JPMorgan Chase & Co. is claiming the founder of Frank, a college financial-planning site the bank acquired in 2021, defrauded it by vastly inflating the number of customers the company had.
(Bloomberg) — JPMorgan Chase & Co. is claiming the founder of Frank, a college financial-planning site the bank acquired in 2021, defrauded it by vastly inflating the number of customers the company had.
The bank “paid $175 million for what it believed was a business deeply engaged with the college-aged market segment with 4.265 million customers,” JPMorgan said in a Dec. 22 lawsuit filed in Delaware federal court. “Instead, it received a business with fewer than 300,000 customers.”
JPMorgan alleges 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 a post-deal investigation.
Javice and Amar together received $26 million in the deal “they would not have have received but for their misconduct,” JPMorgan said.
Retention Bonus
Lawyers for 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.”
In her Delaware Chancery Court suit against JPMorgan, Javice alleges the bank’s launched an internal investigation of the Frank deal as pretext to fire her as its head of student solutions and deny her a $20 million retention bonus.
A lawyer for Amar couldn’t immediately be identified.
The bank, the nation’s largest in terms of assets with a balance sheet of more than $3.3 trillion, has been on a start-up buying spree since Chief Executive Officer Jamie Dimon said in 2020 he wanted acquire more financial technology firms focused on sustainable investing and tax issues.
In its complaint, JPMorgan accuses Javice and Amar of asking Frank’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 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.
The case is JPMorgan Chase Bank v. Javice, 22-cv-01621, US District Court, District of Delaware (Wilmington)
(Updates with details from bank’s suit starting in seventh paragraph)
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