Frank’s chief growth officer Olivier Amar is also named in the JP Morgan complaint. It alleges that Javice and Amar first asked a top engineer at Frank to create the fake customer list; when he refused, Javice approached “a data science professor at a New York City area college” to help. Using data from some individuals who’d already started using Frank, he created 4.265 million fake customer accounts—for which Javice paid him $18,000—and had it validated by a third-party vendor at her direction, JP Morgan alleges. The complaint includes screenshots of the professor’s invoices and claims that Javice went to notable lengths to ensure documentation of this work was either destroyed or altered to avoid raising eyebrows. Amar, meanwhile, spent $105,000 buying a separate data set of 4.5 million students from the firm ASL Marketing, per the complaint. Amar and ASL Marketing did not yet respond to a request for comment.
Once the deal went through, JP Morgan asked Frank for its customer list so the bank could begin marketing its products and services to those students, the suit says. Javice and Amar sent over a list of data derived from ASL Marketing and another third-party vendor, Enformion, according to the suit. When JP Morgan sent test marketing emails to what it thought were 400,000 Frank customers, the results “were disastrous,” it claims. Only about a quarter of the emails were delivered, and of those, just 1 percent were opened, the suit alleges.
That story is amazing. Per Matt Levine:
Frank . . . paid a total of $175,000 for a list of email addresses, and then sold that list to JPMorgan for $175 million , for a perfect 99,900% return on its investment. What an arbitrage! The intuition is that a list of 4 million email addresses with whom you have a warm customer relationship is worth roughly 1,000 times as much as a list of 4 million random email addresses that you scraped up from the dregs of the internet. Javice allegedly scraped up these addresses from the dregs of the internet, dressed them up in Frank’s warm customer relationships, and sold them to JPMorgan at a 1,000x markup. Incredible stuff.
Yeah, it seems like they didn’t realize they were being acquired for their users until well into the purchase. I wonder if they would have gotten away with it if they hadn’t accidentally bought a list with 75% invalid addresses.
Sounds like a bank executive’s wet dream!
It’s unclear why they misrepresented their number of users in the first place. Was it a mistake that just created a hole Javice had to keep trying to fill in? The whole thing is amazing. JP Morgan is not heroic, they were buying an email list in order to spam college students with banking offers. But omg the lengths that Javice went. And then since they’d sold the company, JP Morgan owned the email servers documenting the fraud. Whoopsie! Note to self, do not sell documentation of your fraud to your victim!
Mitch and Murray paid a lot of money for those leads!
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When JP does it to you, that’s just business. Too big to fail. When you do it to JP, that’s fraud. A crime.
JP Morgan definitely isn’t too big to be penalized though. They’ve been fined or settled for around $40 billion in the last 20 years.
JPM probably isn’t paying $175m for a 1-year email list of prospective college students, I wouldn’t think. They can get that for a fraction of that cost. It appears (from this WSJ story) that they had at least some legitimate interest in the tech, or at least their tech that was able to pull 4.5 million new prospective college entrants annually. Or something close to that. That kind of new email generation of high school seniors entering college that refreshes each year might get to that $175m price tag, I guess.
And so what it appears like happened is that “Frank” basically pushed itself out there as an easier way to negotiate FAFSA financial aid applications. “No obligations, see how much aid you can get, click here!” And so the 4.5 million users appear to be from people who went on Frank and started preliminary inquiries…and then jumped right off Frank when the app/site asked for personal information, contact info, and an email address etc.
Per a series of tweets from Ben Kaufman – who does investigation and research for the Student Borrower Protection Center – apparently Javice may have been referencing these initial web “contacts” or site visits as 4.5 million…but the actual number of people who clicked through and put in their information was more like 256,000.
Kaufman’s thread is pretty entertaining and a good read on the scam that was Frank. Starts here:
This all seems like…letthemfight.gif?
Because that’s one of the most important metrics people use to value these companies. If Frank had a lot of customers then the thinking would go that their people and tech must be good enough to attract and serve those customers.
And of course those customers have intrinsic value as an ongoing source of revenue from the existing business relationship, even before you start trying to “upsell” them (which can range from innocuous to obnoxious).
Total failure of due diligence on JP Morgan’s part, obviously. You’d think people would have learnt to caveat emptor in fintech nowadays.
Coming soon: AI history teachers and PR managers.
Spoiler: Hitler costs “500 coins” ($15.99) to unlock.
This reminds me of the end of Charles Stross’ Accelerondo, when the solar-system-wide AI started spitting out historical figures, having had the computing power to model what they would have been like to some degree of accuracy. I suspect these are somewhat less accurate.
I will laugh my ass off if the AI ended up training on Downfall Hitler.
Someone on Twitter had a chat with Henry Ford about his anti-Semitism and it got interesting.
Basically the bot tried to say it didn’t hate the Jews and then would spout anti-Semitic stuff.
So… GOP politician?