A NOTE FROM OUR EDITOR-IN-CHIEF ALYSON SHONTELL

That’s the question Luisa Beltran asks in her latest story on JPMorgan’s blunder with student loan startup Frank. The bank bought Frank in September 2021 for $175 million. At the time, Frank’s founder Charlie Javice claimed it had at least 4.25 million customers—which would have given it about a quarter of the college market.

If only it were true.

Instead, it appears Javice fudged the numbers and made up a few million accounts in a fairly unsophisticated way that JPMorgan—which does plenty of M&A—should have caught during due diligence.

“It’s a head-scratcher for me to think JPMorgan missed [the alleged fake accounts] during due diligence,” David Donovan, who leads the Americas financial-services practice at technology-consulting firm Publicis Sapient, told Beltran.

A VC who backed Frank agreed. “It would be very odd to me to go through a $175 million transaction without testing the email accounts,” they said.

So how exactly did this happen? And who inside and around the bank was responsible for the major oops? Beltran found four executives who were driving forces behind the deal and more in her report on the saga, which you can read in full here.

—Also, Fortune is producing its first documentary with Mark Wahlberg’s Unrealistic Ideas about the downfall of FTX, with exclusive participation from Binance chief Changpeng “CZ” Zhao. Reach out to me if you have information or want to participate. 

JPMorgan hoped to get a foothold in the fast-growing world of student loans. Instead, they got a huge headache.

FEBRUARY 3, 2023

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