When you buy a startup for $175 million only to discover it was built on fake data, you expect some legal headaches. What you probably don't expect is to keep paying for the founder's cellulite butter.
That's the surreal situation JPMorgan Chase & Co. (JPM) finds itself in with Charlie Javice, the convicted founder of fintech startup Frank. According to allegations raised in Delaware court, Javice didn't just defraud the banking giant—she allegedly billed them for personal expenses including cellulite butter and luxury hotel upgrades while fighting the fraud charges.
The $142 Million Tab Keeps Growing
JPMorgan has already shelled out over $142 million in legal fees for Javice and her co-executive Olivier Amar to defend themselves against federal fraud charges. Now the bank is pushing back hard, attempting to revise a judge's order to stop any further payments.
Michael Pittinger, the bank's lawyer, didn't mince words when describing the situation as having "extreme abuses" in court filings, according to The Wall Street Journal. The legal team representing Javice has been accused of submitting bills claiming they worked hours that were "humanly impossible."
Javice's spokesperson, Juda Engelmayer, pushed back on the allegations, insisting the expenses weren't billed by Javice herself but by her legal team. That distinction might matter legally, but it doesn't change the fact that JPMorgan is stuck with the bill.
From $175 Million Acquisition to Seven-Year Prison Sentence
The backstory here is just as wild. JPMorgan acquired Frank for $175 million in 2021, believing it had a substantial user base that would help the bank reach college students. Two years later, Javice was arrested when investigators discovered the startup's value was propped up by falsified subscription numbers.
In March, Javice was found guilty on four fraud counts and sentenced to over seven years in prison. Yet despite her conviction, she continues to bill JPMorgan for legal expenses related to her appeal.
Pablo Rodriguez, a spokesperson for JPMorgan, summed up the bank's frustration: "We continue to believe the legal fees sought by Charlie Javice and Olivier Amar are patently excessive and egregious."
A Cautionary Tale for Corporate Dealmakers
Beyond the headline-grabbing details about cellulite butter, this case highlights serious questions about due diligence in corporate acquisitions. JPMorgan's experience with Frank demonstrates how quickly a deal can go from promising to disastrous when the underlying data proves fraudulent.
The ongoing legal battle and its eye-watering costs serve as a reminder that the damage from a bad acquisition doesn't end with the initial loss. The outcome could influence how corporations approach future acquisition strategies and what safeguards they put in place during due diligence.
