At the time, FRANK was a highly sought startup led by fintech CEO Charlie Javice. In theory, the acquisition was an opportunity to give the company an opportunity to onboard college students into JPMorgan's financial services ecosystem.
When FRANK was acquired, it was touted as the 'fastest-growing college financial planning platform' used by more than 5 million students at 6,000 institutions. The company said that it discovered that the vast majority of accounts on the platform were fake after about 70% of emails to users bounced back.
JPMorgan is now claiming that founder and CEO Javice used the services of a data scientist to create millions of fake accounts during the due diligence process. The bank now says that in reality the startup only had 300,000 accounts rather than 4.3 million students. The bank included emails between Javice and the scientist it employed to create the fake accounts.
Some of the emails include inquiries from Javice in which she directly asks the professor: "Will the fake emails look real with an eye check or better to use unique ID?" JPMorgan inadvertently was given access to these emails as the Frank tech stack was part of the acquisition.
Javice's defense is that she was unceremoniously fired from JPMorgan due to 'manufactured' reasons as it sought to avoid paying money owed to her. She is claiming that the bank should pay her legal bills which were incurred during the investigation and that they are backtracking on the deal after violating student privacy deals. Her attorney is trying to frame Javice as a 'whistleblower' rather than someone who committed fraud.
JPMorgan is vociferously contesting these claims and is seeking to address the issue through legal channels. It's certainly a black mark for CEO Jamie Dimon and JPMorgan, especially as they publicly touted the value of the deal when it was completed. Additionally, many have been critical of JPMorgan's fintech acquisitions over the past couple of years as the value proposition is uncertain and is a departure from its core business.