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Regulator Is Auditing JPMorgan Chase’s Due Diligence In Acquisitions

 |  April 9, 2023

A regulator is reportedly looking into JPMorgan Chase’s due diligence on recent acquisitions.

The Office of the Comptroller of the Currency (OCC) launched the audit before lawsuits were filed against the founder of one of the acquired companies, college financial planning platform Frank, the Financial Times (FT) reported Friday (April 7), citing unnamed sources.

A JPMorgan Chase spokesperson declined to comment on the report. An OCC spokesperson declined to comment, saying the regulator does not comment on specific banks.

Frank was one of 80 companies acquired or invested in by JPMorgan Chase in 2021 and 2022. While that purchase did not cause the OCC’s audit, it is likely to be a focus of the audit because the bank did not uncover during due diligence the problems that would later lead it to file a civil lawsuit against Frank’s founder, according to the report.

Read more: JPMorgan Chase Buys Data Analytics Firm Aumni

JPMorgan Chase brought its lawsuit against Frank founder Charlie Javice in January, saying that she and another Frank executive, Olivier Amar, defrauded the bank by inflating the number of customers who were using the platform, Bloomberg reported Jan. 11.

The bank said in its lawsuit that it made the $175 million acquisition believing that Frank had about 4.3 million customers but later learned that the platform had only about 300,000 customers, according to the report.

It alleges that Javice and Amar had someone create millions of fake accounts in order to mislead the bank as it was considering making the deal, the report said.

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

Javice faces lawsuits from federal regulators as well. She was charged Tuesday (April 4) by the Securities and Exchange Commission (SEC) with fraud in connection with the sale of Frank, with the SEC alleging that she used that fake information to induce JPMorgan Chase into making that transaction.

In addition, the Department of Justice has charged Javice with bank fraud, wire fraud and securities fraud.

A year before the 2021 acquisition of Frank, JPMorgan CEO Jamie Dimon said the bank would be “much more aggressive” in its approach to acquisitions. The bank also added FinTechs with expertise in sustainable investing, robo-advising and constructing tax-efficient portfolios.