Even JP Morgan Gets Scammed... US Startup Inflates Customer Numbers 14 Times

One of the largest investment banks in the United States, JP Morgan, was defrauded of a large sum by a startup founder in his 30s. This is the story of Charlie Jeibis (31), who founded the student loan brokerage startup 'Frank' and once captured the attention of the U.S. financial sector and media.

The New York Times (NYT) reported on the 5th (local time) that Charlie Jeibis was indicted on three charges, including financial fraud. According to the media, Jeibis faces up to 30 years in prison.

Jeibis is a graduate of the prestigious University of Pennsylvania's Wharton School MBA program and founded the fintech startup 'Frank' in 2017, which brokered student loans for college students.

The United States, home to many world-renowned universities, also has a massive student loan industry. As of last year, the total outstanding student loan balance reached $1.7 trillion (approximately 2,240 trillion KRW), comparable to South Korea's gross domestic product (GDP).

Charlie Javis, Founder of 'Frank'
Photo by AP Yonhap News

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Private financial institutions such as banks have also entered the student loan business, making loan conditions stringent and procedures complex. Frank started with the idea of mediating between students struggling with student loan issues and lenders to improve student convenience.

Jeibis was only in his mid-20s when he took on the role of CEO of Frank.

He contributed a scathing column to the NYT criticizing the U.S. student loan system, attracting the spotlight from both the financial industry and the media.

Thanks to this, Frank was able to attract large investments from angel investors and venture capitalists. Building on early success, Jeibis achieved the feat of being selected as one of Forbes' "30 Under 30" in 2019 by a U.S. economic media outlet.

Amid Frank's dazzling growth, JP Morgan also expressed interest in investing. In September 2021, JP Morgan announced it would acquire Frank for $175 million (230 billion KRW). At that time, Jeibis claimed that Frank had collected information on 4.25 million students.

However, shortly after the merger was completed, JP Morgan sensed something was amiss. They sent marketing survey emails to 400,000 Frank customers, but only 28% of the accounts successfully received the emails, and only 103 people actually clicked the link.

JP Morgan requested an investigation from authorities, and the investigation revealed that Frank's actual membership was only about 300,000. Jeibis had inflated the customer base by about 14 times.

Currently, Jeibis has appointed Alex Spiro of the major U.S. law firm Quinn Emanuel as his lawyer and spokesperson. Jeibis's side claims, "JP Morgan realized that this business might conflict with existing student privacy laws and is trying to cancel the deal negatively."

Jamie Dimon, CEO of JP Morgan, admitted during the earnings announcement in February that the acquisition of Frank was "a big mistake."

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