Charlie Javice, the 30-year-old Frank founder accused of fraud, says Jamie Dimon took a personal interest in their $175 million acquisition
Charlie Javice claims it was Jamie Dimon, the powerful billionaire CEO of JPMorgan Chase, who took a personal interest in the bank’s acquisition of her financial aid page Frank, telling her in July 2021 that he thought JPMorgan should “deny the close the deal”. Court documents filed Monday in Delaware District Court.
The deal actually happened. In September 2021, just two months after Javice said the CEO spoke to her, JPMorgan Chase closed the $175 million purchase of Frank, a company it believed had at least 4.25 million users. It took several months for JPMorgan Chase to figure out the truth — that Javice lied and Frank had fewer than 300,000 customers. JPMorgan alleged that the Frank founder and Olivier Amar, Frank’s chief growth officer, had committed securities fraud, contract fraud and conspiracy to commit fraud and aided and abetted fraud by allegedly fabricating around 4 million non-existent accounts which they said they would have used Frank’s services, according to a December lawsuit filed by JPMorgan Chase. (You can read wealth‘s account of the whole saga and how JP Morgan got tied up with Frank Here.)
But Javice, who is 30, claims that JPMorgan Chase, one of the world’s largest banks with assets of $3.7 trillion, knew the truth about Frank, including his size, but still rushed to close the deal, states it in the court documents. The young entrepreneur is challenging a jury trial, but it’s unclear if the court case will get that far.
JPMorgan’s lawsuit against Javice is a “massive CYA effort by leaders within JPMC (JPMorgan Chase) to blame a failed and now regretted acquisition on someone they saw as an easy target: its young founder,” it said Javice in her Answers, Defenses and Counterclaims to JPMorgan Chase’s Lawsuit.
Javice’s response to the JPMorgan lawsuit is her attempt to set the record straight. The bank’s December lawsuit, filed two days after Javice sued JPMorgan for attorneys’ fees and costs, sparked media frenzy earlier this year. Once a media darling, almost all recent articles have portrayed Javice negatively, at worst as con artist which led the bank to buy their startup. Dimon called the acquisition of Frank a “big mistake” during a January conference call to discuss JPMorgan’s earnings.
Javice claims JPMorgan Chase knew exactly what it was getting when it bought Frank, which claimed to simplify the financial aid process, in 2021. The bank only needed to look at public information, reviews of comparable companies at the time, and its own due diligence see Get an accurate picture of Frank, the court filings said. According to its own statements, JPMorgan Chase conducted a multi-week due diligence review of Frank in the summer of 2021. wealth has called, citing JPMorgan’s December lawsuit. Javice, in her initial Complaint against JPMorgan for expenses, said the bank, which committed significant resources to the deal and involved hundreds of its employees in Frank’s due diligence. The bank hired renowned law firm Dechert to advise JPMorgan Chase on the acquisition of Frank. Sidley Austin represented Frank, according to the Javice court record.
Javice cited several reasons she believed JPMorgan was motivated to complete the acquisition of Frank. JPMorgan launched an “aggressive campaign” to buy fintechs beginning in 2020, according to court documents. (Dimon, in an annual shareholder letter in December 2020, listed fintechs as one of the “enormous competitive threats” to banks.) JPMorgan has invested or bought at least 25 fintechs since 2020, according to Refinitiv, a London Stock Exchange Group company. In 2020, JPMorgan Chase Pledged $30 billion to close the racial wealth gap between black, Hispanic, and Latino communities. The bank also wanted to improve its access to an important customer base: young customers. Like many big banks, JPMorgan Chase was once a major provider of student loans, but decided to exit the business in 2013. It currently offers tools to help young customers balance their budgets and save money. The purchase of Frank offered entry into the student market with its young and lower-income student audience, Javice said in the filing.
“As we have stated from the outset, our legal claims against Ms Javice and Mr Amar are set out in our complaint, together with the key facts. We stand by our allegations and this dispute will be resolved through the court proceeding. ‘ said Pablo Rodriguez, a spokesman for JPMorgan Chase, in a statement.
Javice also noted the relatively low price paid for Frank by JPMorgan Chase, a leading mergers and acquisitions advisor. The startup, when it was sold in September 2021, was a seemingly high-flying fintech that had raised more than $20 million in funding. Frank had some notable investors including Marc Rowan, co-founder and CEO of Apollo Global Management, an alternative wealth manager; early-stage venture firm Aleph; and the online education company Chegg. JPMorgan Chase snapped up Frank for $175 million, a low price for a company that claimed a 25% share of the student market. In September 2021, then-comparable companies were trading at higher valuations. Chegg, which claims to own 36% of the student market, had a market cap of $10.9 billion as of September 2021. (Chegg’s valuation has since fallen about 80% to $2.2 billion.)
Javice also claims that Frank’s total marketing spend from 2017 to 2020, around $2.25 million, should have told JPMorgan how many users the startup had in 2021. Frank repeatedly told the bank that the cost of acquiring a registered user of a Frank FAFSA account was about $5, according to the Javice filing. If Frank had 4.25 million users, that would be more than $21 million, far more than the $2.25 million the startup topped.
If Frank really had more than 4 million registered student accounts, which JPMorgan Chase said they believed, then the bank would have had to pay more than $175 million, the filing says. “This would have indicated a leading market share and required a valuation based on easily identifiable market benchmarks that would have exceeded many multiples of the asking price,” Javice said in the filing.
“The original version of this story states that Sidley Austin advised JP Morgan. Instead, the law firm advised Frank.”
This story was originally featured on Fortune.com
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https://finance.yahoo.com/news/charlie-javice-30-old-frank-210913478.html Charlie Javice, the 30-year-old Frank founder accused of fraud, says Jamie Dimon took a personal interest in their $175 million acquisition