'Millions Of Fake Users,' JPMorgan Claims Of Being Defrauded In $175 Million Purchase Of College Website

American multinational financial services company JPMorgan Chase & Co. is claiming that the founder of Frank, a college financial planning site that the bank acquired in September 2021, defrauded it by vastly inflating the number of customers it had.

Millions Of Fake Accounts

Reuters

In its complaint, JPMorgan accuses the website¡¯s founder, Javice, and executive, Amar, of persuading a "data-science professor" at a college near New York to create millions of fake accounts.

JPMorgan "paid $175 million for what it believed was a business deeply engaged with the college-aged market segment with 4.265 million customers," the bank said in last month¡¯s lawsuit filed in Delaware federal court. "Instead, it received a business with fewer than 300,000 customers," as per the Bloomberg report.

JPMorgan alleges that the website¡¯s founder, Charlie Javice, and another executive, Olivier Amar, used fake customer accounts to mislead it into completing the deal. The bank said it uncovered the deceptions in a post-deal investigation.

Javice and Amar together received $26 million in the deal, which "they would not have received but for their misconduct," JPMorgan said.

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College Website¡¯s Allegations Against JPMorgan

Lawyers for founder Javice, who also is suing JPMorgan in state court in Delaware to force the bank to cover her legal fees, argue the bank rushed to buy Frank without doing proper due diligence and was also trying to deflect attention from its violations of student privacy laws.

JPMorgan ¡°committed misconduct and then tried to retrade the deal,¡± Javice¡¯s attorney, Alex Spiro, said in an emailed statement. He called the bank¡¯s suit "nothing but a cover."

As per the report, in her Delaware Chancery Court suit against JPMorgan, founder Javice alleged the bank launched an internal investigation of the Frank deal as a pretext to fire her as its head of student solutions and deny her a $20 million retention bonus.

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JPMorgan Chase & Co. has been on a start-up buying spree since CEO Jamie Dimon said in 2020 he wanted to acquire more financial technology firms focused on sustainable investing and tax issues.

JPMorgan Chase & Co.¡¯s Allegations

In its complaint, JPMorgan accuses founder Javice and executive Amar of asking the website¡¯s director of engineering to create fake customer details by using data generated by computer algorithms. After the engineer refused, the pair found a ¡°data-science professor¡± at a college near New York and persuaded him to create millions of fake accounts, the suit alleges.

Javice says in legal filings that she¡¯s racked up "hundreds of thousands" of dollars in legal bills with Spiro¡¯s firm, Quinn Emanuel, and the Mintz Levin law firm. "JPMorgan Bank has refused to honor its obligations" under the Frank buyout agreement and has "refused to advance expenses" after an initial payment, the suit said.

As per the Bloomberg report, the case is JPMorgan Chase Bank v. Javice, 22-cv-01621, US District Court, District of Delaware (Wilmington).

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