How JPMorgan was cheated of $175 million by a 'teenage prodigy'

When JPMorgan Chase paid $175 million to acquire a college financial planning firm called Frank in September 2021, it heralded the “unique opportunity for deeper engagement” with the five million students Frank worked with at over 6,000 American colleges.
 
Then last month, the biggest bank in the country said it had been conned.
 
In a lawsuit, JPMorgan claimed that Frank’s young founder, Charlie Javice, had engaged in an elaborate scheme to stuff that list of five million customers with fakery.
 

“To cash in, Javice decided to lie,” the suit said. “Including lying about Frank’s success, size, and the depth of its market penetration.” Javice, through her lawyer, has said the bank’s claims are untrue.

 
JPMorgan’s legal filing accuses that Javice and Olivier Amar, Frank’s chief growth and acquisition officer, faked their customer list and hired a data science professor to help pull the wool over the eyes of the bank’s due-diligence team.
 
When Frank was born, in 2016, Javice,24, displayed great media savvy and claimed to have real-world experience with financial aid and the struggle to pay for college.
 
By promising to help users file financial aid forms more quickly and easily — and deliver billions in savings to teenagers who needed help — her business plan had the halo of doing good. It eventually added a dot-org web address for good measure.

 
When many people were still home during the pandemic, Frank started offering “amazing prices” for online classes that earned “real college credits.” This past week, however, schools that appeared on Frank’s website with hundreds of supposedly available courses expressed confusion in interviews about their presence on the site during that period. At one school, nobody had ever even heard of the company.
 
The promise of five million customers, 6,000 schools

The bank planned to pay Javice a $20 million retention fee.
 
If JPMorgan wanted a pipeline of soon-to-be-educated young adults, it was paying $35 per name — $175 million divided by those five million customers. To pay that much, it had to persuade Frank customers to do business with the bank and stick with it for decades.

 
Soon after the merger closed, the bank took its shot and sprayed a portion of Frank’s customer list with solicitations. Of 400,000 outbound emails, only 28 percent arrived successfully in an inbox, compared with the usual 99 percent delivery rate. Just 103 recipients clicked a link to Frank’s website. It was, as the bank put it in its legal filing, “disastrous.”
 
The bank dived into Javice’s Frank email account. There, it found a litigation mother lode. The messages, according to the bank, included copious evidence that she had hired a data science professor to create fake information to prove to the bank that the millions of customers Frank claimed to have were real.

 
Highlights from the emails also included a Frank engineer’s questioning of Ms. Javice’s data manipulation request. She responded that she didn’t think anyone would end up in an “orange jumpsuit” over it, according to JPMorgan’s complaint.
 
Nicholas Biase, a spokesman for the US attorney’s office in New York, declined to comment on whether it had opened an investigation into JPMorgan’s claims.
 
Javice has retained Alex Spiro to represent her. He is currently defending Elon Musk in an investor lawsuit about his comments on Twitter. She has filed a suit seeking legal expenses, arguing that JPMorgan conducted an internal investigation for which it is contractually obliged to cover her costs.

 
“After JPMC rushed to acquire Charlie’s rocket-ship business, JPMC realised they couldn’t work around existing student privacy laws, committed misconduct and then tried to retrade the deal,” Spiro said to The Times. “Charlie blew the whistle and then sued. JPMC’s newest suit is nothing but a cover.”
 
“We deny the allegations. JPMC knows what they filed is retaliatory and misleading. 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 said. “When JPMC 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.”

 
Federal law places restrictions on what colleges and other parties can do with student data. But it is not clear whether a for-profit entity seeking to help with financial aid forms must classify any data that it gets from students in a way that falls under those restrictions.
 
In any event, JPMorgan is not buying Javice’s privacy argument. The bank’s chief executive, Jamie Dimon, called the Frank acquisition a “huge mistake.”
 
Any settlement between the parties would most likely remain private.
 
None of Frank’s investors or Javice’s mentors  would comment on her behalf.
 
©2023 The New York Times News Service