FinTech News
JPMorgan Chase Suing Founder of FinTech Frank for Fraud
In September of 2021, JPMorgan Chase announced that it was acquiring the FinTech startup Frank — a company started in 2017 by then-24-year-old Charlie Javice — for $175 million. Now, more than 18 months later, Chase is suing Javice and has shut down the Frank site.
As CNBC reports, the bank is accusing Javice of fraud, saying the founder manufactured a number of fake accounts. In fact, they estimate that more than four million false accounts were created, with the suit stating that there were fewer than 300,000 authentic customers of Frank at the time the firm was purchased. Furthermore, JPMorgan Chase alleges that Javice hired a data science professor to generate fake user profiles using algorithms. According to reports, the bank started to discover issues when a batch of emails was sent to 400,000 customers, only for 70% to bounce back.
With the lawsuit filed, the bank has shut down the Frank service. A message posted on the site reads, “Frank is no longer available. To file your Free Application for Federal Student Aid (FAFSA), visit StudentAid.gov.”
Javice denies the charges and has filed a separate lawsuit against JPMorgan Chase, stating that she is owed money from the bank for expenses she incurred defending herself in internal investigations she has called “groundless.” She was ultimately terminated from the company in November of last year, with Javice arguing that the bank “manufactured a for-cause termination in bad faith.” Her attorney Alex Spiro told the Wall Street Journal, “After JPM rushed to acquire Charlie’s rocketship business, JPM realized they couldn’t work around existing student privacy laws, committed misconduct and then tried to retrade the deal. Charlie blew the whistle and then sued.”
Frank was a college financial planning platform that included an Easy FAFSA tool to help students apply for financial aid. Another feature of Frank that Chase marketed in its acquisition press release was a ClassFinder, which was a marketplace showcasing discounted course options that offered transferable credits. At the time of JPM’s purchase of Frank, Javice said in a statement, “We launched Frank to make college more accessible for students and their families, and have already helped millions across the nation. We look forward to joining the Chase family to further this mission. Together, we can multiply our impact to help more students and their families achieve their financial goals and education dreams.”
For FinTech observers, this fallout from Frank will be very interesting to watch. What’s more, there are sure to be plenty of questions about the deal itself, such as how JPMorgan Chase’s due diligence efforts missed these alleged issues. Naturally, this case could also have ramifications for future FinTech acquisitions as purchasing companies may do more prodding into startup customer data before closing deals. In any case, we’ll definitely be keeping an eye on this story to see how it develops.
