JPMorgan Chase Shuts Down Student Finance Website Frank

Jamie Dimon said in June that he was preparing the bank for an economic “hurricane” caused by the Federal Reserve and Russia’s war in Ukraine.

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JPMorgan Chase closed on Thursday website for a college financial aid platform, which bought it for $175 million after it claimed the company’s founder created nearly 4 million fake customer accounts.

The country’s largest bank acquired Frank in September 2021 to deepen ties with college students, a key demographic, a Chase executive told CNBC at the time.

JPMorgan touted the deal by telling him the “fastest growing college financial planning platform, used by more than 5 million students at 6,000 institutions. It also provided access to the startup’s founder, Charlie Javicewho came to the New York-based bank as part of the acquisition.

Months after the transaction closed, JPMorgan said it learned the truth after sending out marketing emails to a group of 400,000 Frank customers. The bank said in a that about 70% of the emails had bounced back Lawsuit filed last month in federal court.

Javice, who approached JPMorgan in mid-2021 about a possible sale, lied to the bank about the size of her startup, the bank claimed. Specifically, after Javice was pressed for confirmation of Frank’s customer base during the due diligence process, he used a data scientist to invent millions of fake accounts, according to JPMorgan.

“To take advantage, Javice chose to lie, including lying about Frank’s success, Frank’s size, and the depth of Frank’s market penetration, to induce JPMC to buy Frank for $175 million,” the bank said. “Javice is represented in documents filed in the acquisition data room, in pitch materials and through oral presentations [that] more than 4.25 million students had created Frank accounts.”

Instead of winning a deal with 4.25 million students, JPMorgan had one with “fewer than 300,000 customers,” JPMorgan said in the lawsuit.

Frank emails

In the lawsuit, JPMorgan alleged that Javice first asked its chief technology officer to use algorithms to create “fake customer data.” When he refused, she found a data science professor at a New York-area college to set up the accounts, the lender said.

The bank attached incriminating emails between the unnamed professor and Javice to its lawsuit.

For example, Javice allegedly asked the professor, “Will the fake emails look real on eye check, or better use a unique ID?”

According to a person familiar with the situation, JPMorgan had access to the emails because it acquired Frank’s technology systems as part of the acquisition.

Javice’s Defense

A lawyer for Javice told The Wall Street Journal that JPMorgan had “fabricated” reasons for firing her late last year to avoid paying millions of dollars owed to her. Javice has sued JPMorgan, saying the bank should produce legal costs it incurred during its internal investigations.

“After JPM rushed to acquire Charlie’s rocket business, JPM realized they could not circumvent existing student privacy laws, committed wrongdoing and then attempted to reverse the deal,” attorney Alex Spiro said said the Journal. “Charlie whistled and then sued.”

Spiro, a partner at Quinn Emanuel, did not immediately respond to a call from CNBC.

JPMorgan spokesman Pablo Rodriguez had this response:

“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. All disputes will be settled through legal process.”

‘pinch me’

The alleged fraud committed by Javice and one of its executives “has caused significant damage to JPMC in an amount to be proved in court, but no less than $175 million,” JPMorgan said in its lawsuit.

Regardless of the outcome of this litigation, this is an embarrassing episode for JPMorgan and its CEO, Jamie Dimon. To fend off encroaching competitors, JPMorgan has embarked on a buying spree of fintech companies in recent years, and Dimon has repeatedly defended its tech investments as necessary investments that will yield good returns.

The fact that a young founder in an industry known for shaky metrics and a “fake it ’til you make it” ethos that has allegedly managed to fool JPMorgan, questions how rigorous the bank’s due diligence process is.

In an interview at the time of the deal, Javice marveled at how far she had come leading her startup in just a few short years.

“Today is my first day that I’ve ever been employed by someone else,” Javice told CNBC. “I mean it still feels like I’m pinching myself, did that really happen?”

As a result of the legal scuffle, JPMorgan Frank closed early Thursday morning.

“Frank is no longer available,” it says on the website. “To submit your free Federal Student Aid (FAFSA) application, visit” JPMorgan Chase Shuts Down Student Finance Website Frank

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