JP Morgan paid Millions for Frank. But it was all a Fraud
Even Jamie Dimon is not immune to fraud. Just over a year after paying $175 million to Frank – a startup that helps students through the student loan application process – JP Morgan is suing the company’s founder for lying about the size of the loan. agreement during due diligence.
The claim is that Charlie Javis was going to give the bank a list of 4.5 million customers – but only 300,000 were real. According to the Wall Street Journal, the bank filed a lawsuit late last year in a Delaware court.
The document states that when JP Morgan asked users for proof during due diligence, Javice initially refused the request, arguing that he could not share a client list due to privacy concerns.
When pressed by J.P. Morgan, the businessman created “a massive list of fake customers with the names, addresses, birthdays and other personal information of 4.2 million ‘students’ who didn’t actually exist,” according to the prosecution in the trial. Franck’s chief growth officer, Olivier Amar, was also charged in the lawsuit.
JP Morgan says Javice and Amar asked a developer at the startup to create a fake list. After they refused, the couple made an offer of $18,000 to a data science professor in New York, who accepted.
The bank’s indictment includes screen prints of letters between this professor and Javis discussing how best to cobble together the list to make it believable. According to the document, Amar was also supposed to pay $105,000 to purchase a dataset containing the data of 4.5 million students from a company called ASL Marketing.
In the same week that JP filed a lawsuit, Javice countered another lawsuit against the bank – with an entirely different story. She accuses the bank of launching a series of investigations into her behavior, then “fabricating her termination for just cause”, forcing her out of JPMorgan and withholding the millions she owed.
“After JP Morgan bought high-potential Javice, the bank realized there was no way around student privacy laws, made a mistake, then tried to reverse the deal. ‘deal,” Javice’s attorney told Forbes.
The banking deal paid off for Javis. JP Morgan says it received around $10 million in the sale and has negotiated an additional retention premium of $20 million to be paid in the future. Amar, the chief growth officer, received $5 million as part of the deal and negotiated a retention bonus of $3 million.
At GB, Javis served as Managing Director of Education-focused Products, while Amar was Executive Director for the same region. Another strange story is how the bank discovered the fraud.
According to the WSJ, JP became aware of the situation when he created an email marketing campaign. Messages sent to more than 70% of Frank’s alleged customer email addresses were not successfully delivered.