As the fraud trial against former Frank executives Charlie Javice and Olivier Amar continues, the defense has repeatedly clashed with Judge Alvin K. Hellerstein over the crucial issue of whether JPMorgan Chase’s failure to properly vet Frank’s user data before its $175 million acquisition undercuts its claim of being defrauded.
Yesterday’s testimony from JPMorgan executive Ryan Macdonald revealed that despite assigning 350 people to evaluate the deal, the bank never independently verified the 4.25 million user claim before closing the acquisition. Instead, it proceeded with the purchase before even reviewing the results of a limited pre-closing test—and the final purchase agreement never mentioned user numbers as a condition of the deal.
These revelations raise a fundamental question: If JPMorgan didn’t view user numbers as a key factor in its decision, can it claim to have been deceived?
Judge Limits Defense’s Efforts to Question JPMorgan’s Due Diligence
Throughout the hearing, defense attorney Christopher Tayback attempted to introduce evidence that would demonstrate JPMorgan was never truly concerned about Frank’s actual user numbers before the deal was finalized. However, Judge Hellerstein repeatedly blocked these attempts, siding with the prosecution’s argument that the focus should remain on whether the defendants made fraudulent representations.
One major sticking point was the defense’s effort to introduce Exhibit an exhibit about the Department of Education’s notice on new two-factor authentication requirements for FAFSA submissions. The defense wanted to argue that this policy change—not alleged fraud—was the real reason JPMorgan soured on the acquisition. The judge shut this down immediately.
“There’s no cause and effect. What Chase did afterward has no bearing on whether there was fraud at the time of acquisition,” Hellerstein ruled.
Prosecutor Georgia Kostopoulos reinforced this, stating:
“The fraud happened when the defendants provided a fake customer list. JPMorgan’s internal decision-making is irrelevant.”
Another critical defense argument involved JPMorgan’s own internal understanding of Frank’s user base. A banned SEO presentation suggested that JPMorgan executives knew the numbers were based on website traffic, not unique email accounts. The defense hoped to introduce this to prove the bank was not misled, but Judge Hellerstein dismissed it outright, stating, “I won’t change my ruling. It says nothing of the kind.”
JPMorgan’s Flawed Due Diligence Process: 350 People, No Verification
Despite assigning 350 employees to vet the deal, JPMorgan never conducted a full review of Frank’s user data before signing the acquisition agreement. The testimony of JPMorgan executive Ryan Macdonald outlined a troubling sequence of events:
- July–August 2021: JPMorgan conducted a test on a fraction of Frank’s user base, only a few hundred thousand users—far less than the 4.25 million number being floated, and more in line with the number of FAFSA signups.
- September 2021: JPMorgan signed the acquisition deal before reviewing the results of this limited test.
- Once JPMorgan integrated Frank’s website into its own Internet framework, it wrote on Javice’s bio, “[her] company helped about 350,000 students find about $7 billion in aid,” demonstrating a clear acknowledgement of the actual figures.
- March 2022: Only after the deal closed did JPMorgan fully examine the test results and realize Frank’s actual user base was significantly smaller.
- “We didn’t conduct a formal test of the full dataset before acquisition,” Macdonald admitted.
This timeline bolsters the defense’s claim that user numbers were never a dealbreaker for JPMorgan. If the bank was making its decision based on a different set of priorities—such as Frank’s marketing potential or FAFSA submission tool—then its assertion that it was defrauded by inflated user figures becomes questionable.
Another key factor is that JPMorgan’s final contract with Frank did not require verification of user numbers as a condition of the deal, nor did it mention user numbers at all. This further suggests that user data was not a core concern in the acquisition.
If JPMorgan never intended to verify user numbers before closing, and never made them a contractual obligation, then the defense’s argument is simple: how can the bank now claim to be a victim of fraud?
The July/August 2022 Test—A Year Too Late
Macdonald’s testimony also exposed the fact that JPMorgan did not conduct a full-scale analysis of Frank’s user data until nearly a year after the acquisition.
July–August 2022: The bank finally conducted a full test to determine whether Frank had the user numbers it claimed.
Findings: This test revealed that Frank’s legitimate user base was closer to 400,000, not millions.
Aftermath: JPMorgan executives debated offloading Frank at a discount to Sallie Mae rather than dealing with the fallout of a bad acquisition.
This delay in testing the data suggests that JPMorgan executives were not particularly concerned about user figures until well after the deal had closed. The defense argues this further proves that JPMorgan was not deceived—because it never prioritized user count verification in the first place.
“If user numbers were a primary concern, why didn’t they conduct a full test before closing? Why did they sign the contract without requiring verification? Why did they wait a year before checking?” the defense has repeatedly asked.
These unanswered questions undermine the bank’s claim of being misled.
Was JPMorgan Defrauded—Or Did It Make a Bad Business Bet?
The most revealing part of Macdonald’s testimony was that JPMorgan executives quickly lost confidence in the deal and began considering selling Frank at a discount.
Once the July/August 2022 test confirmed the user base was significantly smaller than expected, the bank’s internal discussions shifted from scaling Frank’s business to dumping it at a loss.
“If a business deal turns out poorly, that doesn’t mean fraud occurred,” the defense has argued.
JPMorgan’s initial enthusiasm for the deal, failure to analyze test results before closing, lack of contractually binding user guarantees, public recognition of the size of the following Javice built, and delayed realization of user discrepancies all point to one conclusion: the bank was willing to take risks—and now regrets it.
However, Judge Hellerstein’s repeated rulings in favor of the prosecution have made it difficult for the defense to present this argument fully.
Despite the strong evidence that JPMorgan willingly entered the deal without requiring a full verification of user numbers, the defense continues to struggle with judicial roadblocks that limit its ability to highlight these facts.
Judge Hellerstein’s insistence that JPMorgan’s due diligence process is irrelevant to whether fraud occurred remains a significant obstacle. However, as more details emerge about the bank’s internal decisions and its failure to prioritize user data, the defense may still have a chance to shift the narrative.
With the prosecution focusing on whether Javice and Amar misrepresented Frank’s user base, and the defense arguing that JPMorgan never cared about user numbers until after the fact, the jury must now determine whether this was a case of deception or a business gamble gone wrong.
As the trial moves forward, expect the defense to continue pushing to introduce evidence that demonstrates JPMorgan’s internal knowledge of the risks and its own role in the deal’s downfall. However, with Judge Hellerstein maintaining firm control over the scope of the arguments, the defense’s ability to fully explore these issues remains uncertain.
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