 2021, JPMC and Frank entered into the definitive Merger
Agreement and set the closing date for September 14, 2021. Javice signed the Merger
Agreement on behalf of TAPD, Inc., as its CEO. Pursuant to the Merger Agreement’s terms,
JPMC acquired all of Frank’s outstanding common and preferred stock for total consideration of
$175 million, and Javice, the Frank Executive, and others from Frank were offered positions
with JPMC post-merger. Javice was entitled to a $20 million retention bonus.
73. Javice’s employment offer, which she signed on August 4, 2021, stated that
performance indicators of her new job would include “expand[ing] [Frank’s] engaged customer
user base of 4.25 MM households to 10MM+ households over the next three years.”
74. Javice and the Frank Executive anticipated that, after the closing, JPMC would
soon ask for the full data of Frank’s purported list of 4.25 million users. Recognizing that their
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scheme would immediately be unmasked if they delivered the data that the Data Science
Professor had fabricated, Javice and the Frank Executive scrambled to buy data from data
providers that at least matched real students, even if those students never had a connection to
Frank.
75. To that end, even before the Merger Agreement was signed, the Frank Executive
reached out to Data Compiler 1. Data Compiler 1 is a marketing company that boasts “the most
comprehensive, accurate and responsive data of high school students, college students, and
young adults available anywhere.” On August 2, 2021, the Frank Executive asked Data
Compiler 1 how much it would cost to buy its “list of students currently in college.”
76. After a series of negotiations between the Frank Executive and Data Compiler 1,
on August 6, 2021, Javice approved the payment of $105,000 for Data Compiler 1’s list of 4.5
million students. Data Compiler 1, however, was only able to provide email addresses for fewer
than 3 million of those students, and it offered no telephone numbers.
77. When Javice learned from the Frank Executive that Data Compiler 1’s list would
not include phone numbers, on August 6, 2021, Javice texted the Data Science Professor. She
wrote: “Weird question – if I have names, emails, physical address for contacts – can we
augment the data with phone numbers from white pages database?” The Data Science Professor
agreed to work on the issue and asked her to send him a test batch of data files to which the
phone numbers would be appended.
78. On August 10, 2021, the Data Science Professor contacted Data Compiler 2. Data
Compiler 2 is a public records aggregator. At Javice’s direction, the Data Science Professor
informed Data Compiler 2 that the data sought would be used to “enrich . . . contacts.”
79. Javice sent the Data Science Professor the Data Compiler 1’s student data that the
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Frank Executive had sent her. On August 23, 2021, the Data Science Professor sent the Data
Compiler 1’s data to Data Compiler 2 and asked that they identify matching phone numbers and
email addresses associated with that data.
80. Data Compiler 2 was able to provide email addresses for less than half of the
students in Data Compiler 1’s data. On August 29, 2021, Javice instructed Data Compiler 2 to
run the student information through their database with just the address information from the
Data Compiler 1 list in an effort to increase the email hits, essentially instructing Data Compiler
2 to provide email addresses found for any person located at the provided address, whether the
student or not (the “household email data”).
81. Javice’s proposed search parameters increased the number of emails retrieved.
On September 9, 2021, Data Compiler 2 emailed Javice and the Data Science Professor data
containing approximately 1.9 million email addresses for the approximately 4.5 million student
records obtained from Data Compiler 1.
82. Frank paid Data Compiler 2 $75,000 for its data.
83. With the data bought from Data Compiler 1 and Data Compiler 2 combined,
Javice and the Frank Executive now had a list of approximately 4.5 million students with
identifying information. Because Frank, through its own business, had attracted only 300,000
students who provided their email, phone number, and other personal identifying information,
few (if any) on the lists Javice and the Frank Executive had caused Frank to purchase represented
students who had actually interacted with Frank.
JPMC Discovered Javice’s Fraudulent Scheme
84. The acquisition closed on September 14, 2021, and Javice and the Frank
Executive, and a few other Frank employees, became employees of JPMC.
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85. By January 2022, Javice and the Frank Executive were still working on the Frank
product as JPMC employees.
86. In January 2022, JPMC sought to begin the cross-marketing of JPMC’s financial
products to Frank’s users.
87. On January 6, 2022, a team of JPMC employees asked the Frank Executive for
the Frank user data that Javice had told JPMC that Frank possessed, and which had supposedly
been validated by the Validator.
88. On January 21, 2022, Javice directed a Frank engineering employee to provide
JPMC’s marketing team with the data the Frank Executive had bought from Data Compiler 1.
The engineering employee did so and, in a later email internal to the Frank group (including
Javice and the Frank Executive), the Frank engineering employee confessed that he was “not
sure about the source of the data” that he had sent JPMC’s team.
89. Later, in early February 2022, Javice sent the marketing team an edited version of
the combined Data Compiler 1 list with the data obtained from Data Compiler 2, which included
the household email data (the “Augmented List”). Despite knowing that both lists had been
bought from commercial data aggregators and did not represent actual Frank users, Javice told
no one at JPMC that the Augmented List contained data that came from anywhere other than
Frank.
90. In July 2022, JPMC’s marketing team sampled 400,000 names from the
Augmented List to launch a test email marketing JPMC’s financial services to what it thought
were Frank users. Of the emails sent to the sample, only 28% of the emails were confirmed
delivered to an operational email address, and just 1.1% of those were opened by the recipient.
Both statistics were far below the typical delivery success rates experienced by JPMC for its
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email campaigns.
91. JPMC conducted an internal investigation regarding the poor results from the
email marketing campaign. Because Frank’s historic emails and data had been transferred to
JPMC as part of the merger, JPMC discovered Javice’s conversations with the Data Science
Professor about creating synthetic data to provide to the Validator and the Data Compiler 1 list
that the Frank Executive had purchased.
92. As a result of that investigation, JPMC learned that Frank had no list of 4.25
million legitimate users with the identifying information Javice had represented it possessed and
that Javice and the Frank Executive had engaged in a months-long scheme to fabricate the data
that both of them knew JPMC was paying $175 million to acquire.
FIRST CLAIM FOR RELIEF
Violations of Section 17(a) of the Securities Act
(Javice)
93. The Commission realleges and incorporates by reference herein each and every
allegation in paragraphs 1–92.
94. Javice, directly or indirectly, singly or in concert with others, and in the offer or
sale of securities, by use of the means or instruments of transportation or communication in
interstate commerce or by use of the mails, (1) knowingly or recklessly has employed one or
more devices, schemes or artifices to defraud, (2) knowingly, recklessly, or negligently has
obtained money or property by means of one or more untrue statements of a material fact or
omissions of a material fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading, and (3) knowingly, recklessly, or
negligently has engaged in one or more transactions, practices or courses of business which
operated or would operate as a fraud or deceit upon a purchaser.
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95. By virtue of the foregoing, Javice, directly or indirectly, has violated, and unless
restrained and enjoined, will again violate Section 17(a) of the Securities Act [15 U.S.C.
§ 77q(a)].
SECOND CLAIM FOR RELIEF
Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder
(Javice)
96. The Commission realleges and incorporates by reference herein each and every
allegation contained in paragraphs 1–92.
97. Javice, directly or indirectly, singly or in concert with others, and in connection
with the purchase or sale of a security, used the means or instrumentalities of interstate
commerce or of the mails or of a facility of a national securities exchange (1) to knowingly or
recklessly employ one or more devices, schemes, or artifices to defraud; (2) to knowingly,
recklessly or negligently make one or more untrue statements of a material fact or to omit to state
one or more material facts necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading; and (3) to knowingly, recklessly or
negligently engage in one or more acts, practices, or courses of business which operated or
would operate as a fraud or deceit upon others.
98. By virtue of the foregoing, Javice violated, and unless restrained and enjoined,
will continue violating, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5
thereunder [17 C.F.R. § 240.10b-5].
THIRD CLAIM FOR RELIEF
Unjust Enrichment
(Relief Defendants Javice Trust 1 and Javice Trust 2)
99. The Commission realleges and incorporates by reference herein each and every
allegation contained in paragraphs 1–92.
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100. Javice Trust 1 and Javice Trust 2 each received proceeds from JPMC pursuant to
the Merger Agreement.
101. Neither Javice Trust 1 nor Javice Trust 2 has any legitimate claim to those ill-
gotten gains.
102. Javice Trust 1 and Javice Trust 2 each obtained the funds under circumstances in
which it is not just, equitable, or conscionable for any of them to retain the funds.
103. Javice Trust 1 and Javice Trust 2 each has therefore been unjustly enriched.
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PRAYER FOR RELIEF
WHEREFORE, the Commission respectfully requests that the Court enter a Final
Judgment:
I.
Permanently restraining and enjoining Javice, and her agents, servants, employees and
attorneys and all persons in active concert or participation with them who receive actual notice
of the injunction by personal service or otherwise, and each of them, from violating, directly or
indirectly, Section 17(a) of the Securities Act [15 U.S .C. § 77q(a)] and Section 10(b) of the
Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R.§ 240.10b-5];
II.
Ordering Javice to disgorge all ill-gotten gains she received directly or indirectly, with
prejudgment interest thereon, as a result of the alleged violations, pursuant to Sections 21(d)(3),
21(d)(5) and 21(d)(7) of the Exchange Act [15 U.S.C. §§ 78u(d)(3), 78u(d)(5) and 78u(d)(7)];
III.
Ordering Javice to pay civil money penalties pursuant to Section 20(d) of the Securities
Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)];
IV.
Permanently prohibiting Javice from acting as an officer or director of a public company
pursuant to Section 20(e) of the Securities Act [15 U.S.C. § 77t(e)] and Section 21(d)(2) of the
Exchange Act [15 U.S.C. § 78u(d)(2)];
V.
Ordering Relief Defendants Javice Trust 1 and Javice Trust 2 to pay, with prejudgment
interest, all ill-gotten gains by which each of them was unjustly enriched, pursuant to Exchange
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Act Sections 21(d)(3), 21(d)(5), and 21(d)(7) [15 U.S.C. §§ 78u(d)(3), 78u(d)(5), and 78u(d)(7)];
and
VI.
Granting such other and further relief as this Court deems just and appropriate.
JURY DEMAND
Pursuant to Rule 38 of the Federal Rules of Civil Procedure, Plaintiff demands that this
case be tried to a jury.
Dated: New York, New York SECURITIES AND EXCHANGE COMMISSION
April 4, 2023
By: /s/ Antonia M. Apps
Antonia M. Apps
Tejal D. Shah
Lindsay S. Moilanen
Nancy A. Brown
Wesley Wintermyer4
New York Regional Office
100 Pearl Street, Suite 20-100
New York, New York 10004
(212) 336-1021 (Moilanen)
Email: [email protected]
Attorneys for the Plaintiff
4
Not admitted in the Southern District of New York. Pro hac vice motion forthcoming.
23OCR text (45,867c · gpumon-ocr-api · 90% conf)
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Case 1:23-cv-02795 Document 1 Filed 04/04/23 Page 1 of 23
ANTONIA M. APPS
REGIONAL DIRECTOR
Tejal D. Shah
Lindsay S. Moilanen
Nancy A. Brown
Wesley Wintermyer
Attorneys for the Plaintiff
SECURITIES AND EXCHANGE COMMISSION
New York Regional Office
100 Pearl Street, Suite 20-100
New York, New York 10004
(212) 336-1021 (Moilanen)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-------------------------------------------------------------- x
SECURITIES AND EXCHANGE :
COMMISSION, :
:
Plaintiff, : 23 Civ. ( )
:
v. :
: COMPLAINT AND
CHARLIE JAVICE, : JURY DEMAND
:
Defendant, :
:
-and- :
:
CHARLIE JAVICE, in her capacity as Trustee :
for the CHARLIE JAVICE 2021 :
IRREVOCABLE TRUST #1, and CHARLIE :
JAVICE 2021 IRREVOCABLE TRUST #2, :
:
Relief Defendants. :
---------------------------------------------------------------x
Plaintiff Securities and Exchange Commission (“Commission”), for its Complaint against
Defendant Charlie Javice (“Javice”), and Javice in her capacity as Trustee for Relief Defendants
Charlie Javice 2021 Irrevocable Trust #1 and Charlie Javice 2021 Irrevocable Trust #2
(collectively, “Relief Defendants”) alleges as follows:
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Case 1:23-cv-02795 Document 1 Filed 04/04/23 Page 2 of 23
SUMMARY
1. In the summer of 2021, Javice sold the company she founded, Frank,1 for $175
million to JPMorgan Chase Bank, N.A. (“JPMC”). Through the deal, JPMC was eager to
acquire the identity information of the 4.25 million customers—purportedly students looking to
finance their educations—that Javice repeatedly claimed Frank had collected. JPMC had been
seeking to expand its market share for financial services and products to the largely untapped
student segment of the population and hoped to use Frank’s customer information to target those
prospects.
2. But, as Javice knew, Frank did not have 4.25 million student customers or their
identifying information. Javice, Frank’s CEO, understood that Frank’s customer data was the
asset that JPMC wanted, and that JPMC would not pursue an acquisition if it knew the truth:
that Frank in fact had identifying data for only about 300,000 students. Therefore, to ensure that
JPMC went forward with the transaction, Javice embarked on a fraudulent scheme to (1) hide the
fact that Frank had identifying data for only about 300,000 students; and (2) fabricate data to
falsely support Javice’s claims.
3. Prior to the acquisition (which was documented as a merger), Javice repeatedly
touted that Frank had 4.25 million customers, and explained in one-on-one meetings with JPMC
employees that those 4.25 million customers were students who had provided a first name, last
name, email address, and phone number to Frank. When JPMC asked to review the customer
data, Javice paid a university professor to create fake data appearing to represent 4.25 million
customers. Javice then provided that list of 4.25 million data entries to a third-party validator,
who in turn reported it to JPMC.
1
The legal name for the company was TAPD, Inc. “Frank” was a doing-business-as alias.
2
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4. Knowing that JPMC would have access to Frank’s real and much more limited
student data after the close of the acquisition, Javice and another high-ranking Frank executive
(the “Frank Executive”) began an effort to create a list of real names that they could pass off as
Frank’s customers. To that end, the Frank Executive arranged for Frank to pay $105,000 to a
third party data compiler for its in-college student data. Javice arranged for Frank to pay
$75,000 to a different data compiler to augment the list the Frank Executive bought with email
and phone number data.
5. But, after the merger when JPMC used those sham lists to test a marketing
campaign for its financial services to a sample of what it thought were Frank’s customers, its
campaign reached few of the intended recipients, and its marketing email was opened by a
fraction of those it did reach.
6. JPMC conducted an internal investigation through which it learned that Frank had
no list of 4.25 million legitimate users and that Javice had engaged in a months-long scheme to
fabricate the data that she knew JPMC was paying $175 million to acquire.
VIOLATIONS
7. By virtue of the conduct alleged herein, Javice has violated, directly or indirectly,
singly or in concert, Section 17(a) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C.
§ 77q(a)], and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) [15
U.S.C. § 78j(b)], and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
8. Unless Javice is restrained and enjoined, she will engage in the acts, practices,
transactions and courses of business set forth in this Complaint, or in acts, practices, transactions,
and courses of business of similar type and object.
3
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NATURE OF THE PROCEEDINGS AND RELIEF SOUGHT
9. The Commission brings this action pursuant to the authority conferred upon it by
Sections 20(b) and 20(d) of the Securities Act [15 U.S.C. §§ 77t(b) and 77t(d)], and Sections
21(d) of the Exchange Act [15 U.S.C. § 78u(d)], seeking a final judgment: (a) permanently
enjoining Defendant from engaging in the acts, practices and courses of business alleged against
them herein; (b) ordering Defendant to disgorge all ill-gotten gains and to pay prejudgment
interest on those amounts pursuant to Exchange Act Sections 21(d)(3), 21(d)(5), and 21(d)(7) [15
U.S.C. §§ 78u(d)(3), 78u(d)(5), and 78u(d)(7)]; (c) ordering Defendant to pay civil money
penalties pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section
21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)]; (d) permanently prohibiting Defendant
from acting as an officer or director of a public company pursuant to Section 20(e) of the
Securities Act [15 U.S.C. § 77t(e)] and Section 21(d)(2) of the Exchange Act [15 U.S.C.
§ 78u(d)(2)]; (e) ordering Relief Defendants to pay, with prejudgment interest, all ill-gotten gains
by which they were unjustly enriched, pursuant to Sections 21(d)(3), 21(d)(5), and 21(d)(7) of
the Exchange Act [15 U.S.C. §§ 78u(d)(3), 78u(d)(5) and 78u(d)(7)]; and (f) ordering such other
and further relief the Court may deem just and proper.
JURISDICTION AND VENUE
10. This Court has jurisdiction over this action pursuant to Section 22(a) of the
Securities Act [15. U.S.C. § 77v(a)] and Section 27 of the Exchange Act [15. U.S .C. § 78aa].
11. Defendant, directly and indirectly, has made use of the means or instrumentalities
of interstate commerce, or of the mails, or of a facility of a national securities exchange, in
connection with the transactions, acts, practices, or courses of business alleged herein.
12. Venue lies in this District under Securities Act Section 22(a) [15 U.S.C. § 77v(a)],
4
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and Exchange Act Section 27 [15 U.S.C. § 78aa]. Certain of the acts, practices, transactions and
courses of business alleged in this Complaint occurred within this District, including that
employees of JPMC involved in the Frank acquisition worked from JPMC’s Manhattan offices,
Frank was represented in the acquisition negotiations by investment bankers located in
Manhattan, and negotiations over the terms of the acquisition, including at least two in-person
meetings involving Defendant, took place here.
DEFENDANT
13. Javice, age 31, resides in Miami Beach, Florida. At all times relevant here,
Javice was the founder, CEO and a stockholder of TAPD, Inc., a for-profit company,
incorporated in Delaware in 2013, which began doing business as “Frank” in 2017. As founder
and CEO, at all relevant times, Javice was the public face of Frank, and was the chief negotiator
on behalf of Frank in its acquisition discussions with JPMC. Javice signed the merger agreement
with JPMC on behalf of TAPD, Inc. At the time of Frank’s acquisition, Javice controlled 8
million shares of TAPD, Inc. common stock and 2.5 million common stock warrants. She
received approximately $9.7 million directly in proceeds from the merger, and millions more
indirectly, through the amounts JPMC paid to the Relief Defendants for Javice’s benefit. As part
of the acquisition, JPMC appointed Javice to a managing director position at JPMC and gave her
an employment agreement that included a $20 million retention bonus.
RELIEF DEFENDANTS
14. Charlie Javice 2021 Irrevocable Trust #1 (“Javice Trust 1”) is a Nevada trust
for which Javice acts as Trustee. Javice formed the Javice Trust 1 in September 2021. Pursuant
to the merger agreement by which JPMC acquired Frank (the “Merger Agreement”), JPMC
directed $4,700,000.11 of the merger consideration (minus amounts charged as selling expenses
5
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Case 1:23-cv-02795 Document 1 Filed 04/04/23 Page 6 of 23
and amounts escrowed as holdbacks) to Javice Trust 1.
15. Charlie Javice 2021 Irrevocable Trust #2 (“Javice Trust 2”) is a Nevada trust
for which Javice acts as Trustee. Javice formed the Javice Trust 2 in September 2021. Pursuant
to the Merger Agreement, JPMC directed $6,999,999.96 of the merger consideration (minus
amounts charged as selling expenses and amounts escrowed as holdbacks) to Javice Trust 2.2
RELEVANT ENTITIES
16. Frank was the doing-business-as name of TAPD, Inc., a Delaware corporation,
with its principal place of business in New York, New York. Javice founded Frank in 2017.
Javice sought to make Frank a trusted online source to help students navigate every aspect of the
college financial aid process. Frank offered students a tool to expedite completion of the Free
Application for Federal Student Aid (“FAFSA”), a time-consuming task required of students
seeking federal grants and loans. As it grew, Frank also provided students with information on
scholarships, financial aid appeals, and college courses.3
17. JPMC is a large financial institution, headquartered in Columbus, Ohio. It
acquired Frank in a merger transaction for $175 million in mid-September 2021.
18. Investment Bank is a boutique investment and merchant bank that Javice hired to
help Frank find additional investors or to identify a possible acquirer and advise it on any
resulting transaction. Javice was the primary source for the information that Frank’s Investment
Bank offered potential investors and acquirers.
2
Charlie Javice 2021 Irrevocable Trust #3 (“Javice Trust 3”) (also a Nevada trust for
which Javice acts as Trustee), was similarly set to receive merger proceeds pursuant to the
Merger Agreement. However, all of the $7,133,805.83 consideration to be paid to the Javice
Trust 3 was held in escrow and has not been paid out to Javice Trust 3.
3
JPMC ceased operating the Frank website in January 2023.
6
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FACTS
19. By 2021, Frank had grown to an online resource for pre-college and college-
interested students across the country.
20. Frank’s primary offering was its automated tool for quick completion and
submission of the FAFSA, which attracted students looking for financial aid to finance their
educations. Frank claimed that its automated tool allowed students to complete the FAFSA in a
fraction of the time that it typically took to enter the required data manually.
21. By 2021, Frank had expanded into other areas of interest to these students. It
offered information on available scholarships, resources for pursuing financial aid appeals, and a
market place for available online college courses offered by third parties.
22. In presentations Frank made to potential acquirers in 2021, Frank claimed that it
was “the trusted financial coach for students” and that its mission was “helping [students]
navigate finances from A-Z.”
23. In 2021, Frank’s website claimed that “4.25 million students choose Frank.”
Frank’s Efforts to Sell Itself
24. Since inception, Frank had financed its operations and growth primarily through
money raised in private placements of its common and preferred stock.
25. On January 25, 2021, Frank’s General Counsel (the “General Counsel”), signed
an engagement letter with the Investment Bank on behalf of Frank (the “IB Agreement”).
Pursuant to that agreement, the Investment Bank was to act as Frank’s “exclusive financial
advisor” in connection with any possible transaction by which Frank would merge with or sell
itself to a third party.
26. Under the terms of the IB Agreement, Frank agreed that it would be “solely
7
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Case 1:23-cv-02795 Document 1 Filed 04/04/23 Page 8 of 23
responsible for the accuracy and completeness of the Offering Materials and represents and
warrants that the Offering Materials will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated . . . or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not misleading.”
27. Javice read and approved the IB Agreement.
28. Over the next few months, Investment Bank employees worked with Javice, the
Frank Executive, and the General Counsel to create pitch decks describing Frank’s products and
market reach (including data related to the number of users), its financials and anticipated
growth, potential new product offerings, and the status and pipeline of its contracts with third-
parties for cross-marketing partnerships.
29. The Investment Bank also worked with Javice, the Frank Executive, and the
General Counsel to populate a virtual data room with Frank data purporting to support the
information in the pitch decks; the data room would be opened to prospective acquirers for their
review.
30. Javice reviewed and approved all pitch decks sent to potential acquirers.
31. By May 2021, Frank had entered into acquisition negotiations with one financial
institution, and Javice presented a pitch deck to that institution touting that there were “4.25mm
Frank Students & Growing.” The large financial institution considered acquiring Frank in order
to market its financial products to what it believed was Frank’s user base of 4.25 million
students; ultimately, however, the financial institution decided not to acquire Frank.
32. In early 2021, a Frank board member approached JPMC about a possible
acquisition of Frank. At this time, JPMC was focused on growing its market share of student
customers and was interested in the leads that Frank offered in that market segment given its
8
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touted engagement with over 4 million college-age or college-ready students.
33. Frank’s pitch deck, provided in early July 2021 to JPMC and approved by Javice,
included a slide that represented that Frank had “4.25mm Students and Growing.” The 4.25
million student figure was repeated on five additional slides in the pitch deck.
34. After JPMC signed a non-disclosure agreement with Frank, Frank and the
Investment Bank opened Frank’s data room to JPMC on July 6, 2021.
35. Several documents concerning customer data were uploaded to the data room
with Javice’s approval. One spreadsheet included a column labeled “FAFSA in Process”
purporting to show 4,265,085 customers who had started to fill out a FAFSA form using Frank’s
online tool. The spreadsheet showed that 2.1 million students had fully completed a FAFSA
through Frank.
36. In later meetings, Javice explained that to begin the FAFSA process through
Frank, a user would first open an account and submit his or her name, email address, and phone
number.
37. On July 12 and July 13, 2021, JPMC employees met with Frank representatives,
including Javice and the Frank Executive, in Manhattan to discuss the information in the data
room and to gain a better understanding of Frank’s products and customer base. During both all-
day meetings, Javice fielded most of the questions on behalf of Frank.
38. At those meetings, Javice knowingly or recklessly confirmed the false statements
in the data room and the substance of her public statements about the size and nature of Frank’s
“users”: she claimed that Frank had 4.25 million users.
39. As Javice defined it at those meetings, a “user” was a Frank website visitor who
created a Frank account by submitting their first name, last name, email address, and phone
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number to Frank. She differentiated “user” from “visitor,” explaining that Frank had more than
35 million visitors to its website, but that those visitors would be counted as “users” only when
they submitted their name, email, and phone number information.
40. The kinds of identifying information that had purportedly been provided by Frank
users were valuable to JPMC in its efforts to market to and attract new customers in the student
population because it would allow JPMC to target those students already familiar with Frank and
its financial aid services with marketing materials about JPMC’s broader array of financial
products and services.
41. Javice understood that the student identifying information that Javice claimed
Frank had collected was important to JPMC.
42. As Javice knew, or was reckless in not knowing, the 4.25 million user number
was false. In fact, Frank had the name, email address, and phone number information for only a
fraction—approximately 300,000—of those students.
43. Javice presented the false number of users to JPMC repeatedly in multiple due
diligence meetings and calls with JPMC.
44. On July 14, 2021, JPMC submitted a non-binding indication of interest to acquire
Frank’s outstanding stock for $175 million, subject to confirmatory due diligence. Frank agreed
to grant JPMC a 14-day period of exclusivity, during which JPMC conducted additional due
diligence, including additional in-person meetings on July 19 and July 20, 2021.
45. As part of its due diligence and follow-up requests, JPMC asked Javice to provide
a list of Frank’s customer accounts that included the identifying information Javice had
represented Frank possessed. Javice attempted to dodge requests for specific details to support
her “user” claims, citing privacy concerns over sharing such personal identifying information
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with a third party. But JPMC insisted.
46. In an August 1, 2021 email, JPMC employees asked: “How many customer
accounts have 100% of the below data?,” referring to first names, last names, dates of birth,
phone numbers, mailing addresses, and email addresses. The email also requested the following
information: “How many customer accounts have partial information? Of partial records, what
% include each data field below?”
47. Later that day, JPMC stressed that these were “critical confirmatory due diligence
requests” that were “conditions to closing the transaction.”
Javice and the Frank Executive Arranged for Fabricated Data to Be Supplied to JPMC
to Support Javice’s False User Representations
48. With the exclusivity period at an end, both JPMC and Javice and the Frank
Executive worked to resolve the conflict between JPMC’s desire to verify Frank’s user claims
and Frank’s stated privacy concerns.
49. JPMC proposed and Javice accepted the use of a third-party validator (the
“Validator”). Pursuant to a data services and non-disclosure agreement with the Validator, Frank
would provide the Validator with “up to 4 million records of customer data,” without certain
personal identifiable information, and the Validator would “validate the coverage of the attribute
data” and “then provide a written report regarding the coverage of the attribute data” to JPMC
without disclosing any of the actual data Frank supplied. Specifically, the validation report
would report to JPMC “[h]ow many UNIQUE customer accounts exist.”
50. Javice and the Frank Executive recognized that they would have to fabricate data
to supply to the Validator to hide the fact that Frank actually had identifying information for only
a fraction of the 4.25 million users that Javice had claimed.
51. Javice and the Frank Executive agreed that they should ask Frank’s Director of
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Engineering (the “Engineering Director”) to supply the missing users by creating “synthetic
data” of the users’ existence and identifying information.
52. On August 1, 2021, Javice emailed the Frank Executive and the Engineering
Director a spreadsheet that purported to show that Frank had 4,265,085 website visitors with a
“FAFSA in Process.” The spreadsheet contained certain general demographic data regarding
these visitors on a cumulative basis, such as their geographic location and degree interest.
However, the spreadsheet did not contain their names, email addresses, phone numbers, or other
identifying information.
53. On August 2, 2021, Javice emailed the Engineering Director a link to a website
that described how to “generate synthetic data that is similar to the actual data in terms of
statistics and demographics.”
54. In a Zoom call later on August 2, 2021—among the Engineering Director, Javice,
and the Frank Executive—the Frank Executive explained to the Engineering Director that he and
Javice wanted him to take the information available on the 4.265 million visitors and use
synthetic data techniques to generate identifying information (e.g., names, email address, and
phone numbers) for those visitors, using the same demographics present in the real data (e.g.,
geographic location and degree interest).
55. Previously, in connection with due diligence meetings with JPMC attended by the
Engineering Director, Javice had directed the Engineering Director not to discuss Frank’s user
metrics in terms of actual numbers with JPMC.
56. During the call with the Frank Executive and Javice, the Engineering Director
was uneasy with their request. Fearing that the synthetic data mimicking actual user data that
they were asking him to create might be used to attract investors, the Engineering Director asked
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the Frank Executive and Javice whether creating such synthetic data was legal. Javice assured
him that it was and responded that no one would end up in “orange jumpsuits.”
57. The Engineering Director refused to comply with Javice’s and the Frank
Executive’s request to create synthetic data. Instead, on August 2, 2021, the Engineering
Director forwarded Javice a link to the data of Frank’s actual users for whom it had identifying
information. As the Engineering Director explained to Javice in a separate message, the data
showed “142K” individuals who had “applications at least started.” Javice directed the
Engineering Director also “to count users who don[’]t have an application.” The Engineering
Director responded: “if [I] count users with no fafsa [sic] applications, we get ~293192 records.”
Javice responded: “Exactly.”
58. Unable to obtain the fabricated data from the Engineering Director, Javice then
turned outside Frank for help. On the same day the Engineering Director declined Javice’s and
the Frank Executive’s request, Javice reached out to a data science professor at a local university
whom she had met in college (the “Data Science Professor”).
59. On August 3, 2021, Javice provided the Data Science Professor with the list of the
fewer than 300,000 users that Frank had actually acquired, and retained him to use “synthetic
data” to create 4.265 million customer names, addresses, email addresses, birthdays, and other
identifying information requested by JPMC.
60. Thereafter, in a series of messages, Javice guided the Data Science Professor in
creating a list of fake user data, answering questions from him about how the data should look.
61. For example, Javice confirmed that the Data Science Professor would “sample
first name and last name independently and then ensure none of the sampled names are real.”
62. For address information, Javice and the Data Science Professor agreed that while
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real addresses would not be used, street names would match actual street names located in the
state for that address.
63. The Data Science Professor warned that because the information he was
supplying indicated that many of the “students” were living, and attending high school and
college in the same town and state, it “would look fishy” if someone “were to audit it.”
64. When the Data Science Professor advised that it would be difficult to create real-
looking email addresses, Javice suggested that he instead insert a “unique ID.” Unique IDs are
commonly used to share sensitive real information by replacing the real data with a unique, and
random, alphanumeric string. But Javice was suggesting their use to conceal the obviously fake
data, and to create the misimpression that real, but sensitive, data was being protected.
65. On August 4, 2021, Javice provided the Data Science Professor with a draft data
validation “report [that they] would need to make sure matches” to the data that the Data Science
Professor was working to generate. The report was already preloaded with counts showing that
Frank had 4,265,085 unique customer accounts with a first name, last name, email address, and
phone number.
66. On August 5, 2021, the Data Science Professor finished generating a list of
exactly 4,265,085 “user” accounts with a first name, last name, email address (provided as a
Unique ID), and phone number, along with varying degrees of other identifying information.
67. That same day, Javice directed the Data Science Professor to submit his list of
4.265 million synthetically-generated users to the Validator.
68. After its review of the data, the Validator advised Javice in an August 5, 2021
email that it had validated that certain fields were “populated versus null/blank.” The Validator
attached its “Validation” report that reflected that 100% of the 4,265,085 entries it reviewed had
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data in the first name, last name, email address, and phone fields.
69. Javice authorized the Validator to release the report to JPMC, but asked that it
“not share additional background” with JPMC.
70. After the report was delivered to JPMC, Javice requested that the Validator delete
the data that Frank had provided through the Data Science Professor.
71. With their fabricated data now successfully “validated,” Javice paid the Data
Science Professor for his services. On August 5, 2021, and in response to his invoice for
$13,300, which detailed the work he performed creating the synthetic data, Javice told the Data
Science Professor to send back an invoice for $18,000, giving him a bonus. To avoid creating
written evidence of the fabrication, she also requested that he prepare a new invoice containing
“just one line item for data analysis.”
In Anticipation of JPMC’s Access to the Data Post-merger, Javice and the Frank
Executive Bought Data to Cover Up their Earlier Deceptions
72. On August 8, 2021, JPMC and Frank entered into the definitive Merger
Agreement and set the closing date for September 14, 2021. Javice signed the Merger
Agreement on behalf of TAPD, Inc., as its CEO. Pursuant to the Merger Agreement’s terms,
JPMC acquired all of Frank’s outstanding common and preferred stock for total consideration of
$175 million, and Javice, the Frank Executive, and others from Frank were offered positions
with JPMC post-merger. Javice was entitled to a $20 million retention bonus.
73. Javice’s employment offer, which she signed on August 4, 2021, stated that
performance indicators of her new job would include “expand[ing] [Frank’s] engaged customer
user base of 4.25 MM households to 10MM+ households over the next three years.”
74. Javice and the Frank Executive anticipated that, after the closing, JPMC would
soon ask for the full data of Frank’s purported list of 4.25 million users. Recognizing that their
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scheme would immediately be unmasked if they delivered the data that the Data Science
Professor had fabricated, Javice and the Frank Executive scrambled to buy data from data
providers that at least matched real students, even if those students never had a connection to
Frank.
75. To that end, even before the Merger Agreement was signed, the Frank Executive
reached out to Data Compiler 1. Data Compiler 1 is a marketing company that boasts “the most
comprehensive, accurate and responsive data of high school students, college students, and
young adults available anywhere.” On August 2, 2021, the Frank Executive asked Data
Compiler 1 how much it would cost to buy its “list of students currently in college.”
76. After a series of negotiations between the Frank Executive and Data Compiler 1,
on August 6, 2021, Javice approved the payment of $105,000 for Data Compiler 1’s list of 4.5
million students. Data Compiler 1, however, was only able to provide email addresses for fewer
than 3 million of those students, and it offered no telephone numbers.
77. When Javice learned from the Frank Executive that Data Compiler 1’s list would
not include phone numbers, on August 6, 2021, Javice texted the Data Science Professor. She
wrote: “Weird question – if I have names, emails, physical address for contacts – can we
augment the data with phone numbers from white pages database?” The Data Science Professor
agreed to work on the issue and asked her to send him a test batch of data files to which the
phone numbers would be appended.
78. On August 10, 2021, the Data Science Professor contacted Data Compiler 2. Data
Compiler 2 is a public records aggregator. At Javice’s direction, the Data Science Professor
informed Data Compiler 2 that the data sought would be used to “enrich . . . contacts.”
79. Javice sent the Data Science Professor the Data Compiler 1’s student data that the
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Frank Executive had sent her. On August 23, 2021, the Data Science Professor sent the Data
Compiler 1’s data to Data Compiler 2 and asked that they identify matching phone numbers and
email addresses associated with that data.
80. Data Compiler 2 was able to provide email addresses for less than half of the
students in Data Compiler 1’s data. On August 29, 2021, Javice instructed Data Compiler 2 to
run the student information through their database with just the address information from the
Data Compiler 1 list in an effort to increase the email hits, essentially instructing Data Compiler
2 to provide email addresses found for any person located at the provided address, whether the
student or not (the “household email data”).
81. Javice’s proposed search parameters increased the number of emails retrieved.
On September 9, 2021, Data Compiler 2 emailed Javice and the Data Science Professor data
containing approximately 1.9 million email addresses for the approximately 4.5 million student
records obtained from Data Compiler 1.
82. Frank paid Data Compiler 2 $75,000 for its data.
83. With the data bought from Data Compiler 1 and Data Compiler 2 combined,
Javice and the Frank Executive now had a list of approximately 4.5 million students with
identifying information. Because Frank, through its own business, had attracted only 300,000
students who provided their email, phone number, and other personal identifying information,
few (if any) on the lists Javice and the Frank Executive had caused Frank to purchase represented
students who had actually interacted with Frank.
JPMC Discovered Javice’s Fraudulent Scheme
84. The acquisition closed on September 14, 2021, and Javice and the Frank
Executive, and a few other Frank employees, became employees of JPMC.
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85. By January 2022, Javice and the Frank Executive were still working on the Frank
product as JPMC employees.
86. In January 2022, JPMC sought to begin the cross-marketing of JPMC’s financial
products to Frank’s users.
87. On January 6, 2022, a team of JPMC employees asked the Frank Executive for
the Frank user data that Javice had told JPMC that Frank possessed, and which had supposedly
been validated by the Validator.
88. On January 21, 2022, Javice directed a Frank engineering employee to provide
JPMC’s marketing team with the data the Frank Executive had bought from Data Compiler 1.
The engineering employee did so and, in a later email internal to the Frank group (including
Javice and the Frank Executive), the Frank engineering employee confessed that he was “not
sure about the source of the data” that he had sent JPMC’s team.
89. Later, in early February 2022, Javice sent the marketing team an edited version of
the combined Data Compiler 1 list with the data obtained from Data Compiler 2, which included
the household email data (the “Augmented List”). Despite knowing that both lists had been
bought from commercial data aggregators and did not represent actual Frank users, Javice told
no one at JPMC that the Augmented List contained data that came from anywhere other than
Frank.
90. In July 2022, JPMC’s marketing team sampled 400,000 names from the
Augmented List to launch a test email marketing JPMC’s financial services to what it thought
were Frank users. Of the emails sent to the sample, only 28% of the emails were confirmed
delivered to an operational email address, and just 1.1% of those were opened by the recipient.
Both statistics were far below the typical delivery success rates experienced by JPMC for its
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email campaigns.
91. JPMC conducted an internal investigation regarding the poor results from the
email marketing campaign. Because Frank’s historic emails and data had been transferred to
JPMC as part of the merger, JPMC discovered Javice’s conversations with the Data Science
Professor about creating synthetic data to provide to the Validator and the Data Compiler 1 list
that the Frank Executive had purchased.
92. As a result of that investigation, JPMC learned that Frank had no list of 4.25
million legitimate users with the identifying information Javice had represented it possessed and
that Javice and the Frank Executive had engaged in a months-long scheme to fabricate the data
that both of them knew JPMC was paying $175 million to acquire.
FIRST CLAIM FOR RELIEF
Violations of Section 17(a) of the Securities Act
(Javice)
93. The Commission realleges and incorporates by reference herein each and every
allegation in paragraphs 1–92.
94. Javice, directly or indirectly, singly or in concert with others, and in the offer or
sale of securities, by use of the means or instruments of transportation or communication in
interstate commerce or by use of the mails, (1) knowingly or recklessly has employed one or
more devices, schemes or artifices to defraud, (2) knowingly, recklessly, or negligently has
obtained money or property by means of one or more untrue statements of a material fact or
omissions of a material fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading, and (3) knowingly, recklessly, or
negligently has engaged in one or more transactions, practices or courses of business which
operated or would operate as a fraud or deceit upon a purchaser.
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95. By virtue of the foregoing, Javice, directly or indirectly, has violated, and unless
restrained and enjoined, will again violate Section 17(a) of the Securities Act [15 U.S.C.
§ 77q(a)].
SECOND CLAIM FOR RELIEF
Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder
(Javice)
96. The Commission realleges and incorporates by reference herein each and every
allegation contained in paragraphs 1–92.
97. Javice, directly or indirectly, singly or in concert with others, and in connection
with the purchase or sale of a security, used the means or instrumentalities of interstate
commerce or of the mails or of a facility of a national securities exchange (1) to knowingly or
recklessly employ one or more devices, schemes, or artifices to defraud; (2) to knowingly,
recklessly or negligently make one or more untrue statements of a material fact or to omit to state
one or more material facts necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading; and (3) to knowingly, recklessly or
negligently engage in one or more acts, practices, or courses of business which operated or
would operate as a fraud or deceit upon others.
98. By virtue of the foregoing, Javice violated, and unless restrained and enjoined,
will continue violating, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5
thereunder [17 C.F.R. § 240.10b-5].
THIRD CLAIM FOR RELIEF
Unjust Enrichment
(Relief Defendants Javice Trust 1 and Javice Trust 2)
99. The Commission realleges and incorporates by reference herein each and every
allegation contained in paragraphs 1–92.
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100. Javice Trust 1 and Javice Trust 2 each received proceeds from JPMC pursuant to
the Merger Agreement.
101. Neither Javice Trust 1 nor Javice Trust 2 has any legitimate claim to those ill-
gotten gains.
102. Javice Trust 1 and Javice Trust 2 each obtained the funds under circumstances in
which it is not just, equitable, or conscionable for any of them to retain the funds.
103. Javice Trust 1 and Javice Trust 2 each has therefore been unjustly enriched.
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PRAYER FOR RELIEF
WHEREFORE, the Commission respectfully requests that the Court enter a Final
Judgment:
I.
Permanently restraining and enjoining Javice, and her agents, servants, employees and
attorneys and all persons in active concert or participation with them who receive actual notice
of the injunction by personal service or otherwise, and each of them, from violating, directly or
indirectly, Section 17(a) of the Securities Act [15 U.S .C. § 77q(a)] and Section 10(b) of the
Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R.§ 240.10b-5];
II.
Ordering Javice to disgorge all ill-gotten gains she received directly or indirectly, with
prejudgment interest thereon, as a result of the alleged violations, pursuant to Sections 21(d)(3),
21(d)(5) and 21(d)(7) of the Exchange Act [15 U.S.C. §§ 78u(d)(3), 78u(d)(5) and 78u(d)(7)];
III.
Ordering Javice to pay civil money penalties pursuant to Section 20(d) of the Securities
Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)];
IV.
Permanently prohibiting Javice from acting as an officer or director of a public company
pursuant to Section 20(e) of the Securities Act [15 U.S.C. § 77t(e)] and Section 21(d)(2) of the
Exchange Act [15 U.S.C. § 78u(d)(2)];
V.
Ordering Relief Defendants Javice Trust 1 and Javice Trust 2 to pay, with prejudgment
interest, all ill-gotten gains by which each of them was unjustly enriched, pursuant to Exchange
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Act Sections 21(d)(3), 21(d)(5), and 21(d)(7) [15 U.S.C. §§ 78u(d)(3), 78u(d)(5), and 78u(d)(7)];
and
VI.
Granting such other and further relief as this Court deems just and appropriate.
JURY DEMAND
Pursuant to Rule 38 of the Federal Rules of Civil Procedure, Plaintiff demands that this
case be tried to a jury.
Dated: New York, New York SECURITIES AND EXCHANGE COMMISSION
April 4, 2023
By: /s/ Antonia M. Apps
Antonia M. Apps
Tejal D. Shah
Lindsay S. Moilanen
Nancy A. Brown
Wesley Wintermyer4
New York Regional Office
100 Pearl Street, Suite 20-100
New York, New York 10004
(212) 336-1021 (Moilanen)
Email: [email protected]
Attorneys for the Plaintiff
4
Not admitted in the Southern District of New York. Pro hac vice motion forthcoming.
23