FinTech a Fraud? JPMorgan Shutting Down Frank

Jamie Dimon’s well-known aversion to fintech has overcome him. JPMorgan Chase closed Frank, a financial assistance company, on Thursday.

On Thursday, JPMorgan Chase shut down Frank, a platform for college students to arrange their financial assistance, and filed a lawsuit against the creator of the business for blatantly misrepresenting the company’s clientele by flooding it with millions of phony accounts. 

The more pertinent issue could be how JPMorgan CEO Jamie Dimon, sometimes known as “America’s Banker,” and his staff allowed themselves to be duped. 

You might wonder why someone would have the audacity to con the largest bank in America.

Busted and broken

For $175 million in 2021, JPMorgan purchased Frank and its founder Charlie Javice. 

Javice bragged that more than five million students at 6,000 institutions utilized her website, which she called the “fastest-growing college financial planning platform.” 

That offered the megabank a seductive entry point into a stream of youthful blood—potential customers, assuming any of them had used Frank.

70% of the 400,000 Frank customers that received marketing emails bounced, which is an abysmal hit rate. 

According to JPMorgan, Javice and another employee, Olver Amar, allegedly created about 4 million fictitious accounts. 

Although one should applaud Javice for his “entrepreneurship,” one might also wonder if JPMorgan could use some help with its due diligence.

Compared to conventional banks, the fintech industry has more ambiguous laws, and because of recent technological breakthroughs, businesses also have much room for expansion. 

On the other hand, banks have restricted market distribution, which Dimon has openly said he finds alarming from an existential standpoint. This fear about fintech could have influenced the bank’s buying of Frank.

To combat the fintech competition, JPMorgan has recently acquired businesses like OpenInvest and Global Shares and invested millions into data startups Kraft Analytics and MedTech. 

For several years, Dimon has also invested heavily in creating proprietary technology. 

The bank spent $800 million in December last year to purchase a 48.5% interest in the Athens-based payment platform Viva Wallet.

  • In 2021, Dimon informed shareholders that “banks are experiencing significant competition from Silicon Valley, both in the shape of fintechs and Big Tech businesses.”
  • A college financial assistance portal that JPMorgan Chase paid $175 million for was shut down on Thursday amid claims that the creator of the business generated over 4 million phony client accounts.
  • JPMorgan said that it discovered the truth about Frank after sending 400,000 clients a series of promotional emails. In a complaint filed in federal court last month, the bank said that almost 70% of the emails bounced back.
  • Charlie Javice, the company’s creator, allegedly used a data scientist to create millions of fictitious accounts after being asked for proof of Frank’s client base during the due diligence procedure, according to JPMorgan.
  • Javice’s attorney said that JPMorgan “fabricated” grounds to terminate her to withhold millions of dollars due to her. Javice filed a lawsuit against JPMorgan, claiming the bank should pay for her legal expenses.
Image courtesy of CNBC

Chase Morgan

According to a Chase official, Frank was bought by the nation’s largest bank in September 2021 to help it strengthen ties with college students, a crucial demographic.

More than 5 million students at 6,000 colleges will utilize JPMorgan’s “fastest-growing college financial planning platform,” according to the company. 

Charlie Javice, the business creator, who joined the New York-based bank as part of the transaction, also had access to it.

JPMorgan said it discovered the reality months after the purchase was finalized after sending promotional mailings to a group of 400,000 Frank clients. 

In a complaint filed in federal court last month, the bank said that almost 70% of the emails bounced back.

Javice allegedly misled JPMorgan about the size of her firm when she contacted the bank in the middle of 2021 about a possible sale. Specifically, according to JPMorgan, Javice used a data scientist to create millions of fictitious accounts after being forced to provide proof of Frank’s client base during the due diligence.

The bank claimed that Javice opted to exaggerate Frank’s size, performance, and market penetration in order to convince JPMC to pay $175 million for Frank. 

According to the report, “Javice claimed that more than 4.25 million students had established Frank accounts in papers put in the acquisition data room, in pitch materials, and through verbal presentations.”

In the lawsuit, JPMorgan asserted that it did not acquire a company with 4.25 million students, but one with “fewer than 300,000 clients.”

Unkind Emails

JPMorgan said in the lawsuit that Javice had initially requested that her engineering head use algorithms to generate “false customer information.” 

The lender said that when he objected, she located a data science professor at a college in the New York region to set up the accounts.

In its lawsuit, the bank cited damning emails between a professor who would remain nameless and Javice.

For instance, Javice reportedly questioned the professor whether using a unique ID would be preferable to using fraudulent emails that would pass an eye test.

A source with knowledge of the situation claims that JPMorgan obtained access to the emails because it had acquired Frank’s technological infrastructure as part of the deal. Javice’s defense

According to Javice’s attorney, JPMorgan “fabricated” reasons to dismiss her late last year to avoid paying her the millions of dollars she was due. 

In her lawsuit, Javice claims that JPMorgan should pay for the legal costs she suffered due to the bank’s internal investigations.

Alex Spiro, an attorney, told the Journal that JPM committed malfeasance after rushing to buy Charlie’s rocketship company and realizing it couldn’t get under current student privacy rules. “Charlie revealed the truth, then filed a lawsuit.”

Pablo Rodriguez, a representative for JPMorgan, responded as follows:

“Our case sets out our legal claims against Ms. Javice and Mr. Amar, along with the crucial facts,” he declared. Mrs. Javice did not report anything illegal. Any disputes shall be resolved through the courts.

JPMorgan Seeks to Banish Paper Payments With a Fintech Venture - Bloomberg
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To Pinch Me

The lawsuit filed by JPMorgan claims that the alleged fraud by Javice and one of her coworkers “materially injured JPMC in an amount to be proved at trial, but not less than $175 million.”

Regardless of the outcome of the legal case, JPMorgan CEO Jamie Dimon and the bank are embarrassed by this circumstance. 

JPMorgan has been on a purchasing binge of fintech businesses in recent years to ward off invading rivals, and Dimon has consistently justified his technology investments as essential and likely to deliver strong returns.

The alleged deception of JPMorgan by a young entrepreneur in a sector notorious for flimsy metrics and a “fake it ’til you make it” mentality raises concerns about the thoroughness of the bank’s due diligence procedures.

Javice expressed her amazement at how far she had gone in only a few years of running her business in an interview conducted at the time of the acquisition.

Javice said, “Today is my first day ever working for someone else.” I still need to touch myself and ask, “Did this happen?

Due to the legal dispute, JPMorgan closed Frank early on Thursday.

The webpage now states, “Frank is not accessible.” Visit to submit your Free Application for Federal Student Aid (FAFSA).

In other JPMorgan legal news, the bank requests that a former employee not be allowed to steal its clients. 

According to a lawsuit, Joseph Michael, who spent more than 18 years working for JPMorgan, violated a contract when he left the business in December by persuading 32 former customers with combined assets of $28 million to move their accounts to his new employer. Jaime’s paranoia does not guarantee that his crew is not being robbed.




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