JPMorgan Chase & Co on Thursday shut down its Frank website, a college financial planning platform it bought in 2021, after suing the startup's founder and another executive for creating nearly 4 million fake customer accounts. The largest U.S. bank by assets had paid $175 million for Frank in a bid to deepen its ties with students.
The bank said it was led to believe by founder Charlie Javice and Chief Growth Officer Olivier Amar that more than 4.25 million students had created accounts on Frank. However, when JPMorgan sent marketing test emails to a list of Frank's customers that the company had provided, only 28% of them were delivered, the bank alleged.
In the suit, JPMorgan alleged that Javice first asked her engineering chief to create “fake customer details” using algorithms. When he refused, she found a data science professor at a New York-area college to create the accounts, the lender said. The bank included incriminating emails between the unnamed professor and Javice in its suit.
Why it matters
Regardless of the outcome of this legal scuffle, this is an embarrassing episode for JPMorgan and its CEO, Jamie Dimon. In a bid to fend off encroaching competitors, JPMorgan has gone on a buying spree of fintech companies in recent years, and Dimon has repeatedly defended his technology investments as necessary ones that will yield good returns. The fact that a young founder in an industry known for shaky metrics and a “fake it ’til you make it” ethos managed to allegedly dupe JPMorgan calls into question how stringent the bank’s due diligence process is.