JPMorgan Chase Files Insurance Claim On Frank Acquisition

J.P. Morgan Chase reportedly aims to collect on an insurance policy after its acquisition of college aid platform Frank.

The bank and Frank founder Charlie Javice are now engaged in a court battle, and J.P. Morgan Chase has filed a claim on a “representations and warranties” policy that it took out on the deal and that applies in cases of fraud, the Financial Times (FT) reported Wednesday (June 21), citing unnamed sources

If the insurance policy taken out by the bank covers 10% to 20% of the purchase price, as is typical of policies of that sort, the amount J.P. Morgan Chase would recoup on its $175 million acquisition of Frank would be between $17.5 million and $35 million, according to the FT report.

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J.P. Morgan Chase acquired Frank in September 2021 with plans to add the platform’s tools that helped students at colleges and universities apply for and negotiate financial aid, enroll in online classes and find scholarships.

The bank planned to have Frank keep its branding and continue to be led by Javice.

Fifteen months later, in January, J.P. Morgan Chase brought a lawsuit against Javice, saying it was defrauded in the deal because Javice and another Frank executive, Olivier Amar, inflated the number of customers who were using the platform.

The bank said in its lawsuit that it made the acquisition believing that Frank had about 4.3 million customers but later learned that the platform had only about 300,000.

Lawyers for Javice said in response to the lawsuit that J.P. Morgan Chase didn’t perform due diligence, rushed into the deal and launched its internal investigation of the deal to fire Javice and deny her a retention bonus.

In April, two federal agencies got involved, with the Securities and Exchange Commission (SEC) charging Javice with fraud in connection with the deal, and the Office of the Comptroller of the Currency (OCC) launching an audit looking into J.P. Morgan Chase’s due diligence on its recent acquisitions.

In addition, Javice has filed a countersuit against the bank in which she denies the allegations of falsifying accounts, according to Wednesday’s report by the FT.