With almost four trillion dollars in assets, five thousand branches, and a quarter million employees, JP Morgan is the largest bank in the US by far, but longtime CEO Jamie Dimon has never been content just maintaining this position and is always looking for opportunities to grow the bank even further. Over the past few years, the number of fintech companies has exploded and have started to gradually take market share away from the old school. Banks The younger: Generations want to manage the entirety of their financial lives from the comfort of their smartphones instead of going to a Traditional Bank branch. Diamond Knew that if he wanted to protect his bank's market share from up-and-coming fintechs, he would have to Pivot the bank to cater to this younger generation.

So over the past three years he went on acquisition spree, buying up small fintech startups all over the world. In 2021, they paid 175 million dollars for a startup called Withfrank.org Jamie Dimon declared last year he planned to get more aggressive in seeking takeovers, and he certainly made good on that promise with JPMorgan buying another Financial startup this time it's college Financial Plan Planning platform Frank Founded by the Visionary 28 year old Charlie Javis Frank hoped to revolutionize the higher education financial aid industry by allowing students to fill out previously complicated paperwork online in a matter of minutes and after just a few years of operation, Frank had exploded in popularity, garnering over 4 million unique users given the massive user base, JP Morgan Jumped at the opportunity to acquire Frank for 175 million dollars and hired Charlie Javis as their Managing Director of Student Solutions one of the highest possible ranks at the firm. One year later, the situation had completely changed. JP Morgan Shut down the website and accused Charlie Javis of orchestrating a massive fraud of the 4 million students that Frank had supposedly served.

Allegedly, more than 90 percent of them were fake, existing only in Charlie Javis's imagination. The bank has formally accused Javis of Fraud and is trying to get back their entire 175 million dollar purchase price. In this video, we'll take a look at how Charlie Javis created Frank and how she allegedly scammed America's largest bank. Good foreign.

Let's start by taking a look at how this story was covered by the media. to stay on top of the latest developments in business and finance. We use a platform called Ground News to figure out what's actually going on. Ground News tracks tens of thousands of media sources and puts related articles in one place so you can compare coverage.

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You can then sort the articles by left Center and right leaning the left-leaning Articles Talk about how Musk drowned Twitter with debt and is desperately laying off critical employees. The right-leaning articles say that the layoffs are a long overdue move to cut the unnecessary bloat at the social media company. Ground News isn't here to tell you which site is correct. it just gives you all the competing perspectives so you can develop informed opinions on any topic.

If you want to try it out for yourself, go to Ground.new WSM to uplevel your news reading experience today. Thanks to Ground News for supporting this video. Charlie Javis Experienced what could be described as a privileged upbringing. Her father was a wealthy financier in New York and she attended an elite French language private high school that charged 40 000 per year in tuition.

She then attended the prestigious Wharton Business school at the University of Pennsylvania. Shortly after graduating, she raised some Venture Capital funds to fund her education technology startup. Frank University Tuition in the U.S is very expensive and millions of students rely on loans and grants to pay for their education. One of the most powerful tools to obtain student aid is the free application for Federal Student Aid or FAFSA form, which determines your eligibility for various government student aid schemes in order to prevent fraud.

The government has made the process extremely complicated, requiring students to provide huge amounts of information and fill out many pages of documents. The processes of filling out the FAFSA form can take many hours and is prohibitively onerous for many students to solve this problem. Javis Created a website called with Frank.org an easy to use online platform where students can fill out their FAFSA forms far more quickly and efficiently. In the first few years, Frank Grew rapidly in Javis's public profile steadily increased in stature.

Her popularity grew to the extent that she was featured on the Forbes 30 Under 30 list and featured in a glowing article published by the dating website Bumble.com She was viewed as an up-and-coming Visionary perhaps even a female version of Steve Jobs But there was a problem. Frank offered his FAFSA filing services for free so they weren't generating any Revenue No matter how large Frank grew, it would always be losing money as a standalone entity. The only way that Javas could turn her creation into monetary gain was to sell it to a strategic acquirer. But why would anyone want to acquire a company that doesn't generate any Revenue foreign JPMorgan Chase Found out about Frank in 2021 they were extremely interested University Students are perhaps the single most valuable cohort of customers to Market to.

If you get a Chase bank account in college, there's a good chance you'll continue to use Chase for the rest of your life. purely out of habit. you'll get a Chase credit card, a Chase mortgage, and the bank may make tens of thousands of dollars of interest income from you over the course of your life. So even if Frank doesn't generate any Revenue directly, it would still be an incredibly valuable asset to the extent that allows them to acquire new customers in the summer of 2021.

JP Morgan's investment team met with Charlie Javis multiple times to conduct due diligence on Frank The main thing that I wanted to investigate was how many students use the website. A website with 10 million users is a lot more valuable than a website with 10 000 users according to Javis Frank had 4.25 million unique accounts, of which 2.1 million had fully completed the FAFSA form online. Given this impressive user base, JPMorgan calculated that they were willing to pay 175 million dollars to acquire the website or roughly 45 dollars per user. it seemed like a pretty good deal from the bank's perspective.

If the lifetime value of a customer is ten thousand dollars, they would need to convert less than one percent of Frank's user base into customers to make back the acquisition cost. So they wrote the check for 175 million dollars and hired us as their managing director of student. Solutions At Chase Almost immediately after making the acquisition, JP Morgan's marketing department got to work. They started sending marketing emails to Frank users advertising Chase checking and savings accounts.

However, almost immediately they realized that something was off. The results of the email marketing campaign were disastrous. 72 percent of the email is balanced, indicating that the email addresses were either inactive or never existed in the first place. Of the emails that were delivered, only one percent of them were even opened compared to a 30 opening rate for similar campaigns.

Remember that the entire reason that JP Morgan bought the company was the target. Frank Users with marketing campaigns. Given the disastrous results, Frank was basically worthless meaning that JP Morgan had paid 175 million dollars for nothing foreign to a recent lawsuit. JP Morgan is accusing Javis of committing a massive and highly sophisticated fraud allegedly Frank didn't have 4.2 million users, they only had 290 000.

Remember that Frank didn't generate any revenue and was burning cash Jarvis was desperate to sell her company to cash out, but with only 290 000 users, a large Bank like JP Morgan wouldn't be interested. So she invented 4 million fake users. But how is this even possible? As one of the largest investment banks in the world, how could JP Morgan have been tricked into buying a website with 90 fake users during the due diligence process? JP Morgan asked Javis to provide a list of the names, phone numbers, home addresses, and email addresses. Providing this data would help JP Morgan verify the authenticity of the users.

Javis First said that she could not hand over the user list as this would violate the data privacy of the students. but this was just a stall tactic as the 4 million long student list did not yet exist while she was stalling over the privacy concerns, Javis was frantically trying to cover for her fraud. She allegedly paid a computer Science Professor eighteen thousand dollars to create a synthetic list of 4.2 million user profiles for each profile. they needed a fake name, fake phone number, fake street address, and fake email address.

Names and phone numbers weren't a big problem. It's pretty easy for a computer scientist to create a million John Smiths and Jane does. Phone numbers are also pretty easy. You just have to get a directory of area codes and randomly generate a list of numbers.

Addresses are a little bit more difficult because you have to make sure that a street name exists in whichever State you decide the imaginary student is living in. Even more tricky was their email addresses. You could randomly generate numbers and letters or even use random words, but it will be pretty obvious that they are fake because people generally don't choose random characters for their email addresses. Eventually, Javis and the computer scientists gave up.

Instead of generating fake home and email addresses, they instead provided so-called unique IDs Unique IDs are randomly generated identifiers that substitute for real data. Again, they used the excuse that this was protecting the student's privacy. While JP Morgan didn't have access to the emails or home addresses, they did have the 4.2 million names and phone numbers. This was enough for them to believe that the users were real and they went forward with the 175 million dollar acquisition.

foreign. in the summer of 2021, the deal was done and Javis got her multi-million dollar payday. but she wasn't out of the woods yet. Now that JP Morgan owned Frank she could no longer hide behind the unique IDs The Bank needed the email addresses for their marketing campaigns, which was the entire rationale behind the acquisition in the first place.

As it turns out, there is a huge industry that revolves around the buying and selling of personal data including email addresses. Javis and her Associates contacted Two Data Brokers ASL Marketing and inform Meon paying them over one hundred thousand dollars for a list of 4.2 million emails Javis augmented her fake customer list with emails and other data acquired from these data. Brokers JP Morgan's marketing team sent out marketing emails to what they thought were Frank users, but they were actually just random email addresses. Imagine if you received an email from Chase Bank saying something to the effect of congratulations on your successful financial aid application to Southeastern Louisiana University but you never applied for student aid and you had never even heard of Southeastern Louisiana University You would probably think the email is some sort of a scam.

The chances that you become a Chase customer as a result of this email is almost zero. Not only that, your perception of the Chase brand will decrease because they sent you this scammy email. The reputational risk for JP Morgan was so massive of that, they almost immediately shut down the website and wrote off the 175 million dollar investment as a zero. The biggest mistake that Javis made was that she used her official Frank email account to orchestrate the alleged fraud.

After JP Morgan acquired the company, the Frank email accounts now belonged to JP Morgan and they were free to look at the Historical emails. After the disastrous results of the marketing campaign, they investigated Javis's email history and quickly found some damning evidence, including her conversations with the computer science professor. Of course, these are just allegations and Javis is entitled to a fair trial, but if JP Morgan has the email records they claim to have, it will be pretty difficult for her to argue against the fraud. Thank you! There are a lot of apparent similarities between Charlie Javis and the convicted fraudster.

Elizabeth Holmes like Holmes Javis Graduated from prestigious University and came from a well-connected family. This gave her the credibility to raise initial funding for a startup. Both of them were pursuing what they thought was a noble mission. In the case of Holmes, it was to democratize access to blood testing.

In the case of Javis, it was to democratize Student Financial Aid. Both of them probably thought their companies would be successful eventually, but needed to embellish things a little bit in the short term to raise capital. In the case of Javis, she must have thought she could make Frank work eventually as she joined JP Morgan as an employee after the acquisition. she probably thought that she can buy a little bit of time with a fake email list.

She could use JP Morgan's resources to expand Frank and eventually achieve the 4 million users that she claimed to have. and maybe it could have worked out eventually. but now that the fraud is exposed, we may never know. All right guys that wraps it up for this video.

what do you think about Charlie Javis's alleged fraud? Let us know in the comments section below. As always, thank you so much for watching and we'll see you in the next one! Wall Street Millennial Signing out.