The emerging firm, which offered student loan payment facilities, claimed to have a portfolio of four million customers
For iProfessional
01/12/2023 – 7:55 p.m.
The largest bank in the United States, JP Morgan, has decided to sue the founder of Frank, a financial technology start-up that it acquired for $175 million. The reason for the complaint against the 30-year-old was “lying about its scale and success”, since the firm registered millions of fake clients.
Former CEO Charlie Javice is the one who came under the microscope. She created a company that provides software to improve the student loan application process for young Americans, turned the startup into “an Amazon for higher education” and even secured the financial backing of billionaire Marc Rowan and leading venture investors, including Aleph, Chegg, Reach Capital, Gingerbread Capital and SWAT Equity Partners.
JP Morgan sued a startup with millions of fake users
The lawsuit, which was filed late last year in the United States District Court in Delaware, claims that in 2021, Javice launched JP Morgan the “lie” that more than four million customers had registered to use Frank’s tools and apply for federal aid.
When JP Morgan asked for evidence during due diligence, Javice created a huge list of fake clients with names, addresses, dates of birth and other personal information of 4.265 million “students” who did not really exist. Frank had fewer than 300,000 customer accounts at the time.
“Javice first rejected JPMC’s request, arguing that he could not share his client list due to privacy concerns”, indicates the document confirming the claim. “After JPMC insisted, Javice decided to come up with several million customer accounts,” he adds. The claim in question includes screenshots of presentations Javice gave to JP Morgan, which illustrate the growth of Frank and they claim that it had more than 4,265,000 users.
Despite the bad forecasts, Javice prepared a countercomplaint against the US bank alleging that last spring, the bank “began a series of unsubstantiated investigations into the conduct of Ms. Javice” and then “manufactured a dismissal for reasons of bad faith.” As part of those investigations, according to the complaint, JP Morgan “falsely accused Ms. Javice of misconduct” during and after the Frank acquisition.
Charlie Javice, founder of Frank.
“After JP Morgan rushed to acquire Charlie’s business, the bank realized it could not circumvent existing student privacy laws, engaged in misconduct and then tried to renegotiate the deal,” the lawyer said. de Javice, Alex Spiro, in an emailed statement to Forbes.
The international instuon’s denunciation also contemplates Frank’s growth director. This is Olivier Amar, with whom Javice would have asked a senior Frank engineer to create the list of fake customers; when he refused, Javice approached “a professor of data science at a New York City-area college” for help.
