What went wrong when JP Morgan bought FAFSA company Frank : The Indicator from Planet Money One of the world's biggest banks acquires a promising tech company, and things go very, very wrong. It's a flashy tech startup story with some surprisingly low-tech twists and a web of alleged lies.

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A big bank's big mistake, explained

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Darian and Adrian, hello.




Wailin Wong.

WONG: We're all about to go on a very special journey together. And to start out, I'm going to play you a little clip.


JAMIE DIMON: And obviously, this thing, in one way or the other, was a huge mistake.

WONG: This thing, in one way or another, was a huge mistake.

WOODS: Intriguing.

WONG: Do you know who this is - who's talking?

WOODS: Like a CEO or a politician?

MA: I'm getting, like, deposition vibes here.

WONG: (Laughter) So the person speaking was Jamie Dimon. He's the CEO of JPMorgan Chase, the big bank.

WOODS: Ah, yes.

MA: Oh.

WONG: And this is actually from the most recent company earnings call. So if he has that kind of deposition quality, I think it's because earnings calls are, like, very rote and boring.

MA: (Laughter).

WONG: I want to ask you guys - do you know what this big mistake is? What is Jamie Dimon talking about?

MA: No, I have no idea what's going on.

WOODS: Yeah, I've read the headlines, but, like, the exact story is going to be intriguing.

WONG: OK. You are in for a treat.



WOODS: I'm Darian Woods.

MA: And I'm Adrian Ma.

WONG: Today on the show, one of the world's biggest banks acquires a promising tech company, and things go very, very wrong. It's a flashy tech startup story with some surprisingly low-tech twists and a web of alleged lies.


WONG: Before I tell you guys what went wrong when JPMorgan bought the financial tech startup called Frank, I need to make sure you know what the FAFSA is.

WOODS: I've heard of this.

MA: Yes.

WOODS: Yeah. But for our international listeners - yeah - it's this whole amount of paperwork that college students have to fill in in America, right?

WONG: Right. It's a bunch of paperwork you have to do before you can get government help paying for college. It's actually a big pain in the butt to fill out. And so...

MA: Right.

WONG: ...That is the promise of this startup, Frank. It was supposed to make it easier to fill out the FAFSA.

WOODS: I mean, it seems like a service that is useful to people.

WONG: Yeah, useful to about 300,000 people. That is about how many users Frank had in the summer of 2021, which is where we're starting our story. That was when Frank's founder and CEO, Charlie Javice, approached JPMorgan about acquiring her company. But she told the bank that Frank had 4 million users.

MA: Interesting.

WOODS: What's a couple of million between friends?

WONG: (Laughter) And, you know, JPMorgan got really excited about this 4 million users number. By the way, just to foreshadow a bit, those numbers and what happens next is alleged in a lawsuit by JPMorgan with some pretty extraordinary documentation. So just to be clear, this is the bank's version of events.


WONG: Now, back to the story. Darian, you are an executive at JPMorgan. You're sitting in your corner office, reviewing these pitch materials from Frank that say the company has 4 million users. What are you dreaming about?

WOODS: A lot of young people who are going to maybe stick with my bank for life.

WONG: Exactly. So JPMorgan asked Frank to prove it has over four million customers. Frank's CEO balks and says that's a privacy issue, but JPMorgan insists. So now, Frank needs a plan. I don't know. What would you guys do?

WOODS: I mean, the truth will set you free. Is that too naive to say?

MA: You could try to do - like, is there a way you could create, like, a bunch of fictional customers...

WONG: Oh, my gosh.

MA: ...And somehow pass them off as real?

WOODS: Adrian is a evil genius.

WONG: (Laughter) You know what, Adrian? I do like where your head's at because what happens is, well, first, the CEO of Frank, Charlie Javice, asks the company's head of engineering if he can make some fake customer data.


WONG: This engineer asks whether making this kind of data set is legal. And Charlie tells him - again, according to JPMorgan's lawsuit - that she doesn't think anyone will end up in a, quote, "orange jumpsuit," end quote, over this project.

MA: (Laughter).

WONG: The head of engineering is, like, mmm - pass. So then Charlie Javice and another executive - they do a couple of things. One thing they do is go out and buy a list of students from a marketing company that collects data on young adults, like high school students and college students. Then, Charlie also hires a data scientist - a data science professor at a university - to generate fake customer data.

MA: Wow.

WONG: So there are lots of legitimate business-use cases for what's called synthetic data - like if you want to train AI with data sets without exposing real people's information. But it turns out it was really hard for this data science professor to come up with convincing fake customer data. Charlie even asks at one point - are these email addresses going to look fake? And he's like, yeah, they're going to look fake.

WOODS: Yeah, I mean, there's only so many charlie_realstudent@gmail.com they can come up with.


WONG: And so, like, for the email problem, they actually come up with a solution where, instead of creating individual fake email addresses, they'll just generate a string of numbers and letters. And then Charlie will tell JPMorgan, oh, we obfuscated the real email addresses for privacy reasons, so these are unique identifiers.

MA: Oh, what a tangled web. OK. All right.

WONG: I know. So Frank submits this list to JPMorgan. And now it is time for due diligence. What happens is, because Frank has raised all these privacy concerns, JPMorgan is like, OK, we will get a third-party validation company to come in and vet your list of customers. But what happens is that all it does is make sure that the number of customers on the spreadsheet that Frank submits matches up with the number of customers Frank says it has.

MA: (Laughter)

WOODS: Yeah, that sounds like shallow diligence.

MA: Undue diligence?

WONG: (Laughter) Do nothing...

WOODS: Do-nothing diligence.

MA: When is this thing - this whole thing going to unravel?

WONG: Oh, very soon - very soon, my friend. So because the due diligence process passes with flying colors...

MA: (Laughter).

WONG: ...JPMorgan acquires Frank for $175 million. Charlie Javice becomes an employee of JPMorgan. Now that the deal is done, JPMorgan is like, oh, boy howdy. Now we get to email all these people and sell them credit cards. And now remember, Frank does not have these email addresses because the ones they tried to get from the professor looked too fake. But they do really need to cough up some emails now. It's, like...

WOODS: You can buy emails. I'm sure you can - I'm sure - if there's one thing in the internet can provide, it's a list of emails.

WONG: Bingo, right? So 'cause remember, like, earlier on, they had already bought one list of emails from a marketing company. And then so now they go out, and they find another marketing company. And they buy more emails from that company, and this is what they ship over to JPMorgan. They're like, here are the four million emails. Now, JPMorgan picks 400,000 emails out of this list to send a test marketing email to. Only 28% of the emails were even successfully delivered, and the rest bounce.

MA: Ouch.

WONG: This is considered an extremely low delivery rate in, you know, like, the email marketing world. Like, JPMorgan is now really, really suspicious. So they open an investigation, and it actually does not seem to take them very long to figure out what happens because, guess what? Charlie Javice and her co-executive used their work email accounts to do all this correspondence, and their work emails are now the property of one JPMorgan Chase because of the acquisition.

WOODS: There is a lesson for you.

MA: Oh. They had all of their discussions.

WONG: Can you believe it? It's like, man, they should've just done all of this over the phone.

MA: Wow.

WONG: (Laughter) And that is the tale of what JPMorgan says happened with Frank. And, again, these allegations come from a lawsuit the bank filed against Charlie Javice and another Frank executive. But here's an interesting wrinkle - Charlie actually sued them a couple days before they sued her. She wants to recoup the legal fees she racked up while they were investigating the Frank deal. In her lawsuit, Charlie calls the bank's investigation into her conduct groundless, and she says she was terminated in bad faith. And FYI guys, I did reach out to her lawyers to get more clarity on that, but they didn't get back to us.

MA: I don't know - what is the moral of this story?

WONG: Well, I was, like, thinking about, you know, like, what should we learn about, you know, the tech industry or about startups? And I realized that, like, even though we were talking about tech here, the heart of this story is incredibly low-tech. It's not like JPMorgan wanted to acquire Frank for some whiz-bang algorithm. They just wanted sales leads. It's, like, the most old-fashioned business asset there is. It's like - do you know this play or movie, "Glengarry Glen Ross," like, about a...

MA: Yes (laughter).

WONG: ...Bunch of salesmen?


KEVIN SPACEY: (As John Williamson) I'm hired to watch the leads.

WONG: It's, like, all these, like, old guys, like, cussing at each other. And they're always like, get me the leads. Get me the leads.


SPACEY: (As John Williamson) I'm not permitted to give them the premium leads.

WONG: JPMorgan just wanted leads. And that's why they wanted to buy Frank - because they thought Frank had already done the hard work of finding good leads. You know, like...

MA: They're like, this is worth $175 million to us.

WONG: Yeah. Yeah.

MA: Wow.

WONG: They paid 175 million for an email marketing list.

WOODS: It is a very expensive Rolodex.

MA: (Laughter).

WONG: And then it turned out to be totally bogus, so now - I don't know. I hope someone learned something.


WONG: This episode was produced by Audrey Dilling, with engineering by Katherine Silva. It was fact-checked by Sierra Juarez and Dylan Sloan. Viet Le is our senior producer. Kate Concannon edits the show, and THE INDICATOR is a production of NPR.

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