The founder of the startup used millions of fake customers to trick it into an acquisition, says JP Morgan, founder
The financial giant is suing the founder of a Mark Rowan-backed startup that it acquired, alleging that the fintech firm, Frank, sold the financial giant on a “lie.”
JPMorgan Chase is suing the 30-year-old founder of Frank, a fintech startup it acquired for $175 million, for allegedly lying about its size and success by creating a massive list of fake users to lure the financial giant into buying it.
Founded in 2016 by former CEO Charlie Javis, Frank offers a program aimed at improving the student loan application process for young Americans seeking financial aid. Its noble goals to build the startup in “Amazon Higher EducationHe was backed by billionaire Mark Rowan, Frank’s lead investor according to Crunchbase, and high-profile venture backers including Aleph, Chegg, Reach Capital, Gingerbread Capital and SWAT Equity Partners.
The lawsuit, filed late last year in US District Court in Delaware, alleges that Javis exposed JPMorgan in 2021 as a “lie” that more than 4 million users had signed up to use Frank’s tools to apply for federal aid. When JP Morgan requested proof during due diligence, Javice allegedly created a massive list of “fake clients – a list of names, addresses, dates of birth, and other personal information for 4.265 million ‘students’ that didn’t actually exist.” In fact, according to the lawsuit, Frank had fewer than 300,000 customer accounts at the time.
“Javice first retracted JPMC’s request, arguing that it could not share its client list due to privacy concerns,” the complaint continues. “After JPMC insisted, Javice chose to invent a multi-million dollar full-cloth Frank customer account.” The complaint includes screenshots of presentations Javice gave to JP Morgan to illustrate Frank’s growth and alleges it has more than 4 million customers.
In the same week, JP Morgan filed its case against Javice, Javice filed a lawsuit against JP Morgan. Frank’s former CEO’s complaint alleged that last spring the bank “initiated a series of baseless investigations into Ms. Javis’ conduct,” then “manufactured termination for cause in bad faith” and “worked to force Ms. Javis out of [JP Morgan] organization,” to deny it millions in damages it was owed. As part of those investigations, the complaint states that JPMorgan “falsely accused Ms. Javis of misconduct” during and after Frank’s takeover.
“After JPMC rushed to acquire Charlie’s rocket business, JPMC realized it could not get around existing student privacy laws, committed misconduct, and then attempted to return the deal,” Javis’ attorney, Alex Spiro, said in a statement emailed to Forbes. . Charlie blows the whistle and then sues. JPMC’s latest suit is only a cover.”
When asked in her 30-under-30 letter what the biggest hurdle the company faces, Javis said: “Expansion.”
Olivier Amar, Franck’s chief growth officer, was also named in the JP Morgan complaint. She claims that Javis and Amar first asked a senior engineer at Frank to create a fake client list; When he refused, Javis called a “professor of data science at the City College of New York” for help. Using data from some individuals who had already started using Frank, he created 4.265 million fake customer accounts — for which Javis paid him $18,000 — and validated them by a third-party vendor at her direction, JPMorgan claims. The complaint includes screenshots of the professor’s invoices and allegations that Javis took notable efforts to ensure that the documentation for this work was destroyed or altered to avoid raising eyebrows. Meanwhile, Amar spent $105,000 purchasing a separate data set of 4.5 million students from ASL Marketing, according to the complaint. Amar and ASL Marketing did not immediately respond to a request for comment.
Members of Congress from both parties sounded alarms about Frank in 2020, calling on the Federal Trade Commission to investigate its “deceptive practices” and issue a temporary restraining order on the company to stop it. “We are concerned that Frank is creating false hope and confusion for students while contributing unnecessary additional work to financial aid administrators,” the lawmakers, including Representatives Lloyd Smoker and Haley Stephens, said. wrote in a message. “We also suspect that the company may be using data collected from misleading students to make a profit by selling the data to third party advertisers. … This tool does not make it easier for students to obtain relief funds and instead appears to be a way for Frank to mine and exploit data.” Students for profit. Frank later received warning speech from the Consumer Protection Agency. Javis’ attorney, Spiro, did not immediately respond to a request for comment on the FTC letter.
When JP Morgan acquired Frank in September of 2021, it brought on Javice, Amar, and other Frank employees as employees. Javis graduated from Wharton at the University of Pennsylvania and his name was to me Forbes List of 30 Under 30 in Finance in 2019. She said Forbes Then, Frank helped 300,000 students apply for financial aid; When it announced the acquisition of JP Morgan linkedin Two years later, she said she was then “serving more than 5 million students at more than 6,000 colleges.” (When asked at her 30-under-30 filing what the biggest hurdle the company faces, Javis said: “Expansion.”)
“Javice chose to invent the multi-million dollar full-cloth Frank customer account.”
Since Frank’s acquisition, she’s been a managing director at JP Morgan overseeing student-focused products at Chase, according to her LinkedIn. It received approximately $10 million as part of the merger, and negotiated an additional $20 million retention bonus to be paid at a later maturity date if it remains in good standing. The complaint said Amar, who was named executive director of student solutions at JPMorgan, according to LinkedIn, received about $5 million from the deal and similarly bargained for a $3 million retention bonus. The suit was mentioned earlier than before Wall Street Journal.
Once the deal was completed, the suit says, JP Morgan asked Frank for its client list so that the bank could begin marketing its products and services to those students. Javice and Amar sent a list of data drawn from ASL Marketing and another third-party resource, Enformion, according to the lawsuit. When JP Morgan sent test marketing emails to 400,000 of Frank’s clients, the results were “catastrophic,” it claimed. Only about a quarter of emails were delivered, and only 1 percent of those messages were ever opened, the lawsuit alleges.
As a result of the “extraordinarily poor returns” from that campaign, JP Morgan reconsidered what it thought it knew about Frank and discovered what it now claims were bogus listings.
“In every aspect of her interaction 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,” the suit says. . “Javice chose to lie every time, and the evidence shows that she repeatedly spin fraud upon fraud to deceive JPMC. Javice and Amar used the bogus client list and other knowingly false merger agreement returns to fraudulently induce JPMC to enter the merger process.”
Javis’ complaint against JPMorgan said the bank failed to “harness the acumen of Ms. Javis and Frank to attract a new and diverse audience for Chase’s services” and instead pursued “poorly conceived business plans” focused on “historic Frank’s clients”.
“Chase grossly mismanaged its investment from the start, and decided it would rather reinvest than work on it further,” Javis’ complaint said.
Amar was shot in October and Javis in November. Several of Frank’s former employees are still employed by JPMorgan, according to LinkedIn.
request in Forbes 30 under 30, the worst advice she’s ever received, Javis replied: “Be patient.”