Any college-age student and their parents are likely familiar with the FAFSA form used to apply for student loans and assistance.
It’s likely not a happy familiarity.
The online form -- formally known as the Free Application for Federal Student Aid -- is infamously complicated and time consuming, requiring excruciating detail of family finances.
Little wonder then that the idea of a financial planning site that simplified the process would hold a lot of appeal, to students, to parents and to the financial institutions that wanted to establish lifetime relationships with them.
That was the logic at play in late 2021, when JPMorgan Chase (JPM) acquired financial planning startup Frank for $175 million.
JPMorgan Saw a Big Opportunity
At the time of the acquisition, the giant bank said “Frank currently serves more than five million students at over 6,000 higher education institutions across the country. Their simple online portal lets students apply for financial aid in minutes and enroll in Frank’s catalogue of affordable online college courses.”
Co-CEO of consumer & community banking Jennifer Piepszak said at the time that “Frank offers a unique opportunity for deeper engagement with students. Together, we’ll be able to expand our capabilities for students and their families, helping them financially prepare for college and other major moments in their future,” according to the statement.
Frank's youthful founder, Charlie Javice said at the time “We launched Frank to make college more accessible for students and their families, and have already helped millions across the nation.”
Ah.
Yes.
About that “millions” figure.
Claims of Fraud Leveled
It turns out, according to JPMorgan, that Javice wasn’t exactly frank about the company’s user base. In a lawsuit, the bank alleges that Javice and another employee paid an outside contractor to fabricate millions of names in their customer database, and really only had about 300,000 users at the time of the acquisition.
Now, the bank wants its money bank.
The bank’s action comes after Javice sued it for improperly firing her and avoiding payment of a multimillion dollar bonus.
The alleged scam has drawn comparisons with the saga of Elizabeth Holmes.
Holmes was 19 when she founded Theranos, which claimed to have developed highly sensitive rapid blood tests. The company raised hundreds of millions in venture capital reaching a valuation of around $10 billion before the scam came undone. Holmes was ultimately convicted on fraud and conspiracy charges.
Javice was named to the Forbes “30 Under 30” list of notable young people in 2019 when she was 26. At the time the magazine said “Frank's software aims to make the application process for student loans faster and easier. Javice founded the 15-person startup in 2016. She has since raised $16 million, and Frank has helped 300,000 users apply for financial aid.”
Meanwhile, the bank has shut down the Frank site which now directs users to the official FAFSA website to apply for student aid directly.
