Charlie Javice convicted of defrauding JPMorgan in $175M startup sale
187 comments
·March 28, 2025whack
paxys
This should be used as an example in engineering ethics classes for how important it is to say "no" to your employer when you are asked to do something that doesn't pass the smell test, no matter how trivial it may seem. This simple act saved the guy his career and (potentially) freedom.
ibejoeb
> engineering ethics classes
Sidebar: do these exist these days? I mean in software, specifically.
trillic
University of Michigan: Great course
https://open.umich.edu/find/open-educational-resources/infor...
toast0
Yeah, I think it's an ABET requirement for accreditation of engineering degrees.
Lots of people with an engineering title don't have an engineering degree though. And of course, passing the class doesn't mean you'll be ethical. Knowing the material and acting on it are different. Also, understanding the requirements and working right at the edge of them is engineering...
nightpool
Yes, all accredited institutions are required to have one as part of their Computer Science curriculum.
anarticle
If you didn't have one, this is a great book: https://www.amazon.com/Human-Error-James-Reason/dp/052131419...
Was used at Drexel in the 00s.
laverya
I had one at University of Michigan, but that was almost a decade ago now.
dmitrygr
UIUC still has it, and it is required for a CS degree: https://siebelschool.illinois.edu/academics/courses/cs210
belter
You mean like sitting idle by your CEO, while he propagates FSD lies for years that can and will and did get people killed?
lynx97
[flagged]
lelanthran
Or a subordinate?
If you're a guy you are always going to be open to accusations of impropriety with or from a woman.
Whether yours the boss or the subordinate doesn't make a difference.
Best approach is to keep the relationship friendly, cordial and at a distance.
itishappy
No surprises here, companies will tell this to your face on day 1. Asking your boss/subordinate out on a date is frowned upon and will be used aggressively against you.
Seattle3503
The accusation didn't work.
vkou
If you're a witness with damning evidence, literally anything you will ever do, as well as anything you didn't do will be used to impeach your credibility in court.
That's what lawyers do. They throw shit and see what sticks.
nielsbot
So, say something like "I can't work for a woman"?
DannyBee
Did you read the transcript?
He actually did ask her out on a date.
Maybe just don't ask your boss out on a date?
robocat
I just presumed it was guy on guy.
Modern sexuality might mean that avoiding the opposite sex is off little help. Instead you need to know how to avoid manipulative sociopaths - which takes years of experience to learn (and perhaps after you learn the skills you decide to join them).
DeathArrow
It's not only about having a boss. When a man and a woman land on opposite sides, the man stands a risk to be accused of sexual harassment, misconduct and being misogynistic.
paxys
Fraud is fraud, but I'm happy JPMorgan got caught up in this mess. Buying a promising startup for its technology or product is one thing, but the bank literally only cared about the personal data of its supposed 4 million high school and college aged users. Good riddance the whole thing imploded and there weren't real teenagers being spammed credit card and car loan offers.
mjcl
One funny aspect is that Javice had an employment contract with JPM that stated JPM would pay for legal defense related to her official duties. Her lawyer argued that means JPM has to pay for her civil and criminal defense lawyers, and the court agreed!
adrr
It supposedly costs $1000+ to acquire a bank customer. When I worked at a Neobank, our valuations were based on that number multiplied by the number of customers we had and people believed our valuations. Never had problems raising money.
mcny
I will never forget the situation of a friend whose father committed check fraud in her name when she was still a child meaning she was never able to have a bank account in her name her whole life (without sending her father back to jail).
I suspect the high valuation is because there are a lot of people like my friend or her dad who can't be on that list of possible banking customers because they can't have a bank account at all.
I really like the idea of everyone having a permanent, fee-free bank account with the federal reserve. It can be zero interest as far as I'm concerned but it should be accessible to everyone regardless of criminal history.
ty6853
The federal reserve doesn't want zero risk banking where end customer is effectively 100% on their books, and will deny accounts to any bank that functions the way your service would would work ( see the denial of account to The Narrow Bank ). It's against their monetary policies as it destroys the mechanism by which credit expansion happens.
> “pose undue risk to the stability of the U.S. financial system and would adversely affect the Federal Reserve’s ability to implement monetary policy"
https://www.chicagobooth.edu/review/safest-bank-fed-wont-san...
HenryBemis
> zero interest
this mean that you are losing anything between 1% and 10% of your money per year (aka inflation). I am not advocating for big banks (which had put food on my table for most of my life) but you only need a (zero-interest) checking account with a debit card for your spending money. Everything else (imho) is most beneficial if you keep them spread out/hidden away, and serving your other purposes (a balance of growth x availability x speed_of_withdrawing).
I remember watching this vid (https://www.youtube.com/watch?v=auzLhKvsxnQ) many years (it feels like it was way before the 6y YT says its age is). I do a combination of this video and the Dave Ramsey 'envelope system' (but with different banks and with different accounts). Now, she speaks about the "US way of life" but I like the principle/discipline of this.
DeathArrow
>I really like the idea of everyone having a permanent, fee-free bank account with the federal reserve. It can be zero interest as far as I'm concerned but it should be accessible to everyone regardless of criminal history.
This might be a great business ideas, starting a bank that caters to criminals. Of course, the fees should be pretty high to offset the risks.
DeathArrow
>It supposedly costs $1000+ to acquire a bank customer.
Those were app users, not bank customers. I think that is less valuable.
trhway
The social media and other app users have long crossed $100/user price, like a decade ago.
So, their app isn't just an app, it is a financial app. Those users can be valued at several hundred each - thus 300 000 real user they had could really be valued at $100M+, no need to fake.
gopher_space
I feel like an overlooked aspect of "you can't fool an honest man" is that the honest man probably isn't in your vicinity to begin with.
soulofmischief
If Diogenes couldn't find an honest man after all his time spent searching, I question if honest men are anything more than an old wive's tale.
throwanem
No one who is one ever claims to be one, and vice versa. Easy to miss the existence of anything else, maybe, when the streetlamps insist so loudly on being looked exclusively under.
freeAgent
That sounds a lot like much of Big Tech, too.
guiriduro
Given JPM's complicity in a number of obvious pump and dump frauds, particularly in sell-side "analysis" if you can call it that, I think its somewhat churlish and clearly unfair to allow it access to the legal system to defend fraud against itself. But I suppose rules are for the little people (any non-Trump friends at least.)
ipsento606
I don't understand how one could sell a company with millions of fake users and not expect the purchaser of that company to realize those users are fake?
I understand how one could think you'd get away with it if one were lying to investors who might lack the ability to verify the claims
But actually selling the company? How would that possibly work?
mmaunder
The article tells you that. They generated a fake user accounts database. The only way to catch that is to manually spot check by contacting users. The buyer clearly didn’t.
ipsento606
The article also says
> JPMorgan became interested partly because of the potential it saw in Frank’s supposedly huge list of satisfied clients. The bank believed those future college graduates could become lifelong bank customers
Generating a fake user accounts database would only conceivably work if you expected the purchaser to never attempt to contact any of the business's users, which seems a ludicrous expectation.
irjustin
The problem fundamentally is during a sale you don't get access to the actual DB. DD you typically only get a subset of data, so whoever you contact or even physically visit, it all could be fake people answering the phone or even at a fake address impersonating whoever they need to.
For $175m of fraud, it's definitely worth to set that up.
The core problem here is - the US lacks the ability to realtime verify identity against a centrally government controlled DB. US would never allow this under privacy rules, but that's what it would take to really identify a particular person.
yieldcrv
The thing that stands out to me about indicted and convicted fraud cases is how they always spell out “all you had to do was”
Like with onecoin, all they had to do was have a blockchain and it would have been the same standard of non-indictable fraud as everyone else
Here all she had to do was harvest from data brokers
bambax
Yes, absolutely. It is ludicrous.
But I think the real reason is those people attempting fraud are fundamentally psychopaths: they can't think correctly about a future where they're being caught. They fix the present, one lie at a time, and get an immediate, narcissistic personal reward every time they fool someone.
They also think rules don't apply to them, and most of the time they're right, as they most often get away with it.
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caminante
Can't tell you how many times this happens, and the buyer doesn't even go public.
Seller probably had leverage to negotiate limited reps and warranties with no earnout and more cash upfront along with saying no to pre-close diligence.
jryb
I’d speculate they convinced themselves that their startup was fundamentally great and they just needed more time for it to attain its full potential. The fake users were just a way to show JPM the company they’d eventually have, so nobody was really going to lose (in their minds).
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afavour
The truth is, these are not very bright guys, and things got out of hand.
freeAgent
Perhaps she thought that she would be able to wiggle out of it or reach a private settlement that saved JPM some embarrassment or something. Still, that was obviously a very stupid decision.
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EdwardDiego
Is "under 30" in "the Forbes 30 under 30" their age, or the likely upper bound of their prison sentences?
paxys
Forbes "30 under 30" actually has up to 600 people a year in 20 categories, and that's just in the USA. Add in international lists and the number rises to well over 1000. Since 2011 there have probably been, what, 10-15 thousand total "honorees"? 3-5 of them going to prison is probably well below average.
MrMcCall
For their socio-economic status? Surely.
jorts
It’s usually a red flag for someone to not engage with as they have a huge ego and pay to get themselves on that list.
ahamilton454
It’s actually just a Forbes marketing ploy. Me and my company made it on the list and they gave us an interview and the guy that interviewed us asked “what is ChatGPT?” And he was supposed to be head of like AI at Forbes. I actually think they somehow make money from it by hosting conferences and stuff. Either way I always was sus of it
maest
I know a couple of people on that list. They are mediocre, at best. So that casts a lot of doubt on Forbes ability/interest in filtering membership.
My sense is that you can network/buy your way onto the list.
DrNosferatu
“Most trusted brand” lists work like that.
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rKarpinski
Usually it's the investors who get people on these lists.
FireBeyond
Stanford is an ... interesting place, it seems. I read that if you filtered for Stanford in the Forbes 30 Under 30 lists, they were most notable for having been accused/charged/convicted of stealing/scamming more money than their companies have generated revenue, to a ratio of nearly 3:1.
bradleyy
I really don't think that the ankle monitor is going to interfere with Pilates instruction.
Florida absolutely has a nonzero amount of "Pilates teachers with ankle monitors".
rdtsc
> Florida absolutely has a nonzero amount of "Pilates teachers with ankle monitors".
"We gracefully incorporate the ankle monitor into the exercise routine, it's just like an extra weight!"
ty6853
Now would be a great time for her to pop out a few kids though, if Holmes is any guidance.
romellem
Related discussion
borgster
How many other stats we see are faked?
She claimed 4.25m users only 300k real.
Startup idea: zero knowledge proof audit mechanism for investors to verify usage stats.
user3939382
Granted that’s a cool idea, but also how about at least an intern doing basic due diligence for your $175M deal. Especially in this case where they had a red flag that she didn’t want to turn over the list until the deal was done.
abraae
> Especially in this case where they had a red flag that she didn’t want to turn over the list until the deal was done
I'm not in the game but I think if I was spending this much money I would want some statistically sound samples of the list. Not the whole list, but enough entries to give me a high level of confidence that the list was made up of real people.
e.g. hash the name and DOB of everyone on the list, then give me the list of hashes. That way I know the list is not full of duplicates. Then I will pick say 10 at random, request their details, and make sure their hash can be recreated and that they are real people.
cratermoon
OpenAI claims 400 million weekly active users. Verify that.
mirzap
Do you know what zero knowledge proofs are? OpenAI could create ZKP that would be easy to verify.
cratermoon
I do. OpenAI has not done so. Draw your own conclusions.
anigbrowl
If she's smart she salted away a couple million to buy a pardon.
iamtheworstdev
$1.8m at a minmum
JumpCrisscross
Dimon and Musk have feuded in the past. This is honestly in her cards.
RC_ITR
What’s crazy to me about all of this is that the College Board will happily sell you the contact info for the 2mn students who take the SAT each year.
We’d probably not know about this if Javice just spent 10 minutes thinking, created a small scholarship, bought student contact info to “market” the scholarship, and then used that real data to commit fraud.
Maybe some recipients notice and report something to JPMorgan, but how many 18 year olds are actively reporting spam?
nimish
So what did the 'due diligence' people actually do on this transaction?
ibejoeb
One wonders. I do b2b stuff, so I verify that clients and contracts actually exist. What happens when you're doing DD for this kind of deal where they're effectively buying a client list comprised entirely of individuals? Call a sample?
rvz
Another fraud-star is officially born.
Joining the ranks of Theranos founder Elizabeth Holmes, Sam Bankman Fried all under the Forbes’ "30 Under 30" list.
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> Frank’s chief software engineer, Patrick Vovor, testified that Javice had asked him to generate synthetic data to support her claim that the company had more than 4 million users. When Vovor asked if that was legal, prosecutors said, Javice and Amar assured him that it was — and told him they didn’t want to end up in orange prison jumpsuits. Vovor testified that he refused to help. “I told them I would not do anything illegal,” Vovor told jurors.
> Seeking to dent Vovor’s credibility, defense lawyers suggested he was resentful that Javice didn’t want to date him.
That is one hell of a defense