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London Tech Week

Founder with 4M fake customers duped JPMorgan for $175M worth of acquisition

Charlie Javice
Photo Credit: Frank

In September 2021, JPMorgan announced that it had paid a whopping $175M to acquire Frank— a startup dedicated to making education more affordable by streamlining the student loan application process. The New York-based startup claimed to have 4.25M Frank users, including their first and surnames, email addresses and phone numbers. Moreover, the startup stated that it worked with over 6,000 American universities.

But now the country’s largest bank admitted that it is duped as everything that was shown to them was a lie.

In a lawsuit, JPMorgan claimed that Frank’s founder, Charlie Javice, had tricked them by showing a fake list of around 5M customers. JPMorgan’s team wrote, “To cash in, Javice decided to lie.”

Reportedly, Javice lied about Frank’s performance, the company’s market penetration, and, most importantly, the size of its customer base. In reality, she only had about 300,000 consumer accounts.

JPMorgan’s legal filing accused Javice and Olivier Amar, Frank’s chief growth and acquisition officer of faking their customer list and hiring a data science professor to pull off this scam, only to take money from the bank.

Javice sent the JPMorgan representatives a spreadsheet of 4.265M students who she said had begun an FAFSA form with Frank during a meeting regarding the partnership.

She also handed a different sheet that stated that just in 2020, more than 34M visitors visited Frank’s website.

Before making the deal, JPMorgan asked Javice  to share a few important pieces of information including a list of Frank’s customer accounts that included important data.

In its legal complaint, the bank said, “At the time of JPMC’s request, Frank was almost four million customer accounts short of its representations to JPMC.Rather than reveal the truth, Javice first pushed back on JPMC’s request, arguing that she could not share her customer list due to privacy concerns.”

“After JPMC insisted, Javice chose to invent several million Frank customer accounts out of whole cloth,” JP Morgan revealed.

Javice and Amar decided to take help from ASL Marketing, a marketing company that keeps comprehensive data of high school and college students. Amar then used the startup’s money to buy a list of 4.5M students from ASL for a sizable $105,000.

JP Morgan realised about the fraud when their marketing tried to send emails to Frank’s user base and to its utter disappointment, it found out that only 28 per cent of emails were delivered. “Of the individuals contacted, only 28 percent of emails were delivered, compared to a 99 percent delivery rate JPMC usually sees with similar campaigns. Just 1.1 percent of the delivered emails were opened, compared to 30 percent for a typical JPMC campaign,” the bank said.

The failed campaign prompted JPMorgan to begin additional investigations into Frank, and Javice’s web of falsehoods eventually unravelled.

The bank is now suing her and Amar, claiming that “Javice and Amar’s fraud materially damaged JPMC in an amount to be proven at trial, but not less than $175 million.”

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