Buyer’s Remorse: JPMorgan Sues Financial Aid Platform Frank Over Fictitious Accounts

In September 2021, JPMorgan parted with $175 million to purchase Frank, a 2010s-era startup that sought to simplify the financial aid process for new college students. About 15 months later, in December 2022, JPMorgan sued Frank’s former leadership, most notably its enigmatic young founder Charlie Javice, according to the Wall Street Journal. 

At issue in the lawsuit are the 4.25 million users Frank claimed to have during the acquisition, over 90% of which were fake, alleges JPMorgan. The most interesting allegation is that the bank accuses Javice and fellow former executive Olivier Amar of paying $18,000 to a data scientist to develop a list of 4.5 million user profiles, including names, birth dates and email addresses. Javice, through her attorney Alex Spiro, has denied the allegations and even accused JPMorgan of attempting to evade student privacy laws.

If parts of this story sound like reruns of previous scandals to you, you’re not alone. A court battle over allegedly fictitious accounts between Elon Musk and Twitter was resolved last year, resulting in Musk purchasing the company. Spiro also represented Elon Musk in that matter. This episode also has overtones of other startup scandals from the prior decade. Theranos, WeWork and Nikola – three companies with famous founders that turned out to be less than advertised – come to mind.

In regard to Frank, one could argue that the signs were there. The New York Times details several potential red flags, including a settlement with the Department of Education over using ‘FAFSA’ (Free Application for Federal Student Aid – a trademark of the Department of Education) in company marketing materials, potential false associations with multiple colleges and universities and a claim that they worked with 6,000 universities even though only 5,916 are able to accept federal student aid. Most interestingly, a student aid expert interviewed for the article noted the following: 

Frank claimed to have served 5 million customers since its inception, but a web traffic measurement firm found that Frank had only 67,000 unique visitors per month around the time of its acquisition. The Times points out that even if it had 67,000 unique visitors per month, each month for its entire existence, Frank still would not have reached 5 million visitors.

JPMorgan’s key interest in this deal appeared to be the user accounts, as it sought to establish banking relationships with over 4 million young adults, after which it could offer them financial services for decades. In fact, the alleged fraud unraveled when JPMorgan sent its first advertising email blast, finding that upwards of 70% of the emails went undelivered.

While the New York Times was fairly critical of JPMorgan’s due diligence in this case, we don’t ultimately know what the bank’s diligence process looked like. However, buyers and advisors should carefully tailor their due diligence procedures to sensitive areas that will make or break a deal. While financial results are always important, there are often other aspects of a business, like synergies, customer bases, product lines and other relationships, that are equally important to a successful deal. This was arguably the case for JPMorgan. The 4.25 million potential banking customers could have proved more lucrative than any additional earnings that Frank brought in – if they were real.

If you’re considering making an acquisition, we highly recommend putting together an experienced diligence team to cover all aspects of the business that you’re buying to limit surprises. Schneider Downs has extensive experience providing buy-side and sell-side financial due diligence. For more information on Schneider Downs and the services we can offer to your organization, please visit our website or the Schneider Downs Our Thoughts On blog, or contact us at [email protected].

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

JPMorgan Paid $175 Million for a Business It Now Says Was a Scam - The New York Times (

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