JPMorgan Bought College Financial-Aid Platform for $175 Million—and Now Says Most of Its Users Were Fake

In December lawsuit, the bank accused executives at Frank of widespread fraud

By Melissa Korn and David Benoit at www.wsj.com

JPMorgan JPM -0.10%decrease; red down pointing triangle Chase & Co. is suing the leaders of Frank, a financial-aid business it bought for $175 million in 2021, alleging they duped the bank by making up millions of fake student accounts to show it had a growing business. 

The bank filed a lawsuit late last month in a Delaware federal court against Frank executives Charlie Javice and Olivier Amar, alleging widespread fraud at a company that is marketed as helping families navigate the complex college financial-aid process. Frank offered a tool to simplify federal financial-aid forms, as well as listings of scholarships and low-cost college courses. 

Ms. Javice approached JPMorgan in summer 2021 about a potential acquisition, according to the lawsuit. She claimed Frank had 4.25 million users, the bank said. The company had fewer than 300,000 real users, the suit said, less than 10% of the stated 4.25 million figure.

“Rather than reveal the truth, Javice first pushed back on [JPMorgan’s] request, arguing that she could not share her customer list due to privacy concerns,” the bank said in its court filing. “After [JPMorgan] insisted, Javice chose to invent several million Frank customer accounts out of whole cloth.”

Ms. Javice filed a separate lawsuit against JPMorgan in Delaware state court a few days before the bank sued her, saying she was owed millions of dollars for expenses incurred while defending herself against internal investigations that began last spring. That suit said she was fired from the bank in November.

She called the investigations “groundless” and said the bank “manufactured a for-cause termination in bad faith.” She said the bank was avoiding $28 million in payments due her on the deal.

Alex Spiro, an attorney representing Ms. Javice, called JPMorgan’s lawsuit “nothing but a cover.” 

“After JPM rushed to acquire Charlie’s rocketship business, JPM realized they couldn’t work around existing student privacy laws, committed misconduct and then tried to retrade the deal. Charlie blew the whistle and then sued,” he said.  

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