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Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

businessinsider.com

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Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#71

Post by dboreham »

PaulWaldman wrote: post #9
Scubabear68 wrote: post #3

The gist of what she is alleged to have done: “An internal investigation revealed that Javice and Frank chief growth officer Olivier Amar — referred to as "CC-1" in the federal charges — paid a New York data science professor $18,000 to create nearly 4 million fake accounts in order to juice Frank's user numbers, JPMorgan alleged in its lawsuit. Amar later bought a list of student email addresses from a marketing fir…

Did they really pay a professor $18K to use a Faker library to generate 4 million records?? That's wild.

That's pretty reasonable imho. Probably took several days of back and forth to establish what they wanted. Then a day to knock up the script, generate the output. Now several more days of back and forth about whether it's what they really wanted. Pad a bit for the risk that they never pay, possibility of legal action in the future, etc.

Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#72

Post by pciexpgpu »

skeeter2020 wrote: post #60
yowzadave wrote: post #46

Earlier quoted context omitted.

I wonder why the Data Science Professor isn't named/charged as an accomplice. Maybe they are acting as a witness for the prosecution?

it sounds like his initial invoice was quite clear in the work completed, then updated at the client's request. So while you can argue moral grounds for not doing this work, I don't think there's illegality, i.e. conspiracy.

I mean if you are a professor and knowledgeable in how the startup uses the data, it’s hardly justifiable that “oh crap i didn’t know they were using it for illegal purposes”.

They were totally complicit allegedly.

Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#73

Post by spop »

kbos87 wrote: post #12
ChrisMarshallNY wrote: post #7

This exact kind of fraud, is just what AI should be good for. I made 10K fake users for testing the app I'm developing now. I used thispersondoesnotexist.com, and about a half hour's worth of PHP programming, to make an open-ended user generator. I only need 10K users, and it takes about an hour or so to generate them, but I'm sure that this type of thing could be easily scaled. "Hey, ChatGPT, can you give me the SQL…

This has non nefarious uses too. In a b2b context it’s often prohibitively time consuming to generate really good but non-real demo data.

I'm working on a platform that lets you generate fake users, but for the purpose of product research: https://notionsmith.ai/

You describe an idea and get very realistic users that you can chat with. Hooking that up to an email account could have been very convincing...

Typing in Frank's elevator pitch:

"Frank is a financial platform that helps college students manage their financial aid and student debt. Frank offers a free solution that allows you to streamline your FAFSA application, educates you about what FAFSA does and what parts of the application are important, and helps you potentially get additional money."

Gives some cool results

Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#74

Post by maxbond »

mbesto wrote: post #56
TacticalCoder wrote: post #37

Earlier quoted context omitted.

> How much due diligence really occurred here? A just question. How much due digilence was done on SBF / FTX by The New-York Times and by the VCs who poured hundreds of millions into a pure fraud?

> How much due digilence was done on SBF / FTX by The New-York Times and by the VCs who poured hundreds of millions into a pure fraud? NYT isn't an investor, so that's a total non sequitur. VCs on the other hand...VCs dont do much diligence. And who really cares really? They lost their money, not yours.

When VCs skip diligence and invest in a bunch of frauds like Wirecard, Greensill, FTX, etc., it creates an externality we all have to deal with - we're basically subsidizing their credulousness by getting defrauded.

Since huge frauds propped up by VCs seem to collapse several times a year, it doesn't seem like losing their money is incentive not to invest in frauds. It seems like they've just priced it in.

Granted, this might be yesterday's war, money might be tight in the next few years and that might better align incentives.

Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#75

Post by mrbombastic »

fisherjeff wrote: post #45
mrbombastic wrote: post #28

Earlier quoted context omitted.

Yeah I am always astounded at stories like this, you acquired a company for 175 million dollars and didn’t even peak at some real data?

I mean from what I understand, they did peek at the “real data”, it’s just that it was convincingly fabricated.

When I say real data I mean data that was not handed to you by people who have 175 million reasons to fake it. Like another commenter added try to talk to some of their customers, in this case even trying to email them seems like it would have been enough.

Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#76

Post by tmpz22 »

A_D_E_P_T wrote: post #40
crop_rotation wrote: post #5

The story is really wild. I read the Matt Levine take on it and it immediately reminded me of Theranos (off course not exactly identical, but still).

For what it's worth, the Matt Levine article is here: https://archive.ph/j5JBq And it is a wild story! It's probably going to get the miniseries treatment. The Uber/Theranos/WeWork shows were pretty popular, after all, so I'd bet that a second batch is coming with FTX, Frank, and that Korean guy who went on the lam in Montenegro. Hah.

The titles write themselves.

"Frankly fradulent"

"When Frank tanked"

"Frank robs the Bank"

Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#77

Post by mbesto »

jcrben wrote: post #58
mbesto wrote: post #56

Earlier quoted context omitted.

> How much due digilence was done on SBF / FTX by The New-York Times and by the VCs who poured hundreds of millions into a pure fraud? NYT isn't an investor, so that's a total non sequitur. VCs on the other hand...VCs dont do much diligence. And who really cares really? They lost their money, not yours.

No, they lost limited partners money, which is to a large degree pension money. Not sure how much VCs coinvest in their own funds but I'm willing to bet most of their retirement funds are not in VC investments.

> which is to a large degree pension money.

Then take this up with your local government then. There is a quantitative risk versus reward they take, and you should be glad that they take this bet. FYI - their portfolio mix for VC assets is usually like less than 5~10%. If a GP makes one bad bet, they hardly feel this.

> Not sure how much VCs coinvest in their own funds but I'm willing to bet most of their retirement funds are not in VC investments.

(1) most co-invest (2) no one in their right mind would put all of their assets in one VC fund. (3) if you're a partner a firm like Sequioa, you likely have a family office setup, which would follow a similar model to that of a pension fund.

Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#78

Post by mbesto »

symlinkk wrote: post #62
mbesto wrote: post #55

Earlier quoted context omitted.

> JPMC tried to verify user data but Javice claimed they couldn't provide user personal information "due to privacy concerns". DD guy here. This is the most plausible explanation. When you're under LOI there is a lot of back and forth, which ultimately guide how the purchase agreement gets formulated. So if this was the case, then they would have made the trade off of "ok she's not letting us see the list, but we'll…

[flagged]

Why not politely ask me what they are and maybe I'll answer.

DD = due diligence

LOI = letter of intent

SPA = stock purchase agreement

RWI = reps & warranties insurance

Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#79

Post by mrmcd »

datpuz wrote: post #29

What was the end game here? Is there any universe where someone does something like this and gets away with it?

Previous reporting on this (when the JPM civil suit was filed) mentioned that JPM didn't care about the fafsa forms business at all. They bought them entirely to get a big pile of marketing leads to sign up young people for banking services early in their adult life before they're signed up with other banks, through a brand they're already familiar with. Considering how many "$200 to open a new checking account!!" junk mail fliers Chase sends me, $41/lead must've seemed like a bargain.

She probably thought they would just be subsumed into a massive corporation, that JPM had shitty metrics and monitoring on their marketing campaign, and nobody would notice most of their emails were going nowhere.

Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#80

Post by spaceman_2020 »

jjgoldman wrote: post #13

Sounds very clearly that JPMC was defrauded, and at the same time did a very poor job of due diligence in a 9 figure acquisition. How did a financial audit not uncover the dramatic mismatch in actual vs. purported activity? How does a transaction value of $41 per user (x 4.25M users) not translate to an auditable revenue stream? This doesn't look good on either party.

I'd reckon all that money slushing around didn't help either. The company was acquired in Sep 2021, right near the peak of the insanity unfolding across markets.
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