JP Morgan Alleges This 30

By Alexandra S. Levine and Iain Martin

JPMorgan Chase (JPMC) sued the founder of the fintech Frank, a startup trend that helps college students manage their student loans and debt, for allegedly lying about its scale and success by creating a huge list of fake users that lured the bank into buying it for $175 million.

Frank, founded by its former CEO Charlie Javice in 2016, offers a software intended to improve the student loan application process for America’s youth seeking financial help.

His lofty goals of converting startup in “an Amazon for higher education” earned him the support of the billionaire Mark RowanFrank’s main investor, according to Crunchbase, and prominent venture investors such as Aleph, Chegg, Reach Capital, Gingerbread Capital and SWAT Equity Partners.

The lawsuit, filed late last year in federal District Court in Delaware, claims that 30-year-old Javice told JP Morgan in 2021 that more than four million users had registered to use Frank’s tools to apply for financial aid from the federal government.

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When JP Morgan requested evidence during the due diligenceJavice supposedly created a huge list of “Fake Clients: A list of names, addresses, dates of birth, and other personal information of 4.2 million ‘students’ who didn’t really exist.” However, according to the claim, Frank had less than 300,000 accounts of customers at that time.

Javice first objected to JPMC’s request, arguing that he could not share his client list due to privacy concerns. the lawsuit continues. “After JPMC insisted, Javice opted to invent several million accounts out of thin air of Frank’s clients. The lawsuit includes screenshots of presentations Javice made to JP Morgan illustrating Frank’s growth and claiming he had more than four million clients.

The same week that JP Morgan filed its lawsuit against Javice, the woman filed a lawsuit against JP Morgan. In it, he alleges that the bank “initiated a series of unfounded investigations into the conduct of Ms. Javice” and subsequently “fabricated a just dismissal in bad faith” and “worked to force Ms. Javice out of the organization )JP Morgan)”, to deny him a million-dollar compensation that was owed to him. As part of those investigations, according to the lawsuit, JP Morgan “falsely accused Ms. Javice of misconduct” during and after the Frank acquisition.

“After JPMC rushed to acquire Javice’s business, the bank realized it could not work around existing student privacy laws, engaged in misconduct, and then tried to renegotiate the deal,” Javice’s attorney, Alex Spiro, said in a statement emailed to FORBES. “Charlie raised the alarm and then sued. The new JPMC lawsuit is nothing more than a cover.”

Frank’s chief growth officer, Olivier Amar, is also named in the JP Morgan lawsuit. It alleges that Javice and Amar first asked an engineer of Frank’s to create the fake customer list. When he refused, Javice asked “a professor of data science at a university in the New York area” for help. Using data from some people who had already started using Frank, he created 4.2 million fake customer accounts, for which Javice paid him $18,000, and had them validated by a third-party provider under his direction, he alleges. JP Morgan.

The complaint includes screenshots of the professor’s bills and claims that Javice went to great lengths to ensure that documentation for this work was destroyed or altered so as not to arouse suspicion. Amar, for his part, spent $105,000 buying another data set of 4.5 million students from the company ASL Marketing, according to the complaint. Amar and ASL Marketing have not yet responded to a request for comment.

Lawmakers from both parties represented in the US Congress had sounded the alarm about Frank in 2020, asking the Federal Trade Commission (FTC) to investigate its “deceptive practices” and issue a temporary restraining order on the company to stop them.

“We are concerned that Frank is creating false hope and confusion for students, while contributing to unnecessary additional work for financial aid administrators,” they wrote in a letter to the FTC lawmakers.

“We further suspect that the company may be using data collected from misled students to make a profit by selling data to third-party advertisers… This tool does not make it easy for students to obtain aid funds and appears to be, instead, a way for Frank to extract and exploit student data for profit.” Later, Frank got a warning letter from the FTC indicating that it may be providing misleading illegal information to its customersconsumer protection agency. Javice’s attorney, Spiro, did not immediately respond to a request for comment on the FTC letter.

When JP Morgan acquired Frank in September 2021, it brought in Javice, Amar and other Frank workers as employees.

Javice graduated from the Wharton School of Business at the University of Pennsylvania and was named to the list Forbes 30 Under 30 in the finance section in 2019. So he told FORBES that Frank had helped 300,000 students apply for financial aid. When he announced the acquisition of JP Morgan on LinkedIn two years later, it said it was “serving more than five million students at more than 6,000 universities.” When she was asked in her presentation of 30 Under 30 What was the biggest hurdle the company was facing, Javice replied: “climb”.

Since the Frank acquisition, Javice served as a CEO at JP Morgan and oversaw Chase’s student products.according to his LinkedIn profile.

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Received nearly $10 million as part of the mergernegotiating an additional $20 million retention bonus to be paid at a later date if he continued to perform well with the company. Amar, who was named executive director of student solutions at JP Morganaccording to his LinkedIn, received about US$5 million from the operation and similarly negotiated a $3 million retention bonus, according to the lawsuit.

After the deal was closed, JP Morgan asked Frank for his client list. so you can start marketing your products and services to those students, on demand. Javice and Amar sent a list of data from ASL Marketing and another provider, Enformion, according to the lawsuit, but when JP Morgan sent test marketing emails to what it believed were 400,000 of Frank’s clients, the results “were disastrous”, it states. According to the lawsuit, only a quarter of the messages reached their destination and, of those, only 1% were opened.

As a result of the “unusually low returns” from that campaign, JP Morgan reviewed what it thought it knew about Frank and discovered what it now claims are fake listings.

“In every aspect of his interactions with JPMC, Javice had to choose between (i) revealing the truth about his startup and accept Frank’s true value and (ii) lie to inflate Frank’s value and reap the rewards of that inflation.” says the lawsuit. “Javice chose to lie and the evidence shows that time and time again he piled fraud upon fraud. to fool JPMC. Javice and Amar used the bogus customer list and other knowingly misrepresentations of the Merger Agreement to fraudulently induce JPMC to enter into the merger.”

Javice’s lawsuit against JP Morgan indicates that the bank failed to “leverage Javice and Frank’s acumen to attract a new, young and diverse audience to Chase’s services” and instead followed “ill-conceived business plans” focused on “Frank’s historical clients.”

“Chase mismanaged his investment from the start and decided he would rather withdraw it than continue working on it,” says Javice’s lawsuit.

Amar was fired in October and Javice in November. Apparently, other former employees of Frank are still working at JP Morganaccording to LinkedIn.

When asked at the presentation of Forbes 30 Under 30 what was the worst advice he had received, Javice replied: “be patient”.

JP Morgan Alleges This 30-Year-Old CEO Scammed Them Out Of Buying Her Startup For $175 Million