The U.S. regulators are scrutinizing the due diligence that JPMorgan Chase (NYSE:JPM) conducted on dozens of smaller acquisitions that the leading bank made in 2021 and 2022, the Financial Times reported. Dealogic estimates that JPMorgan made 80 purchases and strategic investments in 2021 and 2022. The move comes after the founder of now-shuttered student financial aid startup Frank, acquired by JPMorgan in 2021, is facing fraud charges.
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The Office of the Comptroller of the Currency (OCC), which supervises national banks, scheduled a specific audit of JPMorgan’s dealmaking, including the $175 million acquisition of Frank, whose founder Charlie Javice has been charged with conspiracy to commit bank, wire, and securities fraud.
Last week, Javice was accused by the Department of Justice (DOJ) of “falsely and dramatically” inflating the number of customers Frank actually had to “fraudulently induce” JPMorgan to acquire the startup. Last Tuesday, the U.S. Securities and Exchange Commission also sued Javice, accusing her of defrauding JPMorgan.
The charges filed by the DOJ and the SEC against Javice come after JPMorgan filed a lawsuit against Javice in December, alleging the Frank founder told the bank that the startup had 4.25 million customers, when in reality it had only 300,000 customers. Javice allegedly made a $45 million profit from the sale of the company.
JPMorgan shutdown Frank in January, with CEO Jamie Dimon calling the deal a “huge mistake.” The Frank deal is expected to be a key area of focus for the OCC due to the bank’s failure to identify the false claims made by Javice about Frank’s customer base. Meanwhile, in a countersuit filed against JPMorgan, Javice denied the bank’s allegations of falsifying accounts.
Is JPM Stock a Buy?
JPMorgan is scheduled to announce its Q1 2023 earnings on April 14. Analysts expect the company’s Q1 EPS to jump to $3.40 compared to $2.63 in the prior-year quarter.
Wall Street’s Strong Buy consensus rating for JPMorgan Chase is based on 12 Buys and three Holds. The average JPM stock price target of $152.47 suggests 19.6% upside potential.
