JP Morgan Chase is always acquiring new startups to ensure that they have the best financial product possible for its customers. Considering the financial giant has been around for decades, we never expect to hear that they have been “duped.”
Yet, it has just recently been sold on a lie. It acquired Frank, a fintech startup for $175 million.
It could have been a great deal if Frank actually had the number of users it said it had.
The scale was all a lie. As Forbes identified, the startup lied about its success “by creating an enormous list of fake users to entice the financial giant to buy it.
JP Morgan Chase is now suing the founder.
Frank was initially founded in 2016. It offers software that is designed to improve the student loan process. The goal was to be an “Amazon for higher education.” It went as far as winning the support of billionaire Marc Rowan, the lead investor for the startup, according to Crunchbase. It also went on to get a number of prominent venture backers ranging from Gingerbread Capital to Chegg.
Former CEO Charlie Javice pitched JP Morgan back in 2021. The lawsuit alleges that Javice sold them on a lie, explaining that over 4 million users had signed up to use the tools of the startup. JP Morgan, looking to do its due diligence, asked for proof. That’s when Javice established a roster of fake customers, complete with names, addresses, and dates of birth for over 4.6 million “students’ who never really existed.
The reality was that Frank had less than 300,000 customer accounts at the time.
The lawsuit that JP Morgan Chase has against Javice isn’t the only lawsuit going on, however.
Javice has also filed a lawsuit against KP Morgan. According to the former CEO’s complaint, the financial giant “commenced a series of groundless investigations into Ms. Javice’s conduct” and proceeded to manufacture “a for-cause termination in bad faith.”
According to Javice’s lawyer, Alex Spiro, Javice “blew the whistle.” As for the lawsuit that JP Morgan Chase has, it’s “nothing but a cover.”
There’s no telling whether JP Morgan Chase will win their lawsuit at this point or not. It seems that both sides have issues.
JP Morgan Chase hired Charlie Javice after acquiring Frank. She served as a managing director to oversee student-focused products.
Meanwhile, JP Morgan Chase began emailing out those who were on the list to start marketing its products – only to learn of the disaster.
Perhaps the complaint from Javice’s lawsuit says it best: “Chase grossly mismanaged its investment from the start, and it decided it would rather walk the investment back than work on it further.”
Mistakes were made, that’s for sure.
