Forbes 30 Under 30 winner tricked JP Morgan into buying fake user education startup for $175 million
A 30-year-old entrepreneur is being sued by JPMorgan who allege she was tricked into buying her education startup for $175 million.
According to JPMorgan Chase, Charlie Javice created four million fake users to boost the credibility of her fintech company Frank when she sold it to the bank in 2021.
Javice founded the company in 2019 at the age of 24 and was named to the Forbes 30-under-30 list in 2016.
Frank provides software to improve the student loan application process for Americans seeking financial assistance and was once branded the “Amazon of higher education.”
Javice and another company executive, Olivier Amar, allegedly paid a data scientist $18,000 to create a list of fake customers when his own employee refused, the lawsuit says.
Charlie Javice, 30, oversaw the creation of data for four million fictional clients to complete the sale of their education startup to JPMorgan in 2021, according to a lawsuit
Javice and another company executive, Olivier Amar, allegedly paid a data scientist $18,000 to compile a list of fake customers, the lawsuit says
Javice, the daughter of a successful New York-based investment manager, bought a Miami Beach condo for nearly $1.5 million in May 2021, Miami-Dade real estate records show.
She founded Frank a few years after graduating from Wharton Business School, she revealed in an interview about her entrepreneurial success with a former tutor that the school uploaded to its YouTube channel.
In the lawsuit, filed in a US district court in Delaware last year, JPMorgan said Javice accused the company of “lying” that more than four million users signed up to use the tool.
After the bank requested proof of that claim as part of due diligence, she and Amar allegedly created a database of names, addresses, schools and dates of birth for fictitious students.
The data indicated that Frank had 4.265 million customers, when in fact it had fewer than 300,000 customer accounts at the time. The bank says the scheme unraveled when it tried to email users, and 70 percent of the emails bounced, the Wall Street Journal reported.
Javice earned $10 million as part of the merger with JPMorgan, with a $20 million bonus to follow at a later date. Amar made $5 million from the deal, with a similar $3 million bonus, Forbes reported. Both joined JPMorgan after the acquisition, according to their LinkedIn profile.
The court filing contains alleged email exchanges between the data scientist and Javice, in which he explains the methodology behind the scam.
“Our plan was to examine first and last names independently and then make sure none of the names examined were real,” he told her in the lawsuit.
According to Miami-Dade real estate records, Javice purchased an apartment in this Miami Beach complex in May 2021
Javice (pictured in a modern-looking skyscraper with a sunny sky in the background) on a call with her former tutor in Wharton, who interviewed her about her entrepreneurial success while she was in Florida with her family
Javice is also accused of initially trying to evade the bank’s request for this customer information. “Javice initially pushed back on JPMC’s request, arguing that she could not share her customer list for privacy reasons,” the complaint reads.
“After JPMC’s insistence, Javice chose to invent multi-million Frank customer accounts out of a piece of cloth.”
Included in the complaint are screenshots of presentations Javice gave to the bank, which made false claims about the number of users.
JPMorgan has recently come under fire for a spending spree that failed to conduct proper due diligence, Bloomberg noted.
“This raises the question of whether JPMorgan is overspending too quickly,” Wells Fargo analyst Mike Mayo told Bloomberg.
“The purchase price is less than half of 1 percent of this year’s earnings, but it’s still a potential microcosm of a broader problem that JPMorgan may be wasting more money than desired while pursuing such aggressive spending,” he added.
Javice filed her own lawsuit against JPMorgan the same week that she filed her lawsuit. She accused the bank of conducting “a series of groundless investigations” into her behavior and said she “manufactured a bad faith termination for cause” in order to deprive her of an appropriate payout and “undo the deal.” .
“After JPMC rushed to acquire Charlie’s rocket business, JPMC, realizing they could not circumvent existing student privacy laws, committed wrongdoing and then attempted to reverse the deal,” Javice’s attorney, Alex Spiro, wrote in a statement to Forbes. “Charlie whistled and then sued. JPMC’s latest suit is nothing but camouflage.”
The first part of a 2020 letter from members of Congress expressing concern about Frank’s practices
The second part of a 2020 letter from members of Congress expressing concerns about Frank’s practices
However, Frank’s practices have previously been questioned. In 2020, members of Congress wrote a letter to the chair of the Federal Trade Commission claiming that their standardized form for applying for federal aid was impractical.
Specifically, Frank was accused of “inspiring false hope and confusion among students while contributing to unnecessary extra work for grant administrators.”
It also mentioned the value of user information and data. “We also suspect that the company is using the data collected from misled students to generate revenue 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 search and monetize student data,” the letter concluded.
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