Following its $175m acquisition of the online portal Frank, JP Morgan is now embarking on legal action against the firm’s Founder, Charlie Javice, over allegations of inaccuracies with the company’s financial numbers.
It is alleged by JP Morgan that Javice had detailed that in excess of four million users were on the platform in order to bolster the value of the deal. Furthermore, the banking giant also stated that the claims bypassed due diligence, due to a list of ‘fake customers’ being generated to support the claims.
Defence lawyers representing Javice relayed to the Wall Street Journal her belief that JP Morgan had ‘manufactured reasons to force her departure’, in order to avoid issuing her significant amounts of money that she was owed.
Since the acquisition, which has formed part of JP Morgan’s wider aggressive strategy for growth – largely fuelled by acquiring tech companies – the company has closed the website.
JP Morgan had previously harboured high hopes for the acquired firm, highlighting ambitions to build lifelong relationships with Frank customers.
Following the deal, Jennifer Piepszak, co-CEO of JP Morgan subsidiary Chase stated: “We want to build lifelong relationships with our customers.
“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.”
However, according to the lawsuit, Javice is alleged to have sought to ‘cash in and decided to lie about the depth of Frank’s market penetration and success’, which JP Morgan stated led to its significant investment in the firm.
The lawsuit added: “Javice represented in documents placed in the acquisition data room, in pitch materials, and through verbal presentations more than 4.25 million students had created Frank accounts.”