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

The lawsuit alleges that Charlie Javis, the founder of a startup called Frank, claimed that his platform had more than four million users, when in reality, the number was around 300,000 at the time.

Divyanshi Sharma

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

By Divyanshi Sharma: US bank JP Morgan Chase sued a 30-year-old fintech startup founder after he allegedly defrauded a large number of users of his platform. The lawsuit alleges that Charlie Javis, the founder of a startup called Frank, claimed that his platform had more than four million users, when in reality, the number was around 300,000 at the time. The bank claims that the rest of the users were created to sell startups.

JP Morgan had acquired Chase Frank for $175 million (Rs 1,450 crore) in 2021. The lawsuit against Javis was filed in late 2022 in U.S. District Court in Delaware.

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What does the petition say?

As previously stated, the complaint alleges that Javis claimed to have more than 4 million users on its platform at the time of the purchase of Frank. In fact, the complaint claims, there were fewer than 300,000 users at the time. The lawsuit also alleges that Javice lied about the platform’s success and created a fake database with users’ names, addresses, dates of birth and other personal information.

The defendant, Charlie Javis, founded a small start-up business, Frank’s, which apparently had the potential to grow into a successful company in the future and appeared to have proven success in its early stages. But for the cash, Javis decided to lie, including lying about Frank’s success, Frank’s size, and the depth of Frank’s market penetration to get JPMC to buy Frank for $175 million.

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The complaint also states that Javice initially refused to share information about its customers due to “privacy concerns.” However, after insisting on sharing information, he created “customer accounts out of whole cloth.”

“At the time of JPMC’s request, Frank had approximately 4 million fewer customer accounts than his JPMC dealerships. Rather than reveal the truth, Javis initially withdrew JPMC’s request, arguing that he could not share his client list due to privacy concerns. At JPMC’s insistence, Javice decided to invent several million Frank customer accounts out of whole cloth.

How were fake accounts created?

Additionally, the complaint alleges that the list of fake user accounts was created by a data science professor from a college in New York who used “data synthetic” techniques for the purpose and received $18,000 for his services. The accounts were then shared with a third-party vendor for “credit verification,” the complaint said.

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

JP Morgan’s complaint also alleges that Javice tried to cover up the entire affair by instructing the seller to “remove the fake listing.”

About Frank

Frank’s startup presents itself as a platform to help students who are trying to get education loans. It is known to simplify the application process for its users and was launched in 2017. Javice has described the startup as “the Amazon of higher education.”

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