Frank founder Charlie Javice arrested, charged with defrauding JPMorgan Chase | Hacker News Reader

Frank founder Charlie Javice arrested, charged with defrauding JPMorgan Chase

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78 pointsgmays79 comments

> Javice, whom Forbes named a rising star in its "30 under 30" issue in 2019...

Along with other luminaries like Elizabeth Holmes, Sam Bankman-Fried, Martin Shkreli...

I saw a stat the other day that 30 under 30 alums have accounted for something like 2x the amount of fraud $ charges as VC $ raised which I thought was fitting... the list is a magnet for charlatans

It makes sense too. I see being on that list as a negative signal. You’re spending time jumping through the right hoops and social circles to get nominated instead of building.

You can actually nominate yourself for a lot of those. Naturally, that is very attractive to self-aggrandizing bastards with very little to offer to the world.

Costs $30k I believe

What actually happens is the VC firms have a relationship with Forbes and push their most favored start-ups on them. A big chunk of people don’t do anything to get on the list, except write their own bios and of course getting funded by said VCs.

That being said, yes, there’s quite a lot of vain people in there.

The comparison is apples to oranges though. It's like comparing a CEO's claims of future great success to actual shipped units.

To raise funds someone has to actually give up money. When it comes to government prosecution and lawsuits the government and aggrieved parties are more or less free to use motivated reasoning, mental gymnastics and other sorts of faulty logic to make whatever fanciful claims they want so long as there's some shred of a reason for the claim. There's no check being cut, no skin in the game so the numbers aren't ever as grounded in reality as fundraising numbers. These "reality inspired" numbers then gets haggled down to a numbers that are supported by evidence over the course of court proceedings. And then the internet peanut gallery compares the fanciful initial headline to the settlement that is supported by hard evidence and gets their jimmies rustled.

That said I'm sure that list is full of shysters and slime balls.

Forbes is not at all what it used to be. It's a zombie brand.

Malcolm Forbes must be rolling in his grave.

It used to be one of the big-three US business magazines and IMO had the most character of them. Then post-Malcolm online it started catering to a lot of outside contributors, often with various conflicts of interest, and generally sold its soul for clicks.

I think the outside contributors get paid for views. So you either write baity stuff to make it worth your while, or yeah, you have other interests that make it viable beyond the pay.

Kinda like underpaying engineers and ending up with “great ones that work for cheap” that end up being spies/doing espionage.

And some of it at least was paid placement as well that was theoretically vendor-neutral and reviewed editorially but pretty superficially.

Analysts, consultants, and so forth have long been willing to write for trade pubs for the visibility and maybe a few bucks. But the conflicts of interest have always been a bit problematic if only in them choosing what topics not to dive into. I did a fairly long-time blog for another pub and over time they decided their blog network had gotten too uncomfortable for them.

It's not that hard to get on the "30 under 30" list assuming you have the right comms advisor. If you've created a startup with decent revenue and raised a decent Series A, it's definetly doable. In fact, I've seen mid-careerish professionals make the list as well because they had the right network.

There are 20 categories, and each category selects around 30 people a year.

Like everything else, if you attended the right colleges (Ivies, Ivy Adjacent Privates, Public Ivies), built a strong enough network there, and worked your butt off initially you're in a good position to join that list in your late 20s.

Yeah, it's actually a "600 under 30" list, every single year.

Yep. In some categories like Music, Entertainment, and Nonprofits the competition is insane, but anything tech related has a magnitude less competition.

Their expertise extends beyond ranking individuals. Witness the accolades they heaped upon SVB shortly before its sudden demise.

You forgot Adam Neumann :). Though I don't remember if he was on one of these lists or just the cover page.

I remember about 9 years ago the going rate was allegedly $10,000-25,000 to get on the list.

Confirm my hypothesis that "everything is fake".

Just like Guinness World Records, you actually pay to get in the book.

  The Forbes 30 Under 30 have collectively raised $5.3B in funding. 

  The Forbes 30 Under 30 have also been arrested for frauds and scams worth over $18.5B. 

  Incredible track record.

https://twitter.com/ChrisJBakke/status/1643330142054526977

I'm seriously contemplating just starting an inverse-cramer ETF tracking companies associated with these alumni. Anybody interested? (Not kidding)

This is a bit misleading; the funding number is for one year's members, the fraud/scam number is over many.

How would you track it? These are not publicly listed companies (which is what enables most of these scams anyway).

Keep tabs on the 2nd order.

I'd imagine the next Theranos/FTX types are in there already acting empowered and speaking out about altruism, cutting deals with some publicly traded companies.

"We are running a pilot MVNO in SF distributing P2P WiFi via HOBOS. Hobspots we call 'em. Or hopespots. Still workshopping. They get a free phone with 1GB of data, you get better 5G coverage." => Short T-Mobile.

"And coming this winter Ad Coats, because nobody deserves to not look festive during the holidays" => Short Patagonia.

The "move fast and break things, fake it 'til you make it" culture around start-ups I think really blurred the line between acceptable behavior and criminal fraud for a lot of people, and some of them stepped on the wrong side of it and got arrested.

As the startup scene cools a bit, hopefully there will also be a rethinking of some of its values that will lead to less of this sort of thing.

I don’t think it has anything to do with catch phrases or “culture”.

Anyplace that large amounts of money shows up fast just provides opportunity for these things to happen.

And in this case lying about how much business you do / customers you have… that one is as old as business…

This wasn't her bending the rules or going outside the bounds, she straight up faked a majority of their users which was the entire reason JPM invested.

This is more common than you think in the startup world. This isn't the first time I have heard such things. Mobile game companies do this too.

It's surprising that there also seems to be a pattern where the people engaging in these crimes can afford to pay $1mil+ bonds (Holmes, Bankman-Fried).

I haven't recently seen an article where someone committed massive whitecollar fraud and they couldn't afford this bond because they didn't have incredibly wealthy friends or family.

A lot of times they don't have to put up any actual money, just collateral. With bay area housing prices being as high as they are they can typically use their houses to cover the bond.

So foreign investment in USA property can influence fraud in the tech sector, interesting what this one tangential influence could account for.

Goes to show that the fraud is systemic - the individual who is being prosecuted is just the face of the operation, family and friends are in on the joke.

Good.

We have entered the part of the cycle where the frauds & charlatans get their repercussions.

Very 2008-2009esque in that regard.

Not a lot of frauds and charlatans got their repercussions in 2008-09.

I, for one, would like to see all these “financial influencers” get heavily punished. The amount of scams and rugs and market manipulation they all pulled off in 2020-21 was unreal.

They're working on it; some high-profile ones last month: https://www.npr.org/2023/03/22/1165477713/lindsay-lohan-jake...

D-list celebs who promote shit on Instagram without pointing out they're being paid. Somehow, I'm supposed to view this as markedly worse than Tom Brady, Larry David, etc. doing the same thing in a commercial.

Why would you not see them as markedly different?

Commercials don't require disclosure because everyone knows they're a commercial. The same is not true for influencers' Instagram posts. Sometimes the scripting is ham-handed enough to be obvious, but hardly always.

The outcome is the same, people buying something they may not have otherwise. Also, the fact that viewers know something is an ad doesn't change the fact that they view it as a celebrity endorsement.

> The outcome is the same, people buying something they may not have otherwise.

The outcome is the same between murder and a self-defense homicide, too.

> Also, the fact that viewers know something is an ad doesn't change the fact that they view it as a celebrity endorsement.

That's on them, though. They have the information, it's up to them to act on it.

> Six of the celebrities — excluding Soulja Boy (whose legal name is DeAndre Cortez Way) and Mahone — have agreed to pay a total of more than $400,000 to settle the charges without admitting or denying the SEC's findings

$400k isn't nearly enough to deter anyone in the future. That's a month's income for some of them.

If you could make $1M and pay just a month of your income if caught as fine, would you do it?

It lead to the collapse of a _lot_ of fraudulent schemes, though most were fairly small in the scheme of things; Madoff was probably the most prominent big one.

Depends on how broadly you define frauds/charlatans. Sure no one really went to jail for managing their banks risk poorly.

But literal actual frauds - ponzis, etc.. some high profile cases you may have memory holed. Madoff, Allen Stanford, and dozens of smaller ones that popped up week to week as the market went down. Plus all the insider trading cases that shut down SAC for a while and put a bunch of PMs in jail or to negative net worth.

You can also probably connect the dots to the LIBOR scandal breaking as well.

That one of course I think the wrong people went to jail (the guys at the bottom dumb enough to put the deeds in writing vs the guys ordering it & supervising) & it was less criminal than unethical / immoral / etc.

Quite a good number of 100Millions - Billion(s) scale ponzis taken out & put in jail during GFC. 15 years ago, that used to be a lot of money!

https://en.m.wikipedia.org/wiki/Scott_W._Rothstein

https://en.m.wikipedia.org/wiki/Tom_Petters

https://en.m.wikipedia.org/wiki/Laura_Pendergest-Holt

https://en.m.wikipedia.org/wiki/Saradha_Group_financial_scan...

https://en.m.wikipedia.org/wiki/Gary_Sorenson

As they say, only when the tide goes out do you discover who's been swimming naked.

In this case, it's still the "little guy" who's the easy target. Hopefully, it'll parlay into some "big guys", like JPMorgan execs, that get their repercussions.

Curious about her claim of withfrank.org displaying 350,000 students vs the 4 million claim from JP Morgan. Also, curious to know when acquisition talks began and what was said or if instruction was given.

There's a Crunchbase timeline showing that the acquisition was agreed upon in Sept 2021. Wayback machine shows that in January 28th 2021 withfrank.org displayed 350,000, but then changed to 4.25 million on February 22nd 2021. Big jump regardless and mindless by whoever instructed that change unless there was another motive. Welp

https://web.archive.org/web/20210128204248/https://withfrank...

https://web.archive.org/web/20210222193947/https://withfrank...

Did Javice think she was not going to get found out? That she could fool JPM? I just don't get this fraud strategy at all.

The endgame probably was to just get fired... settle out of court for a mutual non-disparagement and then retire to Miami to become a QuantumCrypto angel investor

To me, the striking part of the story is the valuation of spam.

> Javice lied about having data on 4 million clients, including making up fake client information, in order to entice JPMorgan Chase to buy her company in 2021 for $175 milliion

> According to the SEC's complaint, JPMorgan was eager to buy Frank because the company claimed to have contact information — including names, emails and phone numbers — for over 4 million students, a pool of potential new customers the bank wanted to reach.

JPM paid ~$42 per student so it could spam them. I don't know what their conversion funnel looks like, but that's surprisingly high to me. College students make lucrative targets, apparently.

It's also depressing to think about as an individual in this economy - having our personal info harvested, bundled up, traded, and exploited for hundreds of millions of dollars, all without our consent.

I am surprised, presumably, that Discover/Navient/etc would not directly sell their borrower’s contact info for much less than $42 per person, and it would be the highest quality real time data.

Good point, the market rate for contact info must be way below $42. I suspect JPM really wanted the juicier demographic/segmentation data that this little startup app convinced the students to provide. But they're not going to put that in their lawsuit or PR releases: "We thought we were buying 4.2M unsuspecting students' race, sexual orientation, family history, mental health status, blood types, and genetic code, but it was fake! We want a refund."

> College students make lucrative targets, apparently.

I have in my wallet two credit cards that I signed up for back in college. In the 90s. For one of them, I also got a 3 lb. bag of M&Ms. The other one came with a free T-shirt I think? In both cases, them setting up tables on my campus netted multi-decade account holders.

I should've bargained harder that day, though. I didn't realize what my CLTV was to them.

No, they paid $4M to have an existing business relationship with a demographic that is incredibly valuable to a bank (and hard to reach). Email marketing is only one part of that.

Regardless, marketing works, and yes, it's valuable. It's a business thing that I wish I could snap my fingers and make engineers understand. Even a 1% monthly response rate on a 4M member list is 40k leads a month. If your conversion rate is 1% (low), that's 400 sales a month. If your EV is $1000 (not at all unreasonable for a financial product), that's $400,000 a month.

Thanks for the downvote and the explanation, oh wise one. Marketing works, goddamn, I wish I'd thought of that.

> It's a business thing that I wish I could snap my fingers and make engineers understand.

I find interesting that "engineers" (what ever that means) do not understand the concept of marketing...

The question here is not whether not "marketing works", but to which extent it does and also the privacy and ethical concern around buy peoples contact (with out their conscent) and basically spaming them.

I realizing I'm stereotyping, but it's with love (since I, myself, am an engineer, and I also carried this misconception around for a long time).

But to explain: in my experience, engineers are quick to complain about all forms of marketing, and dismiss email marketing in particular as "spam". OP was a specific example of an attitude I've encountered many times before -- taking this so far as to suggest acquiring the users was "just for spamming".

In addition to "all marketing email is spam", other non-truths that engineers believe about marketing:

* if you send more than one email about something, it's intrusive and a violation

* most people unsubscribe from marketing emails

* nobody sees ads

* people hate ads, and would opt-out of all advertising if they could

So who is creating a startup aimed at getting college students to sign up and supply their data?

We know the valuation for each student is $42 - if we can get acquisition below that then we have a profitable business!

If I scammed that much money you wouldn’t find me, not even in New Jersey.

They gave the emails where they bought the fraudulent data to Chase. Not only that, they used company email and money to negotiate and buy the data. They need a lesson in how to commit fraud. I assume they will get that lesson in prison.

There seems to be a fine line between "clever hack" and "federal indictment".

I think people can get so excited about being a unicorn they either forget or don’t bother to learn what is fraud and what it isn’t.

If you make up your user list and say you have x million when you don’t, that’s fraud.

I don't think "lied about having data on 4 million clients, including making up fake client information, in order to entice JPMorgan Chase to buy her company in 2021 for $175 million" falls in an ethical grey area. It's pretty clearly fraud.

It was an overt fraud, after they started talking to JPM about an acquisition Javice and her Chief Growth Officer paid a NY data science professor $13k to invent a list of customers with real addresses and real sounding high school and college addresses, and then paid for a database of real student email addresses to populate it.

This is after their own software engineer refused to do it on ethical grounds. So they went external for help.

Then 1yr later when JPM tried to run an email campaign using their database only 30% of the emails delivered made it through (apparently they didn’t have time to use their “real” email DB). Additionally a JPM employee noticed the user list Frank employees sent was capped at the exact 1,048,576 maximum number of rows Excel allows on a spreadsheet which made him suspicious.

Allegedly

In my opinion.

And what’s so crazy is that it seems like not that hard of a thing to actually make?

Like I’m sure the College Board would sell you a similar list and if you really needed to fluff it, maybe some other shady sources.

Classic “only the stupid fraudsters get caught”

Frank tried this. They purchased lists of student emails from ASL Marketing and Enformion to turn over to JPM. Turns out that the majority of those email addresses were nonfunctional, but even more importantly, even those legitimate email addresses just wouldn't open the emails (because presumably since those users had no previous relationship with Frank or JPM they were just treated as spam). That's what made JPM suspicious. Those emails had an open rate that was > an order of magnitude lower than previous JPM email campaigns.

Yeah but this [0] exists and a good fraudster goes “Hey, I’m an up and coming entrepreneur who is about to cash out and I want to give out some scholarships. Can my foundation buy access to your list please?” Then you spend like $1mn tops on the actual best list of high school emails in the country, give out like $5mn in actual scholarships, and get unlimited love and attention from the kids whose life you changed. Plus you stay rich and don’t go to jail. Hell, maybe you even subtly market Frank in the scholarship emails (Hi, I’m the founder of Frank and want to give back to students more directly…) and your user base actually grows!

[0]* Student Search Service™ Student Search Service is a free, optional service that helps students start a conversation with colleges and scholarship organizations. If students choose to participate in Student Search Service, they agree to share their name, address, college interest, and Student Data Questionnaire responses with colleges, universities, and nonprofit scholarship and educational programs. This information is used for recruitment, scholarship opportunities, and college planning outreach. College Board does not sell student information; however, qualified colleges, universities, nonprofit scholarship services, and nonprofit educational organizations do pay a license fee to use this information to recruit students and provide opportunities in connection with educational or scholarship programs. These license fees are reinvested in our nonprofit mission. For example, these organizations must sign a strict license agreement that outlines how student information can be used. College Board maintains a direct relationship with, and oversight of, all organizations using this student information and monitors the use of student information by licensed organizations. Students can opt out of Student Search Service at any time. More information about Student Search Service.*

They did buy such a DB but the indictment said they didn't get it in time to add the real emails to their fake list. So that's not exactly accurate. Those email lists are real but they are still mostly useless.

The odd thing is, that despite the obvious fraud — paying for a fake of your primary asset — she seemed to have no awareness of being at risk of prosecution.

A smarter criminal would have long-since disappeared to some distant non-extradition country, and now have a different identity and face....

> she seemed to have no awareness of being at risk of prosecution

A lot of these folks have not regularly been told "no" or seen consequences for screw-ups in their lives. When they do get told "no", they use family connections or wealth to push through anyways. It becomes very easy to forget that certain acts draw attention of a large organization that can actually impose real consequences.

Is this for real? Wow. They sold a list they bought for $13K for millions?

I am surprised JPM didn't do proper diligence.

There are a lot of surprises here. I'm surprised this wasn't settled confidentially out of court, since Javice presumably doesn't want to go to prison and JPM doesn't want all this publicity as the bank that paid 9 figures for a fake excel sheet they were gonna use to spam people.

Don't get me wrong, I think it's a good thing that this fraud will be punished... I'm just surprised, either Javice is incredibly stupid/arrogant or someone in JPM was really mad and wanted to press the nuclear button, because a "renegotiation" after a "record keeping error" would have left both parties a lot better off.

She sued them first! They would have probably agreed to settle things quietly. Nope, she wanted them to cover (all!) her legal expenses associated with the internal investigation.[0]

[0] https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/r_2purB7...

Yep she also denied it for months and made up excuses even though they gave her plenty of opportunities to admit it

She deserves jail and her lawyers will be dumb to ask for anything but plea

I hope Dimon is being sufficiently humbled by the complete lack of diligence that was done before the acquisition because it apparently took very little time after to discover what they did.

He’s doing just fine, he found his therapeutic outlet of torturing employees with RTO policies.

What? Where's the fine line here? "Oops, I accidentally faked 95% of my userbase for a 9 figure buyout, could have happened to anyone"?

This was an attempt to defraud a massive company for hundreds of millions of dollars. The line is in rearview mirror and probably hidden by the curvature of the earth at that point.

20/20 burn

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