JPMorgan Chase & Co (NYSE:JPM) said it has shut down Frank, the website for a college financial aid platform it bought for $175 million in September 2021 after alleging the company’s founder, Charlie Javice, created nearly 4 million fake customer accounts, CNBC has reported.
The country’s biggest bank acquired Frank to help it deepen relationships with college students, a key demographic, a Chase executive told CNBC at the time. JPMorgan said then that Frank was the “fastest-growing college financial planning platform” used by more than 5 million students at 6,000 institutions. Javice joined the New York-based bank as part of the acquisition.
Months after the transaction closed, however, JPMorgan said it learned the truth after sending out marketing emails to a batch of 400,000 Frank customers. About 70% of the emails bounced back, the bank said in a lawsuit filed last month in federal court, CNBC said.
The news comes with JPMorgan scheduled to report its fiscal Q4 2022 results today, Friday the 13th.
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Javice, who had approached JPMorgan in mid-2021 about a potential sale, lied to the bank about her startup’s scale, the bank alleges in a lawsuit, CNBC noted. Specifically, after being pressed for confirmation of Frank’s customer base during the due diligence process, Javice used a data scientist to invent millions of fake accounts, according to JPMorgan.
A lawyer for Javice told The Wall Street Journal that JPMorgan had “manufactured” reasons to fire her late last year to avoid paying millions of dollars owed to her. Javice has counter-sued JPMorgan, saying the bank should front legal bills she incurred during its internal investigations.
“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,” attorney Alex Spiro told the WSJ. “Charlie blew the whistle and then sued.”
JPMorgan spokesman Pablo Rodriguez told CNBC: “Our legal claims against Ms Javice and Mr Amar are set out in our complaint, along with the key facts,” he said. “Ms Javice was not and is not a whistleblower. Any dispute will be resolved through the legal process.”
The alleged fraud perpetrated by Javice and one of her executives “materially damaged JPMC in an amount to be proven at trial, but not less than $175 million,” JPMorgan said in its lawsuit, CNBC said.