By: Hellen Zaboulani
JPMorgan Chase & Co. is suing the heads of Frank, a financial-aid startup it purchased for $175 million in 2021.
As reported by the Wall Street Journal, the banking giant is alleging that the college financial aid firm fabricated millions of fake student accounts to create an illusion of a growing business. In late December, JP Morgan filed a lawsuit in a Delaware federal court against Frank executives Charlie Javice and Olivier Amar, alleging widespread fraud at the firm it purchased. The start up offered tools to help simplify college financial-aid forms, including offering a listing of scholarships available, and available low-cost college courses.
In the summer of 2021, Ms. Javice allegedly contacted JP Morgan suggesting an acquisition. The suit alleges that she claimed their company had 4.25 million users. JP Morgan now says there are less than 300,000 real users, or roughly just 10% of the figures stated, as alleged in the suit. “Rather than reveal the truth, Javice first pushed back on [JPMorgan’s] request, arguing that she could not share her customer list due to privacy concerns,” the bank said in its court filing. “After [JPMorgan] insisted, Javice chose to invent several million Frank customer accounts out of whole cloth.”
A few days before JP Morgan filed its suit, Ms. Javice had filed her own lawsuit against the financial giant in Delaware state court, alleging the bank owed her millions of dollars for expenses she incurred defending herself against internal investigations. As per the WSJ, that suit says the bank initiated a “groundless” investigation against her last spring, and that she was ultimately fired from the bank in November. She contends in the suit, that JP Morgan “manufactured a for-cause termination in bad faith” in order to avoid paying $28 million owed to her on the deal. Javice’s lawyer, Alex Spiro, said JPMorgan’s lawsuit is “nothing but a cover.” “After JPM rushed to acquire Charlie’s rocketship business, JPM realized they couldn’t work around existing student privacy laws, committed misconduct and then tried to retrade the deal. Charlie blew the whistle and then sued,” the lawyer said.
A JPMorgan spokesman commented in response, saying the matter will be settled in court, and that Ms. Javice “was not and is not a whistleblower.”
JPMorgan said that before inking the deal, it asked Frank for a list of customers. Their suit alleges that Ms. Javice and Mr. Amar then hired a data-science professor to fabricate a list of fake names and addresses to back up their facade. The unnamed professor was paid $18,000 to make a list using computer-generated information for details including names, birthdays and schools attended, the suit claims. As per the WSJ, the suit includes excerpts of what JPMorgan says are email exchanges between the professor and Javice detailing how best to fake the customer info. “Our plan was to sample first name and last name independently and then ensure none of the sampled names are real,” the professor allegedly wrote to Ms. Javice, as per the suit. Frank also purchased a list of 4.5 million student names from a marketing company after the deal closed, JPMorgan alleges in court documents.
