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JP Morgan Says Startup Founder Used Millions Of Fake Customers To Dupe It Into An Acquisition
JPMorgan Chase is suing the 30-year-old founder of Frank, a buzzy fintech startup it acquired for $175 million, for allegedly lying about its scale and success by creating an enormous list of fake users to entice the financial giant to buy it.
Frank, founded by former CEO Charlie Javice in 2016, offers software aimed at improving the student loan application process for young Americans seeking financial aid. Her lofty goals to build the startup into “an Amazon for higher education” won support from billionaire Marc Rowan, Frank’s lead investor according to Crunchbase, and prominent venture backers including Aleph, Chegg, Reach Capital, Gingerbread Capital and SWAT Equity Partners.
The lawsuit, which was filed late last year in U.S. District Court in Delaware, claims that Javice pitched JP Morgan in 2021 on the “lie” that more than 4 million users had signed up to use Frank’s tools to apply for federal aid. When JP Morgan asked for proof during due diligence, Javice allegedly created an enormous roster of “fake customers – a list of names, addresses, dates of birth, and other personal information for 4.265 million ‘students’ who did not actually exist.” In reality, according to the suit, Frank had fewer than 300,000 customer accounts at that time.
Frank, founded by former CEO Charlie Javice in 2016, offers software aimed at improving the student loan application process for young Americans seeking financial aid. Her lofty goals to build the startup into “an Amazon for higher education” won support from billionaire Marc Rowan, Frank’s lead investor according to Crunchbase, and prominent venture backers including Aleph, Chegg, Reach Capital, Gingerbread Capital and SWAT Equity Partners.
The lawsuit, which was filed late last year in U.S. District Court in Delaware, claims that Javice pitched JP Morgan in 2021 on the “lie” that more than 4 million users had signed up to use Frank’s tools to apply for federal aid. When JP Morgan asked for proof during due diligence, Javice allegedly created an enormous roster of “fake customers – a list of names, addresses, dates of birth, and other personal information for 4.265 million ‘students’ who did not actually exist.” In reality, according to the suit, Frank had fewer than 300,000 customer accounts at that time.
https://www.forbes.com/sites/alexandralevine/2023/01/11/jp-morgan-fake-customers-frank-charlie-javice/?sh=7679697014d4
Charlie Javice Joins List of Forbes '30 Under 30' Alumni Who’ve (Allegedly) Committed Fraud
Most people, when hearing someone was someone was pitching “Amazon for higher education,” would stare blankly in response, and perhaps mutter “wut.” But not mega-bank JP Morgan! When its execs learned that Charlie Javice, founder of the financial aid startup Frank, planned to create an “Amazon for higher education,” they eagerly handed over $175 million dollars. But it turns out they should’ve gone the “wut” route...because they’re now suing Javice for fraud.
Javice, a 2019 recipient of the highest honor a twenty-something can hope for (a spot on the Forbes “30 Under 30" list), appears set to join the illustrious ranks of young founders who got in a bit over their heads and woke up one day a scammer (your Elizabeth Holmeses, your Sam Bankman-Frieds).
https://jezebel.com/jp-morgan-charlie-javice-frank-alleged-fraud-1849980215
3 replies
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Message to JP Morgan Chase: due diligence.
Always investigate and verify, never take their word for anything.
Let the buyer beware. - For the lawyers ... Caveat emptor.
