Young founder allegedly sells startup with fake users to JPMorgan for around Rs 1450 crore, now sued

The lawsuit alleges that Charlie Javis, who founded a startup called Frank, had more than four million users on his platform, while the actual figure was around 3,00,000 at the time.

Divyanshi Sharma

New Delhi,Updated: Jan 13, 2023 15:42 IST

By Divyanshi Sharma: American bank JPMorgan Chase has sued the founder of a 30-year-old fintech startup, accusing her of fabricating the number of users of her platform. The lawsuit alleges that Charlie Javis, who founded a startup called Frank, had more than four million users on his platform, while the actual figure was around 3,00,000 at the time. The rest of the customers are accusing the bank of selling the startup.

JPMorgan Chase acquired Frank for USD 175 million (Rs 1,450 crore) in 2021. Javis is being sued by the end of 2022 in US District Court in Delaware.

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What does the lawsuit say?

As mentioned earlier, the lawsuit alleges that Javis had more than 4 million users on its platform Frank at the time of the purchase. In fact, the complaint alleges that there were less than 3,00,000 users at the time. The suit also claims that Javice lied about the success of the platform and created a list of fake data with users’ names, addresses, date of birth and other personal details.

“Defendant Charlie founded a small start-up business called Javis Frank that had the potential to grow and become a successful enterprise in the future and appeared to have proven success early on. But in order to make money, Javis lied about Frank’s success, Frank’s size, and the depth of Frank’s market penetration. Zaha decided to lie, in order to induce Frank to buy JPMC for $175 million,” the lawsuit states.

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The complaint also states that Javice initially refused to share information about its customers due to ‘privacy concerns’. However, insisting on sharing information, she created ‘customer accounts from whole cloth’.

“At the time of JPMC’s request, Frank had about 4 million fewer customer accounts than JPMC had represented. Instead of revealing the truth, Javis initially pushed back against JPMC’s request, arguing that she could not share her customer list due to privacy concerns. After JPMC insisted, Javis had several million Frank customers. “He chose to invent the accounts out of whole cloth,” the suit said.

How are fake accounts created?

Additionally, the suit alleges that a data science professor from a college in NYC created the list of fake user accounts, used ‘synthetic data’ techniques for this purpose and paid USD 18,000 for his services. These accounts are shared with a third-party vendor for ‘verification’, the complaint states.

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The lawsuit also names Oliver Amar, the startup’s chief growth officer, and that they (Javis and Amar) asked a high-ranking engineer at the company to create a fake list, before contacting the data science professor. A marketing firm, ASL Marketing, is also named in the lawsuit.

JPMorgan’s complaint also alleged that Javis tried to cover up the entire issue by instructing the seller to ‘delete the duplicate listing’.

About Frank

The startup, Frank, markets itself as a platform to help students trying to get education loans. It simplifies the application process for its users and was launched in 2017. Javis describes the startup as the ‘Amazon for higher education’.

Source

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