Was Frank a Fraud?

While trolling the internet, I found an article, now deleted, with the headline “JP Morgan Chase Acquires Frank.” “Oh no!”, I thought, “My friend Frank Vukovits has sold his soul! I hope he got a lot of money!” I kept digging and found an article titled “JP Morgan says Frank was a Fraud“. Clearly, they weren’t talking about Frank Vukovits. He is many things, but fraud is not one of them. He’s also not the type of guy to sell his soul.

Frank was a website that was designed primarily to help students complete student loan applications. It was started by Charlie Javice now 30, based on her struggles to properly complete paperwork. Also part of the Frank team was Olivier Amar,

JP Morgan Chase paid $175 million to purchase Frank in 2021. The theory was simple. Frank purported to have more than 4.25 million college students as users. JP Morgan Chase wanted an opportunity to market their financial products to these college users. It seemed like a win-win until it wasn’t.

There are a pair of lawsuits now with Javice claiming that JP Morgan Chase fired her to avoid an upcoming $20 million payout. She also claims she objected to JP Morgan Chase marketing to these users and that student privacy concerns may prohibit marketing to many of these accounts.

JP Morgan Chase disagrees. JP Morgan argues that they hired a consultant to perform due diligence and the consultant was okay with a list of 4.25 million users. Post-acquisition JP Morgan asked for a list of 400k users to test the market and only 103 users from that list even clicked through to JP Morgan. This abysmal 0.026% click-through rate led JP Morgan to dig deeper into what was going on. Mostly they dug into Frank emails, which became JP Morgan Chase emails post-acquisition and now passed through JP Morgan servers.

The emails showed that before the acquistion Frank didn’t have full information on 4.25 million users, only about 300k users. Much of the rest of their data was incomplete. As a result, Javice decided to make up 4.25 million users based on what little data they had. She went to Frank’s head of engineering to make up user and email records and he refused. That doesn’t happen enough so good for him. “The Director of Engineering questioned whether creating and using such a data set was legal, but Javice tried to assure the engineer by claiming that this was perfectly acceptable in an investment situation and she did not believe that anyone would end up in an “orange jumpsuit” over this project.”

If your boss uses the phrase “orange jumpsuit” you should look for a new job. Javice then turned to a data science professor to generate synthetic data. Discussions like this one highlighted by Matt Levine are particularly damning:

“Regarding creating physical addresses, the Data Science Professor wrote to Javice, “I can’t seem to find addresses in my raw files . . . . Should I attempt to fabricate them?” Javice responded “I just wouldn’t want the street to not exist in the state.” Later, the Data Science Professor determined that “‘real addresses’ may not be doable,” and Javice responded “If we can’t do real addresses what[’]s the best we can do for that?” …

Javice was particularly concerned with the email addresses, asking the Data Science Professor “will the fake emails look real with an eye check or better to use unique ID?” He responded “[t]hey will look fake,” at which point Javice agreed to use a “unique ID” instead.”

While Javice was fabricating 4.25 records to fool the due diligence consultant, Olivier Amar was purchasing 4.5 million student records from a marketing firm. At some point they were going to have to give JP Morgan Chase something resembling real college students. Those records were still short email addresses for about 2.5 million users so Amar turned to the same data science professor and third party to help find the relevant email addresses or generate them synthetically…er make them up. This explains the abysmal response rate to JP Morgan Chase’s email test. This was essentially a spam list with half the emails made up.

As the lawsuits continue, JP Morgan Chase has since shut down the Frank website. Is this fraud? No one has been convicted of anything, but the emails say Frank the website was willing to sell its soul for $175 million.