JPMorgan Chase must pay the legal fees for Frank founder Charlie Javice in her defence against a lawsuit from the US banking group, which has alleged she defrauded the company when it paid $175mn to acquire her financial aid start-up.
A Delaware court on Monday ruled JPMorgan was obliged to cover Javice’s legal fees as part of her agreement to sell her company, Frank, to the bank in 2021.
JPMorgan sued Javice in December, alleging she told the bank her company had 4.25mn customers when in fact it had only 300,000. Javice was then charged in April with fraud by US prosecutors who also allege she falsified user numbers as part of the sale. She is also facing a civil lawsuit from the Securities and Exchange Commission.
The ruling applies to legal fees in JPMorgan’s lawsuit against Javice, but lawyers for Javice can request that this be expanded to include her defences in the government cases as well.
Frank helped college students apply for financial aid for their education. JPMorgan paid $175mn for the company through its Chase retail banking division with the aim of giving the lender greater access to younger customers. It was one of a number of smaller acquisitions it made around that time.
After the deal, Javice joined JPMorgan as a managing director, but the bank terminated her contract for cause in November. Prosecutors have alleged that Javice stood to make $45mn from the sale of Frank, which she founded in 2016 and was backed by Apollo Global Management’s Marc Rowan.
In her countersuit against JPMorgan, Javice denied allegations that she falsified user data. She has put up her Miami Beach apartment to secure a $2mn bond imposed by the court in exchange for her release from custody.
A JPMorgan spokesperson said after the ruling that the bank would “continue to focus on the main issue of addressing our fraud claims . . . through the legal process”.
Javice has been in talks with prosecutors about a potential resolution to the criminal case, according to court records last week.
The ruling was first reported by Bloomberg.
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