Charlie Javice, the 30-year-old Frank founder accused of fraud, says Jamie Dimon took a personal interest in her $175 million acquisition

The deal did indeed get done. In September 2021, just two months after Javice says the CEO spoke to her, JPMorgan Chase closed its $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 had lied and Frank had less than 300,000 customers. JPMorgan claimed the Frank founder and Olivier Amar, Frank’s chief growth officer, committed securities fraud, fraud with the contract, and conspiracy to commit fraud, as well as aiding and abetting fraud for allegedly fabricating around 4 million nonexistent accounts that they said used Frank’s services, according to a December lawsuit from JPMorgan Chase. (You can read Coins2Day‘s account of the whole saga and how JP Morgan got tied up with Frank here.)

But Javice, who is 30 years old, alleges that JPMorgan Chase, one of the world’s biggest banks with $3.7 trillion in assets, did know the truth about Frank, including its size, but still rushed to do the deal, the court documents said. The young entrepreneur is demanding 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 those responsible inside JPMC (JPMorgan Chase) to shift the blame for a failed and now-regretted acquisition to someone they viewed as an easy target: its young female founder,” Javice said in her answers, defenses, and counterclaims to the JPMorgan Chase lawsuit. 

Javice’s reply to the JPMorgan lawsuit are her attempt to set the record straight. The December lawsuit from the bank, filed two days after Javice sued JPMorgan for legal fees and expenses, set off a media frenzy earlier this year. Once a media darling, Javice has been portrayed negatively in nearly all the more recent articles, at worst as a con artist who tricked the bank into buying her startup. Dimon, during a conference call in January to discuss JPMorgan’s earnings, called the Frank acquisition a “huge mistake.”

Javice contends 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, valuations for comparable companies at the time, and its own diligence to get an accurate picture of Frank, the court filing said. By its own admission, JPMorgan Chase conducted several weeks of due diligence on Frank during the summer of 2021, Coins2Day has reported, citing JPMorgan’s December lawsuit. Javice, in her initial complaint against JPMorgan for expenses, said the bank committed considerable resources to the deal, involving hundreds of its employees in diligence of Frank. The bank hired well-known law firm Dechert, which advised JPMorgan Chase on the Frank acquisition. Sidley Austin represented Frank, according to the Javice court filing.

Javice cited several reasons she thought JPMorgan was motivated to close the Frank acquisition. JPMorgan embarked on an “aggressive campaign” to buy fintechs starting in 2020, according to the 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 business. In 2020, JPMorgan Chase committed $30 billion to close the racial wealth gap among Black, Hispanic, and Latino communities. The bank has also wanted to boost its access to an important client base: young customers. Like many large banks, JPMorgan Chase was once a major originator of student loans but decided to get out of that business in 2013. It currently offers tools to help young customers balance their budgets and save money. Buying Frank offered an in-road to the student market with its young and lower income student audience, Javice said in the filing. 

“As we have stated from the beginning, our legal claims against Ms. Javice and Mr. Amar are set out in our complaint, along with the key facts.  We stand behind our allegations, and this dispute will be resolved through the legal process,” said Pablo Rodriguez, a JPMorgan Chase spokesman in a statement.

Javice also pointed out the relatively small price that JPMorgan Chase, a leading advisor on mergers, paid for Frank. The startup, when it sold in September 2021, was a seemingly high-flying fintech that had raised more than $20 million in funding. Frank had some big name investors including Marc Rowan, cofounder and CEO of Apollo Global Management, an alternative asset manager; early stage venture firm Aleph; and, online education company Chegg. JPMorgan Chase scooped up Frank for $175 million, a low price for a company that at least claimed to have a 25% market share of the student market. In September 2021, comparable companies at the time were trading at higher valuations. Chegg, which claims to have 36% of the student market, had a $10.9 billion market capitalization in September 2021. (Chegg’s valuation has since dropped about 80% to $2.2 billion.)

Javice also contends that Frank’s total marketing spend from 2017 to 2020, around $2.25 million, should’ve clued JPMorgan into how many users the startup had in 2021. Frank repeatedly indicated to the bank that the cost of acquiring a registered user of a Frank FAFSA account was around $5, according to the Javice filing. If Frank had 4.25 million users,  this would come to more than $21 million, far more than the $2.25 million the startup cited. 

If Frank really did have more than 4 million registered student accounts that JPMorgan Chase said it believed it had, then the bank should’ve paid more than $175 million, the filing said. “This would have indicated a leading market share and called for a valuation based on easily identifiable market comparables that would have exceeded many multiples of the offer price,” Javice said in the filing. 

“The original version of this story said that Sidley Austin advised JP Morgan. Instead the law firm advised Frank.”