JPMorgan Chase shuttered the college financial aid platform Frank, which the investment bank acquired for $175 million two years ago, and sued founder Charlie Javice after learning that she allegedly fabricated more than 90% of the website’s accounts.
The complaint filed by JPMorgan accused Javice of falsely claiming in documents, pitch materials, and verbal presentations that more than 4.25 million students had created accounts with Frank to manage their financial aid applications. The bank said analysts confirmed that some 4 million of the accounts were fake after test emails were sent to hundreds of thousands of supposed customers and only successfully reached 28% of the users. Slightly more than 1% of the delivered emails were opened, falling far short of the typical 30% rate seen by the bank.
The lawsuit said Javice had a choice between “revealing the truth about her startup” or “lying to inflate Frank’s value” in every interaction she had with JPMorgan. “Javice chose each time to lie, and the evidence shows that time and again she layered fraud upon fraud,” the bank concluded.
Javice became an employee of JPMorgan following the $175 million acquisition, which was completed in 2021. She successfully bargained for an additional $20 million retention bonus in her employment contract.
Javice had filed suit against JPMorgan days before they filed the complaint against her, claiming she was owed millions of dollars for expenses she incurred during an internal investigation that began last spring, according to a report from the Wall Street Journal. Alex Spiro, an attorney representing Javice, told the outlet that the lawsuit from JPMorgan was “nothing but a cover.” He alleged that the bank “rushed to acquire” the company, then realized “they couldn’t work around existing student privacy laws, committed misconduct and then tried to retrade the deal.”
The website for Frank currently says the service is “no longer available.”
JPMorgan claimed that Javice refused to provide the company with a list of customers due to “privacy concerns.” When analysts insisted, she and Olivier Amar, another executive at Frank, allegedly approached the company’s director of engineering and asked him to create fake customers using computer algorithms. When the engineer declined to participate in the scheme, Javice and Amar allegedly paid a data science professor to create millions of customer profiles with names, email addresses, and birthdays to provide to JPMorgan.
The lawsuit added that Javice was particularly concerned with the email addresses, asking the professor whether they would “look real with an eye check.”
Javice founded Frank in 2017 and earned a spot on the Forbes 30 Under 30 list two years later. Other investors in the company had included Apollo Global Management CEO Marc Rowan and education technology company Chegg, according to a press release from JPMorgan.
A glowing profile of Javice published by Forbes noted the entrepreneur’s selfless desire to help students attain higher education. The author said she “sounds like an eager data analyst when she talks about the matching problem and how it triggers other issues of equity and access.”
The lawsuit comes after FTX, the cryptocurrency exchange platform launched by Sam Bankman-Fried, filed for bankruptcy after users learned their deposits were commingled with Alameda Research, a trading firm also controlled by the young entrepreneur. Bankman-Fried and his associates likewise received gushing profiles in the mainstream media after donating millions of dollars to various outlets. A self-described “effective altruist,” Bankman-Fried later admitted that his supposed generosity was a ploy to earn the trust of “woke westerners.”