JPMorgan was scammed with fake users by the founder of the startup it bought for $175 million
JPMorgan was duped by Charlie Javice, founder of the Frank venture, which it bought for $175 million. JPMorgan claimed that Javice lied about Frank’s success to sell the venture for $175 million.
Recently, there has been an event that will be the subject of Netflix documentaries. Frank, a financial platform for college students looking to apply for federal aid, applied to JPMorgan in the summer of 2021 . An executive at JPMorgan said in a press release in September 2021 that Frank presented a unique opportunity for deeper engagement with students and they acquired the company.
JPMorgan touted the agreement as the fastest growing university financial planning platform, used by more than 5 million students at 6,000 institutions. Also, as part of the acquisition, venture founder Charlie Javice joined JPMorgan. It doesn’t seem like any trouble so far, but it all started after that.
Months after the transaction closed, JPMorgan sent out marketing emails to 400,000 Franc customers. According to JPMorgan, a staggering 70 percent of these emails are bounced. This led to an investigation against Javice and the company. Javice, who applied to JPMorgan about a potential sale in mid-2021, lied to the bank about the scale of his venture, the bank claims. According to the company, Javice created millions of fake accounts after being pressured to approve Frank’s client base during the due diligence process.
JPMorgan claimed that Javice lied about Frank’s success to sell the venture for $175 million. The company noted that Javice represented in documents placed in the data collection room, promotional materials, and oral presentations where more than 4.25 million students created Frank accounts.
It has less than 300,000 users instead of 4 million users
JPMorgan claims that Frank actually has fewer than 300,000 users , which is less than 10 percent of the number of users Javice cited when selling the site.
JPMorgan sued Olivier Amar, chief growth officer for Javice and Frank. But that didn’t stop there, as a lawyer for Javice told The Wall Street Journal that JPMorgan had come up with reasons to fire Javice late last year to avoid paying off the millions of dollars owed to him. Javice also sued JPMorgan, saying the bank had to pay its legal bills. We will be eagerly awaiting how this interesting case will turn out.