Citing Fraud, JPMorgan Shutters Site It Bought in 2021

Financial aid site bought for $175 million allegedly created fake accounts

By
Lyle Niedens
Full Bio
Lyle spent most of the past two decades in a variety of product, communication and financial writing roles with large asset managers and mutual fund distributors, mostly recently as vice president, director of product development with Waddell & Reed/Ivy Distributors Inc. Previously, he spent a decade in senior roles as an editor and reporter with business publications and financial news wires, including Dow Jones, BridgeNewsand Knight-Ridder Financial News. A graduate of the University of Kansas with an M.B.A. and a B.S. in journalism, he lives in Westwood, KS, a suburb of Kansas City, with his wife, Caryl, and their sons, Conley and Pierce.
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Published January 12, 2023
JPM CEO Jamie Dimon

Drew Angerer / Getty Images

KEY TAKEAWAYS

  • 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.

Article Sources
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  1. Reuters. "JPMorgan shuts down financial planning website Frank after suing founder."

  2. JPMorgan. "JPMorgan Chase Acquires Frank, the Leading College Financial Planning Platform for Students."

  3. CNBC. "JPMorgan shutters website it paid $175 million for, accuses founder of inventing millions of accounts"

  4. Wall Street Journal. "JPMorgan Bought College Financial-Aid Platform for $175 Million—and Now Says Most of Its Users Were Fake."

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