JP Morgan shut down student financial-aid website Frank, which it acquired for $175 million, and is suing its founder over what it says are misleading statements the bank gave about its user base.

The multinational institution purchased the startup company in 2021, believing it had more than 4 million users. It alleges 30-year-old founder Charlie Javice created a slew of fake accounts to embellish the company's credentials and capabilities and close the sale.

JP Morgan filed a complaint in the U.S. District Court of Delaware. It argues Javice attempted to avoid providing proof of its user base before ultimately fabricating evidence that it served more than 4 million students who do not exist. In reality, Frank had about 300,000 clients.

"After JPMC insisted, Javice chose to invent several million Frank customer accounts out of whole cloth," the complaint obtained by Forbes said.

A spokesperson for JP Morgan told CNBC that the organization believed it was helping Frank grow and "deepen" its relationship with borrowers, believing it was the "fastest-growing college financial planning platform."

Javice filed a countersuit against JP Morgan, accusing the financial giant of terminating her without cause and launching an undue investigation into her activities.

"After JPMC rushed to acquire Charlie's rocketship business, JPMC realized they couldn't work around existing student privacy laws, committed misconduct and then tried to retrade the deal," said Alex Spiro, an attorney for Javice.

Spiro said JP Morgan's lawsuit is a "cover" for its own improper activities.

In 2020, the Federal Trade Commission warned Frank to stop using "potentially misleading marketing" tactics directed at students related to seeking financial relief in light of COVID-19.

"It is unlawful to make representations that are likely to deceive consumers. This includes express or implied representations, whether made directly or indirectly," the complaint said.

The FTC also voiced concern that Frank was misusing data acquired from "misled" students and selling that data to third parties for profit.

The Frank website is no longer operational. Visitors are met with a message that reads, "Frank is no longer available. To file your Free Application for Federal Student Aid (FAFSA®), visit StudentAid.gov."

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