JPMorgan shutters website it paid $175 million for, accuses founder of inventing millions of accounts

In this article

  • JPM
Dimon said in June that he was preparing the bank for an economic "hurricane" caused by the Federal Reserve and Russia's war in Ukraine.
Al Drago | Bloomberg | Getty Images

JPMorgan Chase on Thursday shut down the website for a college financial aid platform it bought for $175 million after alleging that the company's founder created nearly 4 million fake customer accounts.

The country's biggest bank acquired Frank in Sept. 2021 to help it deepen relationships with college students, a key demographic, a Chase executive told CNBC at the time.

JPMorgan touted the deal as giving it the "fastest-growing college financial planning platform" used by more than five million students at 6,000 institutions. It also provided access to the startup's founder Charlie Javice, who joined the New York-based bank as part of the acquisition.

Months after the transaction closed, JPMorgan said it learned the truth after sending out marketing emails to a batch of 400,000 Frank customers. About 70% of the emails bounced back, the bank said in a lawsuit filed last month in federal court.

Javice, who had approached JPMorgan in mid-2021 about a potential sale, lied to the bank about her startup's scale, the bank alleged. Specifically, after being pressed for confirmation of Frank's customer base during the due diligence process, Javice used a data scientist to invent millions of fake accounts, according to JPMorgan.

"To cash in, Javice decided to lie, including lying about Frank's success, Frank's size, and the depth of Frank's market penetration in order to induce JPMC to purchase Frank for $175 million," the bank said. "Javice represented in documents placed in the acquisition data room, in pitch materials, and through verbal presentations [that] more than 4.25 million students had created Frank accounts to begin applying for federal student aid using Frank's application tool."

Instead of gaining a business with 4.25 million students, JPMorgan had one with "fewer than 300,000 customers," JPMorgan said in the suit.

Javice's defense

`Pinch me'

The alleged fraud perpetrated by Javice and one of her executives "materially damaged JPMC in an amount to be proven at trial, but not less than $175 million," JPMorgan said in its suit.

Regardless of the outcome of this legal scuffle, this is an embarrassing episode for JPMorgan and its CEO Jamie Dimon. In a bid to fend off encroaching competitors, JPMorgan has gone on a buying spree of fintech companies in recent years, and Dimon has repeatedly defended his technology investments as necessary ones that will yield good returns.

The fact that a young founder in an industry known for shaky metrics and a "fake it 'til you make it" ethos managed to dupe JPMorgan calls into question how stringent the bank's due diligence process is.

In an interview at the time of the deal, Javice marveled at how far she had come in just a few years leading her startup.

"Today is my first day employed by someone else, ever," Javice told CNBC. "I mean it still feels very much like, pinch me, did this really happen?"

As a result of the legal scuffle, JPMorgan shut down Frank early Thursday morning.

"Frank is no longer available" the website now reads. "To file your Free Application for Federal Student Aid (FAFSA), visit"


Related Posts