JP Morgan Chase claims that the startup presented fabricated data to make the software seem like it was as successful as advertised. Frank, the software in question, claimed it had millions of users when in reality, it only had around 300,000.
How Frank Managed to Scam a Massive Corporation
For some context, Frank is a software startup that assisted students with their loans, specifically helping with the forms and paperwork that was too complicated. It basically worked like TurboTax, but for student loans instead of income tax returns, as pointed out by Gizmodo.
Frank CEO Charlie Javice pitched the sale to JPMorgan Chase, saying that the software had more than 4.25 million users and has had 35 million website visits since 2020. It even claimed that around 2.1 million users already completed their applications.
JPMorgan asked for a list of customer accounts for proof, which contained names, dates of birth, addresses, and more. However, Frank declined the request saying that it would bring up privacy concerns seeing that it held sensitive data.
Since Frank didn't actually have a list to show proving the 4.25 million users they claimed, a data science professor fabricated one based on the existing 300,000 users for $18,000. Although, they did not stop there.
Allegations state that the startup software's Chief Growth Officer Oliver Amar added more false data. He was said to have reached out to a student marketing company and spent $105,000 to buy 4.5 million user data, which contained names, addresses, and phone numbers.
This was then presented to JPMorgan Chase, which made Frank appear to be a greatly successful company. The company then bought the platform for $175 million, obviously overpaying for the software.
Read Also : Elon Musk's Army of Fans Bombs JPMorgan with 1-Star Reviews on Yelp in Hilarious Lawsuit Twist!
The Aftermath of JPMorgan's Purchase
The financial services company filed a lawsuit against Frank, saying that it only appeared like it had the potential to grow into a successful enterprise because of the records of early proven success. They added that it was all a lie to induce a purchase.
The bank then acquired the software startup in 2021 in order to entice a demographic, which is college students. JPMorgan realized that the list was made up when they sent out marketing emails and around 70% of the emails bounced back, according to CNBC.
On top of that, Frank CEO Charlie Javice's lawyer claimed that the bank created reasons to fire her, which would save the megacorporation million in payments that they owed her. Javice also sued JPMorgan Chase expressing that the bank should pay for legal bills incurred.
Alex Spiro, a partner at Quinn Emanuel, said that JPM rushed the deal, and upon realizing that they couldn't work around the student privacy laws, they committed misconduct and attempted to retrade the deal.
A spokesperson from JPMorgan responded to the allegations, saying that their legal claims against Javice and Amar were set out in their complaint along with key facts. He added that the dispute will be resolved through the legal process.
