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JPMorgan Chase (NYSE:JPM) alleged that the founder of college financial planning platform Frank it acquired earlier defrauded it by inflating the number of customers it had, Bloomberg reported on Thursday.
The banking giant “paid $175M for what it believed was a business deeply engaged with the college-aged market segment with ~4.3M customers,” according to the report, citing a lawsuit filed in the Delaware Court of Chancery last month.
But the platform had “fewer than 300K customers,” JPMorgan (JPM) alleged. It claimed Frank founder Charlie Javice and chief growth officer Olivier Amar used fake customer accounts to inflate its user base, which JPMorgan (JPM) uncovered in an investigation after the acquisition closed.
Javice’s counsel argued that JPMorgan (JPM) rushed the Frank acquisition without proper due diligence. They also claimed the bank was trying to deflect attention from its violations of student privacy laws, the report added. Javice is suing JPMorgan (JPM) to force the bank to cover her legal fees.
“Even the most savvy financial institutions can be victims of fraud, and the Frank deal amount was quite small,” said Wells Fargo analyst Mike Mayo.
“To us, this raises questions about JPM’s financial discipline, the degree of waste, and whether JPM is spending too much, too fast,” he added, noting that the bank announced 15 deals in about two years.
JPMorgan Chase (JPM) did not immediately respond to requests for comment.
The bank had acquired the college financial planning platform in September 2021.
Image and article originally from seekingalpha.com. Read the original article here.