Ever so often, I get an email asking if I want to purchase a list of contact information. I’m not sure why any of these solicitors would think I’m interested in said contact information. I have no idea what I would do with a bunch of random people’s info. In fact, now that I think about it, I might even pay not to be sent said contact information. That way I don’t have to worry about keeping track of these strangers’ contact info and make sure nothing happens to it.
But there are people who apparently really want to pay for random people’s contact information. That’s because obtaining said contact information could help you look like a bigger company than you are with more customers than you have. That could, in turn, help you garner the interest of a big financial institution that would want to acquire you for millions of dollars and land you a great gig with a great title at the big financial institution. So said contact information—even if it isn’t accurate, or perhaps even entirely fabricated via computer algorithms—could actually be quite valuable to those people.
This is the matter at hand in the damning lawsuit JPMorgan Chase filed against Charlie Javice, the now 30-year-old founder of a financial aid startup called Frank, and her colleague Olivier Amar. Frank was founded in 2017 by Javice when she was in her mid-20s to help college students obtain financial aid by determining their eligibility for grants, loans, and work-study programs. The startup’s claim to fame was how it helped students complete the Free Application for Federal Student Aid (FAFSA) in only a matter of minutes. JPMorgan acquired Frank in September 2021 for $175 million, handed Javice and Amar multi-million exit package agreements, and brought some of Frank’s employees in-house in what would be deemed a rather successful exit for the startup and its investors (which include Apollo’s Marc Rowan, Aleph, Chegg, and Gaingels).
But now, less than two years after buying Frank, the bank and wealth management giant fired Javice and Amar and has now sued them, alleging fraud and claiming that, of the nearly 4.3 million customers on a list sent to JPMorgan during the due diligence process, close to 4 million of them didn’t even exist. (Forbes first reported the lawsuit.)
These allegations are frankly astounding. And it only gets worse as you read through each page of the lawsuit, which includes a copy of an invoice in which Javice allegedly paid a data science professor $18,000 (more than 270% his hourly rate) to generate fake information for millions of fake customers. There are also emails (supposedly sent from Javice’s Frank account that, post-acquisition, became a JPMorgan email account), in which Javice and the professor go back and forth, saying things like: “Didn’t we agree to make fake ones” or “Will the fake emails look real with an eye check or better to use unique ID?”
Yikes.
JPMorgan also alleges that Amar arranged an approximately $105,000 payment for a list of data on 4.5 million random students (then $70,000 for some other student data) and alleges that Javice and Amar then used email addresses obtained through those means to try to bluff their way through a JPMorgan marketing campaign. You know it’s not great when a former Frank engineer (who JPMorgan says was first asked to generate the fake student information himself) allegedly asked his CEO “whether the request was legal.”
To be clear, Javice disagrees with this telling of what happened, as you can read in the lawsuit she filed against JPMorgan Chase in the Delaware Court of Chancery, shortly after she and her colleague were sued. (She denies all allegations against her.) Javice has raised her own complaints against JPMorgan, including that the bank fired her in bad faith after commencing a series of “groundless investigations” into her conduct. She also asserts that Chase was trying to monetize student FAFSA data and conducting direct marketing campaigns in a way that “disregarded the regulatory environment in which the financial aid platform operated.” The bank has withheld $28 million owed to her, she alleges.
“After JPMC rushed to acquire Charlie’s rocketship business, JPMC realized they couldn’t work around existing student privacy laws, committed misconduct and then tried to retrade the deal. Charlie blew the whistle and then sued. JPMC’s newest suit is nothing but a cover,” Javice’s lawyer, Alex Spiro (who also happens to also be Elon Musk’s lawyer, as Matt Levine so interestingly pointed out), said in a statement sent to Fortune. A JPMorgan spokesman told Fortune that “any dispute will be resolved through the legal process” and has said previously that “Ms. Javice was not and is not a whistleblower.”
Frank had been funded by venture capitalists all along the way, with early investments from Silvertech Ventures, Apollo Global Management’s Marc Rowan, Aleph, Slow Ventures, Ground Up Ventures, Reach Capital, and Regah Ventures, according to PitchBook. Chegg, Gaingels, SWAT Equity Partners, and GingerBread Capital invested in 2020. (I reached out to several of these investors as well as former board members, but no one returned my requests for comment.) Now, Frank doesn’t seem to exist. JPMorgan shut the site down yesterday.
If JPMorgan’s allegations are true, the alleged fabrication of data began in 2021, so it’s unclear what kind of figures Javice presented to her own investors and her board throughout the fundraising process and throughout the acquisition talks. It does appear that at least one of her investors appeared enthused in early 2021. The lawsuit claims that it was a principal of “one of Frank’s largest investors” that made the intro to JPMorgan in March 2021—in the thick of a booming venture market, which ultimately led to the acquisition talks.
Startup founders may be known to exaggerate on occasion, but this is no matter of exaggeration. If JPMorgan’s claims are true, only 7% of Frank’s self-proclaimed user base actually existed. 7%. It’s honestly amazing it took JPMorgan several months to find out.
It’s a bad look for the founder—and the funder.
A Tiger Global settlement… Semafor reported yesterday that Tiger Global made a secret settlement with a senior female employee who left the firm two years ago. Tiger allegedly paid $10 million to this employee, who wasn’t named in the story, to settle allegations of bullying, harassment, and insensitivity, three people familiar with the matter told Semafor. Tiger’s LPs apparently hadn’t been told of the settlement, and some investors are reportedly now “reconsidering commitments they’ve already made.”
“We have worked hard to create a culture that embodies integrity, respect, humility, a drive for excellence, and continuous improvement,” a Tiger spokeswoman told Semafor (she declined to comment further to Fortune). “Prioritizing these values in our day-to-day interactions inside and outside of Tiger Global has been the glue that has underpinned our success for the past 21 years. We remain committed to driving continuous improvement across Tiger Global as we look towards the future.”
SBF shares his side of things (again)… Live from house arrest on the Stanford University campus, Sam Bankman-Fried is laying out his side of things yet again. Here is what he is saying.
Just a reminder to share your thoughts on this sector… Term Sheet is partnering with Semaphore again for its 15th annual confidence survey of private equity, venture capital, hedge fund, and other professionals. Did 2022 turn out to be a poor year for both investment returns and the managers/service providers of PE, VC, and hedge funds? Are investors complicit in the downfall of Sam Bankman-Fried and FTX? How could a split Congress influence the private markets? Weigh in, if you like, and share your level of confidence in yourself, the economy, and your business; it’s anonymous and should take you 3-4 minutes. You can take the survey here. Have a look at last year’s results here and here.
In observance of Martin Luther King Day, Term Sheet is taking Monday off. Until Tuesday,
Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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Jackson Fordyce curated the deals section of today’s newsletter.
VENTURE DEALS
- Butter, a San Francisco-based payments platform, raised $21.5 million in Series A funding. Norwest Venture Partners led the round and was joined by Atomic, Transpose Platform, and Spring Tide Capital.
- CyberX, a Singapore-based market maker for digital assets, raised $15 million in Series A+ funding from Foresight Ventures.
- Mondu, a Berlin-based B2B payments company, raised $13 million in Series A extension funding. Valar Ventures led the round and was joined by FinTech Collective.
- Nest Genomics, a New York-based health technology company, raised $8.5 million in seed funding. B Capital led the round and was joined by Y Combinator, Casdin Capital, DCVC, Samsung Next, Maven Ventures, iAngels, Arkin Digital Health, LionBird, Anne Wojcicki, Deneen Vojta, and others.
- enrichAg, a Vancouver-based soil enrichment platform, raised $6 million in seed funding led by At One Ventures.
PRIVATE EQUITY
- Alpine Investors acquired Medusind, a Miami-based revenue cycle management services provider to the health care industry. Financial terms were not disclosed.
- Epiq Solutions, a portfolio company of The Veritas Capital Vantage Fund, acquired Xiphos Systems Corporation, a Montreal-based space-focused computing solutions provider. Financial terms were not disclosed.
- HMH, a portfolio company of Veritas Capital, agreed to acquire NWEA, a Portland, Ore.-based educational research and assessment company. Financial terms were not disclosed.
- InTandem Capital Partners acquired a majority stake in HouseWorks, a Woburn, Mass.-based home care company. Financial terms were not disclosed.
- MessageGears, backed by Long Ridge Equity, acquired Swrve, a San Francisco-based marketing app platform. Financial terms were not disclosed.
- RoadSafe Traffic Systems, a Trilantic North America portfolio company, acquired Western Remac, a Woodridge, Ill.-based sign manufacturing and installation services provider. Financial terms were not disclosed.
- Salt Creek Capital acquired Broco Rankin, an Ontario, Calif.-based tools and equipment manufacturer. Financial terms were not disclosed.
OTHER
- A unit of Apollo Future Mobility Group agreed to acquire WM Motor Holdings, a Shanghai-based electric vehicle maker, for $2.02 billion.
- Avel eCare acquired NightWatch, a Crab Orchard, W.V.-based pharmacy telemedicine services provider. Financial terms were not disclosed.
- LCVista, a Seattle-based learning and compliance management platform, and Prolaera, a Seattle-based professional education platform, completed a merger. As part of the transaction, Polaris Growth Fund acquired a majority stake.
- Lessen acquired SMS Assist, a Chicago-based facilities maintenance technology company. Financial terms were not disclosed.
- Morning Brew acquired Our Future, a New York-based business-focused media company. Financial terms were not disclosed.
- ServiceNow acquired a minority stake in Proven Optics, a Columbus, Ohio-based financial management software company. Financial terms were not disclosed.
PEOPLE
- 645 Ventures, a New York and San Francisco-based venture capital firm, promoted Vardan Gattani to principal and Jon Smith and Lexi Quirk to vice president.
- Advance Venture Partners, a San Francisco- based venture capital firm, promoted Alex Christ to partner.
- Fifth Wall, a New York-based venture capital firm, hired Yvonne Voon as a partner. Formerly, she was with LOGOS Property.
- Harvest Partners, a New York-based private equity firm, promoted Joshua Carter, Kenneth Chen, Chris Peyser, Chris Schaller, and David Swanson to partner and Ethan Soodak to principal.
- Lovell Minnick Partners, a Philadelphia-based private equity firm, promoted Irene Hong Edwards and Timothy Rampe to partner; Lindsay Strait to vice president; Cody Isdaner to chief compliance officer and counsel; Marji Hendler to head of administration; and Paul Mattson to vice president of finance.
- Tau Ventures, a Palo Alto-based venture capital firm, hired Sonal Panda as principal. Formerly, she was with Signos.
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