JPMorgan Chase shuts down Frank Student Financial Aid website
Dimon said in June that he was preparing the bank for an economic “hurricane” caused by the Fed and Russia’s war in Ukraine.
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c. B. Morgan Chase Closed on Thursday website For a college financial aid platform it bought for $175 million after claiming the company’s founder created nearly 4 million fake customer accounts.
The nation’s largest bank acquired Frank in September 2021 to help it deepen relationships with college students, a key demographic, a Chase executive told CNBC at the time.
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JPMorgan described the deal as giving it “The fastest growing College financial planning platform” used by more than five million students in 6,000 institutions. It also provided access to the founder of the startup Charlie Javiswhich joined the New York-based bank as part of the acquisition.
Months after the deal closed, JPMorgan said it learned the truth after sending marketing emails to a group of 400,000 Frank customers. The bank said about 70% of emails bounced back The lawsuit was filed last month in the Federal Court.
The bank alleged that Javis, who had approached JPMorgan in mid-2021 about a potential sale, lied to the bank about the size of her startup. Specifically, after being pressured into confirming Frank’s client base during the due diligence process, Javis used a data scientist to invent millions of fake accounts, according to JPMorgan.
“To profit from the money, Javis decided to lie, including lying about Frank’s success, Frank’s size and Frank’s depth of market penetration in order to induce GPMC to buy Frank for $175 million,” the bank said. Javice was represented in documents placed in the acquisition data room, in presentation materials, and through verbal presentations. [that] Over 4.25 million students have created Frank accounts to begin applying for federal student aid using the Frank application tool. “
JPMorgan said in the suit that instead of having a business with 4.25 million students, one JPMorgan had “less than 300,000 customers.”
Javis’ attorney told the Wall Street Journal that JPMorgan “fabricated” reasons to fire her late last year to avoid paying the millions of dollars she was owed. Javis sued JPMorgan, saying the bank must provide legal bills incurred during its internal investigations.
“After JPM rushed to acquire Charlie’s rocketship, JPM realized it could not get around existing student privacy laws, committed misconduct, and then attempted to back out of the deal,” said attorney Alex Spiro. he told the newspaper. “Charlie whistled and sued.”
Spiro, who is a partner with Quinn Emanuel, did not immediately return a call from CNBC.
JPMorgan spokesperson Pablo Rodriguez received this response:
“Our legal claims against Ms. Javis and Mr. Amar are set out in our complaint, along with the essential facts,” he said. “Ms. Javis has not been and will not act as a whistleblower. Any dispute will be resolved through the legal process.”
JPMorgan said in its filing that the alleged fraud committed by Javis and one of its executives “caused material damage to JPMC in an amount that will be proven at trial, but not less than $175 million.”
Whatever the outcome of this legal squabble, this is an embarrassing episode for JPMorgan and its CEO Jamie Dimon. In an effort to fend off the encroachment of competitors, JPMorgan went a step further Fintech buying spree in recent yearsDimon has repeatedly defended his technology investments as necessary investments that will yield good returns.
The fact that a Young founder in manufacturing Known for vibrating scales And “fake” so you can make it, her sense of humor manages to fool JPMorgan’s calls into questioning how strict the bank’s due diligence procedures are.
In an interview at the time of the deal, Javis marveled at how far she had come in just a few years leading her startup.
“Today is my first day ever worked by someone else,” Javis told CNBC. “I mean it’s still very much like, pinch me, did this really happen?”
As a result of the legal wrangle, JPMorgan closed early Thursday morning.
The site now reads “Frank is no longer available”. To submit your free application for Federal Student Aid (FAFSA), visit StudentAid.gov.