The lawsuit alleges that Charlie Javice, founder of a startup called Frank, claimed that his platform had more than four million users when, in fact, the number was around 300,000 users at the time.
By Divyanshi Sharma: The US bank JP Morgan Chase sued the founder of a 30-year-old Fintech startup after alleging that she fabricated user numbers for its platform. The lawsuit alleges that Charlie Javice, founder of a startup called Frank, claimed that his platform had more than four million users when, in fact, the number was around 300,000 users at the time. The rest of the users, the bank alleges, were invented to sell the startup.
JP Morgan Chase had acquired Frank for $175 million (Rs 1,450 crore) in 2021. The lawsuit against Javice was filed in late 2022 in the US District Court in Delaware.
What does the lawsuit say?
As stated above, the lawsuit alleges that Javice claimed to have more than 4 million users on its platform, Frank, at the time of the acquisition. In reality, the complaint alleges, there were fewer than 300,000 users at the time. The lawsuit also states that Javice lied about the success of the platform and produced a list of false data containing users’ names, addresses, dates of birth, and other personal information.
“Defendant Charlie Javice founded a small start-up company known as Frank that apparently had the potential to grow into a successful company in the future, and appeared to have had proven early success. But to profit, Javice decided to lie, including about Frank’s success, Frank’s size, and the depth of Frank’s market penetration to induce JPMC to buy Frank for $175 million,” the lawsuit states.
The complaint also states that Javice had initially refused to share information about its clients, citing “privacy concerns.” However, when urged to share the information, he created ‘customer accounts out of thin air’.
“At the time of JPMC’s application, Frank was missing nearly 4 million customer accounts for his representations to JPMC. Rather than reveal the truth, Javice first rejected JPMC’s request, arguing that he could not share his client list due to privacy concerns. After JPMC insisted, Javice decided to concoct several million Frank’s customer accounts out of thin air,” the lawsuit states.
How were the fake accounts created?
In addition, the lawsuit alleges that the list of fake user accounts was created by a data sciences professor at a university in New York City who used ‘synthetic data’ techniques for that purpose and was paid $18,000. for your services. These accounts were then shared with a third-party provider for “validation,” the complaint states.
The suit also names the startup’s chief growth officer, Olivier Amar, and says that before they (Javice and Amar) approached the data science professor, a senior engineer at the company was asked to create the fake list. A marketing company called ASL Marketing was also named in the lawsuit.
The JP Morgan complaint also alleges that Javice had tried to cover up the entire problem by instructing the provider to “delete the fake listing.”
The startup, Frank, markets itself as a platform to help students trying to get education loans. It is known to simplify the application process for its users and was launched in 2017. Javice has described the startup as the ‘Amazon for higher education’.