JPMorgan Chase (JPM) conducted extensive due diligence into college financial aid startup Frank, and was aware of the actual number of customers before acquiring it in 2021, the lawyer for Charlie Javice, the startup's founder, said in opening arguments at the federal fraud trial of Javice and another former Frank executive, according to multiple news outlets late Thursday.
The US Department of Justice is alleging Javice defrauded JPMorgan into acquiring Frank for $175 million by misrepresenting the platform's customer base, claiming 4.25 million users when it had only about 300,000, Reuters reported, citing prosecutor's opening remarks in Manhattan federal court Thursday. JPMorgan reportedly realized the discrepancy when it tried to contact Frank's customers but received far fewer responses than expected.
Javice's lawyer contends the bank developed "buyer's remorse" after financial aid regulations changed. He accused the bank of using fraud claims against Javice to back out of the deal, Reuters reported.
Javice faces federal criminal charges of securities fraud, wire fraud, bank fraud, and conspiracy, but has pleaded not guilty, according to reports.
JPMorgan did not immediately respond to requests for comment from MT Newswires.
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