Charlie Javice sold her financial aid startup Frank to JPMorgan Chase for $175 million. But soon after the ink on the deal was dry, the bank discovered that their new acquisition was not at all what it seemed. WSJ’s Alexander Saeedy explains how a trial about fraud committed against JPMorgan resulted in the bank feeling the heat. Kate Linebaugh hosts. Sign up for WSJ’s free What’s News newsletter. Further Listening: - A $175 Million ‘Huge Mistake’ - JP Morgan CEO Jamie Dimon on What’s Next for the Economy Learn more about your ad choices. Visit megaphone.fm/adchoices
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At a federal courthouse in Manhattan, a witness was called to the stand. He was testifying for the prosecution. The witness, Patrick Vuvor, had been the chief software engineer at a financial aid startup called Frank. On the stand, he recounted a story from back in 2021. Frank's founder, a woman named Charlie Javis, was on the precipice of selling her business to JPMorgan Chase.
It would be a big, life-changing deal. And this witness testified that Javis had an unusual request.
She tells him, I need you to create a synthetic database of containing four million profiles, essentially artificial data.
That's our colleague Alexander Saidi. So how does this engineer testify that he responded to this request?
Well, at first he says, is this even legal? And he then says he refused to do it. because he wasn't sure it was even legal, what was being asked of him. In reply, Charlie said to him, don't worry, I don't want to end up in an orange jumpsuit. It was when the jumpsuit comment happened that it was like, this is a real trial about real crimes.
There are 12 real people sitting here listening and deciding whether or not you're going to really go to jail or not. And when he said it in front of the jury, you could feel it in the room that the stakes just got a lot higher. And I'm not trying to be dramatic. It really did feel that way.
This trial, which concluded Friday, exposed not just the actions of Charlie Javis. It also revealed ignored warnings and lax due diligence at J.P. Morgan on a deal that CEO Jamie Dimon has called a, quote, huge mistake. Why was this trial worth paying attention to?
It was worth paying attention to because it offered a pretty unprecedented insight into how the sausage gets made at arguably the most powerful bank in the world. The big question was, well, how did this happen at the biggest bank in the country that's supposed to be an expert in deal-making?
And did you get the answers?
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