Startup employees questioned customer stats before acquisition

Startup employees purchased by c. B. Morgan Chase They expressed disbelief when the company’s founder directed them to increase the number of their clients before the acquisition, according to internal letters released Thursday in a legal notice. filing.

The founder, Charlie Javis, instructed employees to change the “public numbers” for college aid platform Frank to 4.25 million customers in January 2021, JPMorgan alleged in the filing. The bank alleged that Frank had fewer than 300,000 real customers when JPMorgan bought him in September 2021.

“Do we really have 4.25 million students?” asked a Frank employee in a Slack thread in January 2021.

“is this real?” another asked.

“Charlie is the king of finding the magic numbers,” wrote another employee whose names were deleted from the file.

The release of private employee letters is part of the latest bout in the legal dispute between Javice and JPMorgan, which has paid $175 million for the startup. JPMorgan, the largest US bank by assets and a consistent acquirer of fintech startups, sued Javis in December 2022, alleging that the founder lied about the scope of her company to close the deal.

According to Thursday’s report, Javis justified the change in user statistics by telling employees that visitors to the site count as customers, the bank claimed.

In the original lawsuit, JPMorgan alleged that Javis hired a data science professor to concoct fake accounts after an employee refused to do so.

Javis’ problems have worsened in recent weeks. In April, the Justice Department filed criminal charges against the startup’s founder and sued the Securities and Exchange Commission, which accused her of fraud related to the sale of the company.

Javis said in court filings that JPMorgan knew how many employees Frank had and that the bank sought to blame her for its mistakes.

Javis’ attorney did not immediately respond to messages left late Thursday.