Mathieu Shapiro Discusses the saga of JPMorgan Chase and Frank in American Banker

Obermayer managing partner Mathieu Shapiro was interviewed by American Banker on January 27, 2023, in connection with Bank-fintech acquisitions and more specifically, the saga of JPMorgan Chase and Frank. JPMorgan Chase filed a lawsuit on Dec. 22, 2022, alleging that it was defrauded by the founder of Frank, a college financial-planning website that it acquired in September 2021. JPMorgan Chase paid $175 million to acquire Frank on the premise that it had 4.25 million customers with accounts, but in reality, the vast majority were fabricated, according to the complaint, and there were fewer than 300,000 true users. Observers who read JPMorgan Chase’s complaint wondered if there were some key steps the bank missed in due diligence. 

“Entrepreneurs turn into these media stars,” said Mathieu Shapiro, who likened the rise and fall of Frank to the scandals revolving around the health technology company Theranos and cryptocurrency exchange FTX. “Once you have the whole world talking about how great they are, it becomes harder to stand up and say, this doesn’t compute, what are they actually doing to make the loan process easier?”

In its complaint, JPMorgan Chase noted that college students represented a market it wanted to better reach. It cited the 4.25 million customer count as a sign that Frank was “deeply engaged with the college-aged market segment.” In its complaint, Chase also lays out the steps it took, including reviewing a spreadsheet of 4,265,085 individual students who were purportedly customers of Frank and sending an email requesting specific details to back up the number of purported users. After Javice declined to submit emails and home addresses for privacy reasons, Chase agreed to use a third-party data management vendor to validate Frank’s customer information. 

“What any two entities decide to accept in terms of respecting privacy, coming up with a confidentiality agreement, letting a handful of people look at the actual data or not — that is all part of the negotiation process,” said Shapiro. “There may be reasons why Javice wanted to insist on privacy, at which point it falls to the acquirer to say, am I willing to go forward without the information I otherwise would have gotten?”

Read the full article, “‘A huge mistake’: Lessons from the JPMorgan-Frank fintech deal“,  here.