Charlie Javice launched her company Frank in 2017 when she was 24 and a recent Ivy League grad with the goal of helping students apply for college financial aid. By 2021, she was lauded as a business visionary and had sold her startup to JPMorgan Chase for $175 million

Now, JPMorgan claims that Frank’s inspiring story of helping more than 5 million students get into college was largely a fabrication, according to a lawsuit filed last month by the bank. Javice allegedly paid a data science professor $18,000 to contrive a list of more than 4 million fake student names in order to convince the financial giant to shell out the purchase price, the suit claims.

The allegations are the latest case of a highly lauded millennial company founder accused of fudging the truth to score financially, ranging from Sam Bankman-Fried of FTX to disgraced Theranos founder Elizabeth Holmes. Meanwhile, Frank, once expected to help JPMorgan expand its reach among college students, has now been shuttered. 

“[T]o cash in, Javice decided to lie, including lying about Frank’s success, Frank’s size and the depth of Frank’s market penetration in order to induce [JPMorgan] to purchase Frank for $175 million,” the bank alleges in the complaint.

Alex Spiro, an attorney for Javice, denied the allegations in a statement emailed to CBS MoneyWatch. JPMorgan “knows what they filed is retaliatory and misleading,” he said. “They were provided all the data upfront for the purchase of Frank and Charlie Javice highlighted the restrictions placed by student privacy laws during due diligence.”

He added, “When [JPMorgan] couldn’t work around those privacy laws after the purchase of Frank, JPMC began twisting the facts to cover their tracks and are falsely accusing Charlie Javice to retrade the deal.”

JPMorgan, which said Javice no longer works at the company, said it is asking for unspecified punitive and compensatory damages at trial.

“Proven acquisition machine”

The lawsuit outlines why JPMorgan was attracted to Frank when Javice, a graduate of the University of Pennsylvania, approached the bank in the summer of 2021. She touted the startup’s 4.25 million users, students who had started or completed the Free Application for Federal Student Aid, or FAFSA, through Frank. 

The FAFSA, which has a reputation for being a notoriously difficult application, is required by colleges, states and the Department of Education to qualify for financial aid, scholarships and more.

That pool of young customers was apparently like catnip for JPMorgan, which noted in its lawsuit that it believed “Frank was a proven acquisition machine for college-aged students.”

But, the lawsuit alleges, when JPMorgan asked Javice for proof that she had more than 4 million customers, she at first pushed back, claiming she couldn’t share the names due to privacy issues. Frank in fact had fewer than 300,000 customer accounts, the suit claims.

“After JPMC insisted, Javice chose to invent several million Frank customer accounts out of whole cloth,” the lawsuit alleges. 

4.2 million fakes alleged

Javice allegedly turned to an unnamed professor at a New York City-area college to fix her problem, paying him $18,000 to create a list of names. 

“Ultimately, the data science professor created a list of 4.265 million fake customer accounts (the ‘Fake Customer List’) as Javice had requested,” JPMorgan claims in the suit.

JPMorgan, unaware of the alleged problems at this point, completed the $175 million purchase, but realized something might be wrong when it sent out a marketing test campaign to Frank’s customer list. The results were “disastrous,” according to the complaint. 

“JPMC sent marketing test emails to what it believed were 400,000 unique Frank customers,” the suit alleges. “Of the individuals contacted, only 28% of emails were delivered, compared to a 99% delivery rate JPMC usually sees with similar campaigns. Just 1.1% of the delivered emails were opened, compared to 30% for a typical JPMC campaign.”

Now suspicious, the bank reviewed Frank’s business, as well as emails, chats and messages between Javice, the data science professor and Frank’s chief growth officer, which the suit claims revealed the issues with Frank’s client list. 

“In every aspect of her interactions with JPMC, Javice had a choice between (i) revealing the truth about her startup and accepting Frank’s actual value and (ii) lying to inflate Frank’s value and reaping the rewards from that inflation,” the lawsuit alleges. “Javice chose each time to lie, and the evidence shows that time and again she layered fraud upon fraud to deceive JPMC.”

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