- Firm had hoped acquisition would help it build relationships with Generation Z and other college students.
- Website owner allegedly created 4 million fake accounts to boost chances of deal.
- JPMorgan says it uncovered fraud in marketing email blast.
JPMorgan Chase closed a student financial aid website it purchased for $175 million in September 2021, alleging the website's founder created 4 million fake customer accounts.
The banking giant made the decision Thursday to shut down the website, Frank, a month after filing a lawsuit again Charlie Javice, the site's founder. That suit claims Javice created fake customer accounts to satisfy JPMorgan's questions about its customer base in due diligence discussions preceding the acquisition.
Purchasing the website exemplified JPMorgan's focus on boosting its financial technology capabilities to maintain its market-share expansion. Thursday's decision, for now, ends JPMorgan's brief foray into student financial aid planning, one it hoped would expand relationships with Generation Z and other college students.
When it purchased Frank, the bank claimed it was the "fastest-growing college financial aid planning platform," comprising 5 million students at 6,000 higher-education institutions. Javice joined JPMorgan as part of the acquisition.
Months after the deal, JPMorgan says it sent marketing emails to 400,000 supposed Frank customers. In its suit against Javice, the company said about 70% of those emails bounced back to the firm as non-deliverable.
JPMorgan alleges Javice used data scientists to help create fake Frank accounts. The bank said at the time of the acquisition, it was led to believe Frank had 4.25 million customers, when the site actually had fewer than 300,000.
Javice claims JPMorgan sought reasons to fire her late last year to avoid paying millions of dollars it owed her, according to The Wall Street Journal. She sued the bank for misconduct to cover legal bills she incurred during the bank's internal investigation.
JPMorgan disputes Javice's claims, with spokesman Pablo Rodriguez telling CNBC "Ms. Javice was not and is not a whistleblower."
Shares of JPMorgan, scheduled to report its fourth-quarter earnings Friday morning, closed little changed at $139.50.