SEC CHARGES FOUNDER OF STUDENT LOAN ASSISTANCE CO. WITH MULTI-MILLION DOLLAR FRAUD IN SELLING COMPANY TO JP MORGAN CHASE

 Dear Series 66 Test Candidates:

Here's a good example of the powers of the SEC to file complaints about securities violations in federal district courts, to root out fraud by securities professionals, brokers, investment advisers, and to bring charges of fake representations and unfair business dealings in the securities industry.

FOR IMMEDIATE RELEASE

2023-74

Washington D.C., April 4, 2023 —

The 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.

"Rather than help students, we allege that Ms. Javice engaged in an old school fraud: she lied about Frank’s success in helping millions of students navigate the college financial aid process by making up data to support her claims, and then used that fake information to induce JPMC to enter into a $175 million transaction," said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. "Even non-public, early-stage companies must be truthful in their representations, and when they fall short we will hold them accountable as in this case."

Here is the link to NASAA's Test Specifications for the Series 66 Exam. See the references to Fake Representations and Unfair Business Dealings in the Securities Industry in NASAA's Series 66 Test Specifications, Section IV (H) (4).

Study for the Series 66 Exam is available from Amazon in both paperback and Kindle e-book versions. Here is the link to Bob Eder's book on Amazon.

For questions about Bob Eder's Series 66 manual, Study for the Series 66 Exam, or questions in general about the Series 66 Exam, or about  Fake Representations and Unfair Business Dealings in the Securities Industry, feel free to email Bob Eder at bobeder@bobeder.net.

Bob Eder received his Juris Doctor (J.D.) degree from the University of Utah, Quinney College of Law, in 2001. See Bob Eder's Author Page on Amazon.com.