A fintech startup bought by JP Morgan Chase for millions may have been built on a bed of lies, according to a new lawsuit from JP Morgan. And if the investment bank is to be believed, things went wrong with a check for $18,000 to a New York City-area data science professor.
On Dec. 22, JP Morgan filed a lawsuit against Charlie Javice, the millennial founder of student aid platform Frank, and the company’s Chief Growth Officer Olivier Amar, alleging the pair fabricated around 4 million nonexistent accounts they said they did that they had used their service JP Morgan bought in September 2021 for $175 million.
The investment bank closed Frank on Thursday, weeks after the lawsuit was first filed. The bank alleges in its lawsuit that while it expected to buy a company with over 4 million users that “delves heavily into the college-age market segment,” it actually received a customer list of “no more than 300,000” accounts have.
Alex Spiro, Javice’s legal representative, did not respond to Fortune’s request for comment, but has denied the allegations against her to other news outlets. Javice sued JP Morgan in December, alleging that the bank used an investigation against Frank as a pretext to fire her from her job at the firm, Bloomberg reported. Spiro told the outlet that the bank’s lawsuit was “nothing but a cover”. Fortune was unable to get a replacement for Amar.
JP Morgan claims that in 2021, when the bank and Javice first discussed an acquisition, Frank was left with “nearly 4 million customer accounts behind his proxies” at the bank. To make up the shortfall before Frank’s official customer account data is submitted to JP Morgan for due diligence, the bank claims Javice and Amar first approached the platform’s unnamed director of engineering to create “synthetic data” — fake customer information obtained by Computer algorithms were generated.
According to JP Morgan’s lawsuit, the engineer felt uncomfortable and asked “if the request was legal,” and ultimately declined, so Javice and Amar allegedly resorted to an outside source who only described himself as “a data science professor at a New York-area college.” City” was referred to in the lawsuit.
According to the lawsuit, the professor agreed and was willing to offer “creative solutions” to Javice and Amar’s data problems. What ensued, according to the lawsuit, was an extraordinary series of email exchanges.
‘Shall I try to fabricate them?’
The data science professor was hired to create data for nearly 4.3 million customers for Frank, including names, emails and birthdays, according to JP Morgan’s lawsuit, and it was allegedly made clear from the start that the professor and Javice both fully aware that the information was fictitious.
In creating the new clients’ names, the professor reportedly emailed Javice with a proposed model for weeding out real people’s names by independently testing first and last names to “ensure that none of the scanned names are real.” “.
In another email, the professor allegedly noted how much of the accounts’ personal information histories were the same, including an unnatural repeat rate for high school names and hometowns. Such a list “looks fishy [him] if [he] should check it out,” the professor wrote. When it came to creating phone numbers, Javice allegedly told the professor that some duplicate numbers among accounts were acceptable as long as there were no more than “5% to 7%” copies, according to the lawsuit.
Physical addresses emerged as one of the biggest sticking points, according to the lawsuit, due to the complexity of creating unique addresses, with Professor Javice allegedly at one point saying they “wasted too much time on the address thing.” Earlier in the process, Professor Javice allegedly said he was having trouble finding credible addresses. “Shall I try to fabricate them?” he asked, to which Javice replied, “I just don’t want the road to not exist in the state.”
For his troubles, the data science professor sent Javice a $13,300 bill, according to JP Morgan’s lawsuit. However, summarizing his work proved problematic, as the professor allegedly wrote down individual lines of each fake information field he helped create. Javice “immediately” asked the professor to revise the bill with a single line of “data analysis,” promised him a bigger bonus, and increased the bill to $18,000, according to the lawsuit, and the professor then allegedly complied.
Pablo Rodriguez, a spokesman for JP Morgan, told Fortune that the dispute between the bank and Javice should be settled in court.
“Our legal claims against Ms Javice and Mr Amar are set out in our complaint with the key facts. All disputes will be settled through the court process,” he said.
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