Charlie Javice launched her company Frank in 2017 when she was 24 and a recent Ivy League graduate with the goal of helping students apply for college financial aid. By 2021, it will be praised A business visionary, she sold her startup to JPMorgan Chase for $175 million.
Now, JPMorgan claims that Frank’s inspiring story of helping more than 5 million students get into college was largely a fabrication, according to a lawsuit filed by the bank last month. Javis allegedly paid a data science professor $18,000 to devise a list of more than 4 million fictitious student names in order to convince the financial giant to write off the purchase price, the suit alleges.
The allegations are the latest case of a highly acclaimed millennial founder accused of manipulating the truth to score financial goals, which range fromFrom FTX to the disgraced founder of Theranos . Meanwhile, Frank, once expected to help JPMorgan expand its reach among college students, is now shut down.
“[T]o For cash, Javice decides to lie, including lying about Frank’s success, Frank’s size, and Frank’s depth of market penetration in order to motivate [JPMorgan] to purchase Frank for $175 million,” the bank alleged in the complaint.
Alex Spiro, Javis’ attorney, denied the allegations in a statement emailed to CBS Money Watch. “He knows what they’re doing is retaliation and misleading,” JPMorgan said. “They were provided with all the data in advance of the purchase of Frank and Charlie Javis, and they highlighted the limitations of student privacy laws during due diligence.”
He added, “When? [JPMorgan] Unable to circumvent these privacy laws after purchasing Frank, JPMC began distorting the facts to cover their tracks and falsely accused Charlie Javis of returning the deal.”
JPMorgan, which said Javis was no longer employed by the company, said it was seeking unspecified punitive and compensatory damages at trial.
Proven Acquisition Machine
The lawsuit explains why JPMorgan was drawn to Frank when Javis, a University of Pennsylvania graduate, contacted the bank in the summer of 2021. She promoted the startup’s 4.25 million users, students who started or completed the Free Application for Federal Student Aid, or FAFSA, through Frank .
Notorious for being a difficult application, the FAFSA is required by colleges, states, and the Department of Education to qualify for financial aid, scholarships, and more.
This group of young customers was apparently catnip for JPMorgan, which indicated in its lawsuit that it believed “Frank was a proven acquisition machine for college-age students.”
But, the lawsuit alleges, when JPMorgan asked Javice to prove it had more than 4 million customers, it initially countered, claiming it couldn’t share names because of privacy issues. The suit claims that Frank in fact had fewer than 300,000 customer accounts.
“After JPMC’s insistence, Javice chose to invent multi-million Frank customer accounts out of whole cloth,” the lawsuit alleges.
4.2 million alleged fakes
Javis allegedly turned to an unnamed City College of New York professor to fix her problem, paying him $18,000 to create a list of names.
“In the end, the data science professor created a list of 4.265 million fake customer accounts (the “Fake Customer List”) as Javice requested,” JPMorgan claims in the lawsuit.
JPMorgan, unaware of the alleged problems at this point, completed the $175 million purchase, but realized something might be amiss when it sent a test marketing campaign to Frank’s client list. The complaint stated that the results were “catastrophic”.
The lawsuit alleges that “JPMC sent emails to test marketing to what it believed were 400,000 unique customers on Frank.” Among the individuals contacted, only 28% of emails were delivered, compared to the 99% delivery rate typically seen by JPMC with similar campaigns. Only 1.1% of delivered emails were opened, compared to 30% for a campaign JPMC is typical.”
Now suspicious, the bank has reviewed Frank’s business, as well as emails, chats, and messages between Javis, a professor of data science and Frank’s chief growth officer, which the lawsuit claims revealed problems with Frank’s client list.
The suit alleges that “in every aspect of her interactions with JPMC, Javis had a choice between (1) revealing the truth about her startup and accepting Frank’s actual value and (2) lying to inflate Frank’s value and reap the rewards of that inflation.” . “Javis chose to lie every time, and the evidence shows that she repeatedly spin fraud upon fraud to deceive JPMC.”