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Bad decision. > Javice asked an “outside data scientist” to fabricate a list of customers when the bank asked for proof of Frank’s user data, -NBC If they had

Bad decision. > Javice asked an “outside data scientist” to fabricate a list of customers when the bank asked for proof of Frank’s user data, -NBC If they had 3 million fake accounts and didn’t catch the fraud, then they were in on it. It’s a great deal. If the company does well, everyone wins. If it doesn’t, then you already know you can claim fraud. At that point it’s not fraud.

HFguy 2y ago
How exactly do you think JPM would benefit from fake customers???
- zakki 2y ago
  When fake customers generate real customers.
- goodluckchuck 2y ago
  I simply mean they probably knew the business didn’t have that 4 Million customers and they were probably content to buy a business that had 300k customers. Would you have turned down an early opportunity to invest in Facebook, Reddit, Airbnb, etc, when they were in a fake it till you make it stage? It’s prudent to recognize that yes the business is cooking the books (after all we’re JPM, you don’t think we do some of that ourselves?) and yes they may also be a worthwhile bet.
  - hattmall 2y ago
    The way this is different is because those sites were faking it to make their site seem more active to users. Here there's no draw to users it's ONLY for the valuation and purchase. JPM wanted 4 million people unable to fill out a FAFSA but willing to pay to have it done. The exact kind of person who fucks up credit cards and pays $$$ of interest for years.
- blatantly 2y ago
  A person or group working there benefited from it, which is enough for it to happen. 2008 was that at an endemic scale.
  - rchaud 2y ago
    Nothing to do with 2008. JP Morgan and the other banks made fees by selling mortgage-backed securities where the real credit risk was obscured by packaging good mortgages with bad. JP Morgan spending $175m for hot air isn't something they can spin into gold.
- khazhoux 2y ago
  Volume!
skybrian 2y ago
If they're both doing it, isn't it still fraudulent accounting?
aprilthird2021 2y ago
It doesn't matter if they were in on it though. It's still a crime to commit fraud even if the people investing think fraud is good
bradfa 2y ago
How does due diligence miss this? Not saying the bank was in on it but it feels like the bank screwed up.
- dmix 2y ago
  If I remember correctly this fraud was only done after they got acquired. The company's sales/marketing dept asked the newly acquired startup for a customer list to hit up, which is when the founder generated one after being asked repeatedly for it. Which is when they were caught, emails bounced and they noticed the excel sheet rows matched the total limit in Excel. So apparently the M&A team trusted the startup was successful when purchasing without seeing the customer list. Most startups get reputation through their press + fancy VC backers giving social credit + a good slide deck, which apparently was enough.
  - bpodgursky 2y ago
    A startup would never give away their customer list to during due diligence. That would be insane. Many unscrupulous acquirers would take it, clone the product, and run.
    - dmix 2y ago
      Good point, another commenter above linked to the court records which explained she provided this during due-diligence: > Javice agreed to provide in the template actual customer data for all fields except email and home street addresses; those she agreed to provide as a “unique ID” due to alleged privacy concerns. So they did verify it but didn't catch it until the real list was sent.
      - bpodgursky 2y ago
        I'm not sure what JPMorgan could have done before closing the deal realistically. At a point society only works if people tell some version of the truth. It's very hard to protect against blatant and shameless fraud beforehand.
yubblegum 2y ago
That seems to also help with scaring off potential competitors in that niche. So, she knew that they knew that she knew that they knew, but what they knew and she didn't know was ___. (You can ask a chat box to fill in the blank there.)
hug 2y ago
> She asked the Director of Engineering if he could help her take a known set of FAFSA application data and use it to artificially augment a much larger set of anonymous data that her systems had collected over time. The Director of Engineering questioned whether creating and using such a data set was legal, but Javice tried to assure the engineer by claiming that this was perfectly acceptable in an investment situation and she did not believe that anyone would end up in an “orange jumpsuit” over this project https://www.documentcloud.org/documents/23570243-frank_suit/#document/p21 https://www.documentcloud.org/documents/23570243-frank_suit/...
- fulladder 2y ago
  If your boss brings up "orange jumpsuits" in any context, you should probably start looking for a new job. Even if it's to tell you that you won't be wearing one, the fact that the person thinks this way is very sus.
Aurornis 2y ago
> At that point it’s not fraud. There is no fraud exception where the person gets away with committing the fraud because you think the other party should have caught it. You’re also mistaken if you think JPM had upside in acquiring a fraudulent business with fraudulent users. There isn’t a scenario where they do well with it because they couldn’t sell a fraudulent company. They become responsible for the fraud if they tried to resell it.

HFguy 2y ago

How exactly do you think JPM would benefit from fake customers???

zakki 2y ago
When fake customers generate real customers.
goodluckchuck 2y ago
I simply mean they probably knew the business didn’t have that 4 Million customers and they were probably content to buy a business that had 300k customers. Would you have turned down an early opportunity to invest in Facebook, Reddit, Airbnb, etc, when they were in a fake it till you make it stage? It’s prudent to recognize that yes the business is cooking the books (after all we’re JPM, you don’t think we do some of that ourselves?) and yes they may also be a worthwhile bet.
- hattmall 2y ago
  The way this is different is because those sites were faking it to make their site seem more active to users. Here there's no draw to users it's ONLY for the valuation and purchase. JPM wanted 4 million people unable to fill out a FAFSA but willing to pay to have it done. The exact kind of person who fucks up credit cards and pays $$$ of interest for years.
blatantly 2y ago
A person or group working there benefited from it, which is enough for it to happen. 2008 was that at an endemic scale.
- rchaud 2y ago
  Nothing to do with 2008. JP Morgan and the other banks made fees by selling mortgage-backed securities where the real credit risk was obscured by packaging good mortgages with bad. JP Morgan spending $175m for hot air isn't something they can spin into gold.
khazhoux 2y ago
Volume!

skybrian 2y ago

If they're both doing it, isn't it still fraudulent accounting?

aprilthird2021 2y ago

It doesn't matter if they were in on it though. It's still a crime to commit fraud even if the people investing think fraud is good

bradfa 2y ago

How does due diligence miss this? Not saying the bank was in on it but it feels like the bank screwed up.

dmix 2y ago
If I remember correctly this fraud was only done after they got acquired. The company's sales/marketing dept asked the newly acquired startup for a customer list to hit up, which is when the founder generated one after being asked repeatedly for it. Which is when they were caught, emails bounced and they noticed the excel sheet rows matched the total limit in Excel. So apparently the M&A team trusted the startup was successful when purchasing without seeing the customer list. Most startups get reputation through their press + fancy VC backers giving social credit + a good slide deck, which apparently was enough.
- bpodgursky 2y ago
  A startup would never give away their customer list to during due diligence. That would be insane. Many unscrupulous acquirers would take it, clone the product, and run.
  - dmix 2y ago
    Good point, another commenter above linked to the court records which explained she provided this during due-diligence: > Javice agreed to provide in the template actual customer data for all fields except email and home street addresses; those she agreed to provide as a “unique ID” due to alleged privacy concerns. So they did verify it but didn't catch it until the real list was sent.
    - bpodgursky 2y ago
      I'm not sure what JPMorgan could have done before closing the deal realistically. At a point society only works if people tell some version of the truth. It's very hard to protect against blatant and shameless fraud beforehand.

yubblegum 2y ago

That seems to also help with scaring off potential competitors in that niche. So, she knew that they knew that she knew that they knew, but what they knew and she didn't know was ___. (You can ask a chat box to fill in the blank there.)

hug 2y ago

> She asked the Director of Engineering if he could help her take a known set of FAFSA application data and use it to artificially augment a much larger set of anonymous data that her systems had collected over time. The Director of Engineering questioned whether creating and using such a data set was legal, but Javice tried to assure the engineer by claiming that this was perfectly acceptable in an investment situation and she did not believe that anyone would end up in an “orange jumpsuit” over this project https://www.documentcloud.org/documents/23570243-frank_suit/#document/p21 https://www.documentcloud.org/documents/23570243-frank_suit/...

fulladder 2y ago
If your boss brings up "orange jumpsuits" in any context, you should probably start looking for a new job. Even if it's to tell you that you won't be wearing one, the fact that the person thinks this way is very sus.

Aurornis 2y ago

> At that point it’s not fraud. There is no fraud exception where the person gets away with committing the fraud because you think the other party should have caught it. You’re also mistaken if you think JPM had upside in acquiring a fraudulent business with fraudulent users. There isn’t a scenario where they do well with it because they couldn’t sell a fraudulent company. They become responsible for the fraud if they tried to resell it.