OCC to audit JPMorgan’s dealmaking: sources
The Office of the Comptroller of the Currency has planned a specific audit of JPMorgan Chase’s deal-making, the Financial Times reported on Friday, citing people familiar with the matter.
JPMorgan’s due diligence has been called into question as a scandal – which has evolved into university support platform Frank, which the bank bought in 2021.
The Justice Department on Tuesday charged Frank’s founder, Charlie Javice, with wire fraud, wire fraud, securities fraud and conspiracy to commit wire 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 was also reportedly pursuing Frank at the time.
JPMorgan sued Javice in December, alleging 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 allege 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 computer science professor at a New York-area college to set up the accounts, JPMorgan said in its December lawsuit.
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 planned before JPMorgan filed its December lawsuit, 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 deal-making accelerated after JPMorgan CEO Jamie Dimon promised in 2020 that the bank would be “much more aggressive with acquisitions across the board.”
However, regulations prohibit the bank from acquiring more US-based deposit-taking institutions because it already holds more than 10% of US deposits.
So JPMorgan started investing in banking-adjacent businesses. It acquired UK digital wealth management platform Nutmeg and acquired significant stakes in Greek fintech Viva Wallets and Brazilian digital bank C6.
But the bank has also invested in platforms that lie further afield: a majority stake in Volkswagen’s payment business or, for example, buying the company behind the Zagat guide book. Last month, JPMorgan agreed to buy Aumni, a Salt Lake City-based investment analytics fintech, for an undisclosed sum.
JPMorgan shut down the Frank platform in January.
