The news of the federal charges against Frank’s founder Charlie Javice has sent shockwaves through the business and technology worlds. The charges come after a convoluted corporate drama that has been playing out for some time as JPMorgan Chase and Javice wrangled over the values and potential of the student-aid startup she sold to the bank.
Javice has been accused of artificially inflating the user numbers of her startup from 300,000 to 4.25 million users. It goes without saying that’s a major discrepancy. To further complicate matters, her lawyer, Alex Spiro, has stated that Javice was a whistleblower against the bank. Whether you believe Javice or the federal charges, it’s clear that this dispute still raises questions about JPMorgan’s handling of the deal and its due diligence process.
A look into Charlie Javice’s rise, fall and dispute with JPMorgan currently gives her the title of one of the wildest fintech deals in recent memory. She was an ambitious entrepreneur, and began to establish a following among investors and the media when she founded Frank in 2018. Her story of finding success in a man-dominated field and becoming one of the youngest entrepreneurs to ever receive venture capital funding was inspiring to many.
But, no matter how her story resolves itself, one thing is certain: The turmoil in the US banking industry isn’t over yet and JPMorgan’s handling of the deal has been called into question. Its role in the debacle appears to be inattentive due diligence. There are reports that the bank relied too heavily on a third party to verify Frank’s user base. The validator only checked the data fields were “populated versus null/blank,” and did not verify that the information was accurate.
These revelations lead to speculation: was the bank feeling the pressure of an efficient tech-driven market? Was it looking to out-spend the competition? These are difficult questions, to be sure, and it remains to be seen if we ever get answers to them.
JPMorgan is no stranger to tech-driven fintech deals. The bank has already made its share, and it’s also acquired financial giants including Bear Stearns and Washington Mutual as part of its history. It’s worth noting that Jamie Dimon, the CEO of JPMorgan, issued a 43-page shareholder letter this week. He argued that the turmoil in the US banking industry is not yet over, and that there could be more pain to come.
In the tech-driven world, it’s a race to stay ahead of the competition and it appears as though Charles Javice may have been determined to win that race. Whether her actions were purposeful or in desperation for her startup to survive, only time will tell. But her story and the questions that it raises about JPMorgan’s handling of the deal is one that will stay with us for years to come.
