JP Morgan Chase Sues Founder of Student Loan Fintech Startup Frank Morgan accuses Charlie Javice of conspiring with another exec to create a detailed list of millions of fake customers.
By Steve Huff
In December 2022, JP Morgan Chase filed suit against Charlie Javice, the 30-year-old founder of fintech startup Frank, which the bank purchased for $175 million. Morgan alleges Javice misled it regarding Frank's value by faking a massive list of customers to convince Morgan it was a worthwhile purchase.
The Wall Street Journal reports that Morgan filed the suit in Delaware, naming Javice and fellow Frank exec Olivier Amar. Court documents depict an alleged deception that began in 2021 when Javice approached the bank about an acquisition, claiming that Frank had 4.25 million users. The company had just under 300,000 users at the time.
Here's more from WSJ:
"Rather than reveal the truth, Javice first pushed back on [JPMorgan's] request, arguing that she could not share her customer list due to privacy concerns," the bank said in its court filing. "After [JPMorgan] insisted, Javice chose to invent several million Frank customer accounts out of whole cloth."
Javice — who Morgan fired in November 2022 — initiated her own legal claim in Delaware a few days before Morgan sued her. In her suit, she says Morgan owes her millions to compensate for money she spent in her defense when Morgan began internal investigations.
According to Javice, Morgan "deliberately fabricated a termination for cause in bad faith." She also says Morgan is evading paying her $28 million connected to Frank's original acquisition.
Javice launched Frank in 2016. The company aimed to simplify the student loan application process, and Javice reportedly wanted to make it "Amazon for higher education." Her vision was potent enough to get support from many notable VCs and Frank's lead investor, billionaire Marc Rowan.
As described in court documents, the alleged deception was anything but incidental. It was prompted by Morgan's request that Javice prove Frank had the number of subscribers claimed. The suit alleges Javice first refused, citing privacy concerns, then invented not only the names of fake customers but also added "addresses, dates of birth, and other personal information for 4.265 million 'students' who did not actually exist."
Javice allegedly pulled Amar into the scheme when they paid an data science professor $18,000 to create the fake list. In the end, should Morgan's case prove true, the scam may have unraveled because the list was too detailed. The "other personal information" mentioned in court papers included email addresses.
WSJ reports that JP Morgan knew something was wrong when it launched an email campaign using the same addresses, and 70% were undeliverable.
