Forbes 30-Under-30 winner tricked JP Morgan into buying an education startup with fake users for $175 million

JPMorgan is suing a 30-year-old businesswoman, who claims she was tricked into buying her education startup for $175 million.

JPMorgan Chase says Charlie Javice created four million fake users to boost the credibility of his fintech company Frank when he sold it to the bank in 2021.

Javice started the company in 2019 at age 24 and was named to the Forbes 30-under-30 list in 2019.

Frank offers software to improve the student loan application process for Americans seeking financial aid and was once called “the Amazon of higher education.”

Javice and another company executive, Olivier Amar, allegedly paid a data scientist $18,000 to create a fake customer list when his own employee refused, the lawsuit alleges.

Javice and another company executive, Olivier Amar, allegedly paid a data scientist $18,000 to create a fake customer list, the lawsuit alleges.

Javice, the daughter of a successful New York-based investment manager, bought a Miami Beach apartment in May 2021 for just under $1.5 million, according to Miami-Dade property records.

Started by Frank a few years after graduating from Wharton business school, he revealed during an interview about his business success with a former tutor, which the school uploaded to his YouTube channel.

In the lawsuit, filed in a US district court in Delaware last year, JPMorgan said Javice told the company a “lie” that more than four million users had signed up to use the tool. .

After the bank asked for proof of that claim while conducting due diligence, she and Amar allegedly fabricated a database of fictitious student names, addresses, schools and dates of birth.

The data suggested that Frank had around 4,265,000 customer accounts; in fact, less than 300,000 of them were legitimate, it is claimed. The bank says the scheme was undone when it tried to send emails to those users and 70 percent of its emails bounced. The Wall Street Journal reported.

Javice earned $10 million as part of the merger with JPMorgan, with a $20 million bonus at a later date. Amar made $5 million on the deal, with a similar bonus of $3 million, Forbes reported. Both joined JPMorgan after the acquisition, according to their LinkedIn profiles.

The court filing includes alleged email exchanges between the hired data scientist and Javice in which they explain the methodology behind the fraud.

“Our plan was to independently take a first and last name sample and then make sure that none of the names in the sample are real,” the lawsuit alleges he was told.

Javice bought an apartment in this Miami Beach complex in May 2021, according to Miami-Dade property records.

Javice (pictured in a modern-looking skyscraper with sunny skies in the background) on a call with her former tutor at Wharton, who was interviewing her about her business success while she was with her family in Florida.

The lawsuit also accuses Javice of initially trying to circumvent the bank’s request for that customer information. “Javice first rejected JPMC’s request, arguing that it could not share its client list due to privacy concerns,” he said.

“After JPMC insisted, Javice decided to make up several million accounts of Frank’s customers out of thin air,” he added. Included in the complaint were screenshots of presentations Javice made to the bank making false claims about his number of users.

JPMorgan has recently come under fire for a spending spree during which it has failed to carry out proper due diligence, Bloomberg noted.

“This raises questions about whether JPMorgan is spending too much too fast,” Mike Mayo, an analyst at Wells Fargo, told Bloomberg.

“The purchase price is less than half of 1 percent of this year’s earnings, but it still presents itself as a potential microcosm of a broader problem that JPMorgan may be wasting more money than desired by pursuing such aggressive spending.” he added.

Javice filed his own lawsuit against JPMorgan in the same week he filed theirs. He accused the bank of conducting “a series of unsubstantiated investigations” into his conduct, saying they “manufactured a termination for cause in bad faith” to deprive her of a proper payment and “re-negotiate the deal.”

“After JPMC rushed to acquire Charlie’s rocket business, JPMC realized it could not circumvent existing student privacy laws, engaged in misconduct and then tried to renegotiate the deal,” the lawyer said. by Javice, Alex Spiro, wrote in a statement to Forbes. ‘Charlie blew his whistle and then demanded. JPMC’s newest suit is nothing more than a cover.

The first part of a letter written by members of Congress in 2020 expressing concern about Frank’s practices.

The second part of a letter written by members of Congress in 2020 expressing concern about Frank’s practices.

Frank’s practices, however, have been questioned before. In 2020, members of Congress wrote a letter to the chairman of the Federal Trade Commission claiming that his standardized form for requesting federal aid funds would not be feasible.

Specifically, he accused Frank of “creating false hope and confusion for students while contributing unnecessary extra work to financial aid administrators.”

He also mentioned the value of user information and data. “We further suspect that the company may be using data collected from misled students to profit by selling data to third-party advertisers,” the members of Congress wrote.

“In short, this tool does not make it easier for students to obtain aid funds and instead appears to be a way for Frank to mine and exploit student data for profit,” the letter concluded.