The Office of the Comptroller of the Currency has scheduled a specific audit of JPMorgan Chase’s dealmaking, the Financial Times reported Friday, citing people familiar with the matter.
JPMorgan’s due diligence has come into question as a scandal — embroiling the college-aid platform Frank, which the bank bought in 2021 — has deepened.
The Justice Department on Tuesday charged Frank’s founder, Charlie Javice, with wire fraud, bank fraud, securities fraud and conspiracy to commit bank and wire fraud. The Securities and Exchange Commission, additionally, charged Javice with fraud, alleging she misrepresented the size of Frank’s user base in an attempt to entice JPMorgan to buy the startup in a deal worth $175 million. A competitor bank also was allegedly pursuing Frank at the time.
JPMorgan sued Javice in December, asserting that she claimed, in pitch materials and verbal presentations, that Frank had 4.25 million users but that the platform’s customer base actually numbered fewer than 300,000.
Prosecutors claim that, during discussions with JPMorgan, Javice asked Frank’s director of engineering to create “an artificial, synthetic data set” from the company’s actual data set.
But when the engineer refused, Javice hired a data science professor at a New York-area college to create the accounts, JPMorgan said in its December suit.
The bank has said it realized something was wrong after it sent marketing materials to users on the larger list but found that 28% were delivered and 1.1% were opened.
The OCC audit was scheduled before JPMorgan filed its December suit, the Financial Times reported Friday. JPMorgan and the OCC declined to comment to the Financial Times or Reuters.
The bank made 80 purchases and strategic investments in 2021 and 2022, according to Dealogic.
The dealmaking accelerated after JPMorgan’s CEO, Jamie Dimon, pledged in 2020 that the bank would be “much more aggressive with acquisitions across the board.”
Regulations, however, prohibit the bank from acquiring additional U.S.-based deposit-taking institutions because it already holds more than 10% of U.S. deposits.
So JPMorgan took to investing in businesses that are banking-adjacent. It bought British digital wealth management platform Nutmeg and acquired significant stakes in the Greek fintech Viva Wallets and the Brazilian digital bank C6.
But the bank has also invested in platforms that are further afield: a majority stake in Volkswagen’s payments business or, for example, buying the company behind the Zagat guidebook. Last month, JPMorgan agreed to purchase Aumni, a Salt Lake City-based investment analytics fintech, for an undisclosed sum.
JPMorgan shut down the Frank platform in January.