Finance

Employees of a startup purchased by JPMorgan Chase expressed disbelief when the company’s founder directed them to boost their customer count ahead of the acquisition, according to internal messages released Thursday in a legal filing.
The founder, Charlie Javice, instructed employees to change “public-facing numbers” of college aid platform Frank to 4.25 million customers in January 2021, JPMorgan alleged in the filing.
“Do we really have 4.25M students?” one Frank employee asked in a January 2021 Slack thread.

Charlie Javice, who is charged with defrauding JPMorgan Chase & Co into buying her now-shuttered college financial aid startup Frank for $175 million in 2021, arrives at United States Court in Manhattan in New York City, June 6, 2023.
Mike Segar | Reuters

Employees of a startup purchased by JPMorgan Chase expressed disbelief when the company’s founder directed them to boost their customer count ahead of the acquisition, according to internal messages released Thursday in a legal filing.
The founder, Charlie Javice, instructed employees to change “public-facing numbers” of college aid platform Frank to 4.25 million customers in January 2021, JPMorgan alleged in the filing. Frank had fewer than 300,000 real customers when JPMorgan bought it in September 2021, the bank has alleged.

“Do we really have 4.25M students?” one Frank employee asked in a January 2021 Slack thread.
“Is this real?” another asked.
“Charlie is king of finding magic numbers,” wrote another employee, whose names were redacted in the filing.
The release of private staff messages is part of the latest salvo in the legal dispute between Javice and JPMorgan, which paid $175 million for the startup. JPMorgan, the biggest U.S. bank by assets and a steady acquirer of fintech startups, sued Javice in December 2022, alleging that the founder had lied about her company’s scale to close the deal.
According to Thursday’s filing, Javice justified the change in user stats by telling employees that website visitors counted as customers, the bank alleged.

In its original suit, JPMorgan alleged that Javice hired a data science professor to concoct fake accounts after an employee refused to do so.
Javice’s problems have intensified in recent weeks. In April, the startup founder was criminally charged by the Department of Justice and sued by the Securities and Exchange Commission, both which accused her of fraud related to the company sale.
Javice has said in court filings that JPMorgan knew how many users Frank had and that the bank sought to blame her for its mistakes.
A lawyer for Javice didn’t immediately respond to messages left late Thursday. More

Bank of America has committed to giving more than $500 million in equity investments to minority- and women-led fund managers to support diverse entrepreneurs.
More than 60% of the fund managers who can pull from the equity pool are led by women.
So far, more than 150 funds have used the equity to invest in upward of 1,000 companies.

A Bank of America branch in New York’s Times Square.
Stan Honda/AFP/Getty Images

Bank of America has committed to giving more than $500 million in equity investments to minority- and women-led fund managers to support diverse entrepreneurs, the bank announced Thursday in a press release. 
More than 60% of the fund managers who can pull from the equity pool are led by women, more than 65% are led by Black individuals, more than 20% by Hispanics and Latinos and more than 15% are led by Asians, said Tram Nguyen, global head of strategic and sustainable investments at Bank of America.

The program started in 2020 and so far, more than 150 funds have used the equity to invest in upward of 1,000 companies, collectively controlling $7 billion of capital, Bank of America said. This translates to support for 1,500 diverse entrepreneurs and the employment of more than 21,000 people.
“We work across our company to address critical needs in our communities, including the lack of access to capital that diverse business owners face as they start or grow their businesses,” Nguyen said in a news release.
In 2023 so far, ventures led or founded by Black or Asian individuals typically received approximately 0.9% of venture capital funding, while businesses led by Hispanic and Latino individuals received roughly 0.94%, according to data from Crunchbase.
Total VC dollars put into companies last year dropped 36%, affected by the rise in inflation and interest rates, and Black-owned businesses saw a 45% drop, CNBC’s Gabrielle Fonrouge reported in February.
Bank of America is also separately working with the National Football League and National Black Bank Foundation to support Black- and minority-owned banks, CNBC’s Frank Holland reported.
“We’re very focused on supporting our fund managers,” Nguyen said. “We’re building a community, connecting them with our company and its vast network and resources, connecting them with each other and the broader investment community.” More

CAVA, at the New York Stock Exchange during its initial public offering, June 14, 2023.
Source: NYSE

Check out the companies making the biggest moves midday.
Cava Group — Shares soared 99% in midday trading during its first day as a public company. Cava Group priced its initial public offering at $22 per share and began trading Thursday at $42 per share.

SkyWest — The airline stock gained 4.51% after being upgraded by Deutsche Bank to buy from hold. The Wall Street firm said it believes there will be “significant improvement” in the company’s return on invested capital over the next two to three years. Deutsche Bank also upgraded Allegiant, which was up 1.4% in midday trading.
Domino’s Pizza — The pizza chain gained 6.46% after Stifel upgraded the stock to buy from hold. The firm said delivery sales should stabilize further while carryout sales pick up in the next year.
Kroger — Shares dropped 2.69%. On the company’s earnings call Thursday, Kroger CEO Rodney McMullen said, “The economic environment is more significantly impacting our budget-conscious shoppers.” The company reaffirmed identical sales, without fuel, and adjusted earnings-per-share guidance for the full year. Kroger also posted revenue that came in slightly below Wall Street’s expectations. Sales for the first quarter were $45.17 billion, compared with analysts’ forecast of $45.26 billion, according to FactSet.
Target — Shares of the big-box retailer jumped nearly 3.46% after Bernstein reiterated its outperform rating on the stock. The Wall Street firm said investors should buy the weakness in Target shares, which are down 15% over the past month.
Lennar — Shares of the homebuilder rose 4.41% Thursday. Lennar reported better-than-expected results for the fiscal second quarter Wednesday evening. The company said it generated $3.01 in earnings per share on $8.05 billion in revenue. Analysts were expecting $2.33 in earnings per share on $7.22 billion of revenue, according to FactSet. The company’s earnings were boosted by gains on technology investments, but Lennar still would have beaten expectations excluding that benefit. Lennar also hiked its full-year guidance for home deliveries.

SoFi Technologies — The financial technology stock slid 1.95% following a downgrade by Oppenheimer to perform from outperform. The Wall Street firm said it was bullish long term, but believes the stock price has been seeing appreciation much stronger than experienced in the broader market.
AutoZone — The stock added 4.08% after the auto parts retailer authorized the repurchase of an additional $2 billion of the company’s common stock late Wednesday.
Corning — Shares gained 1.81% after Citi upgraded Corning to buy from neutral. The Wall Street firm also boosted its price target to $40 from $36, suggesting upside of more than 20% from Wednesday’s close. Citi said it has “greater conviction” in the glass maker’s margin recovery potential.
John Wiley & Sons — Shares sank about 11.39%. The company reported adjusted earnings per share for the fiscal fourth quarter of $1.45, up from $1.08 per share a year ago. However, revenue declined, coming in at $526.1 million, compared with $545.7 million last year. Management also announced a restructuring plan, divesting its noncore education businesses.
Coinbase — The stock recovered earlier losses and closed 0.65% higher. Mizuho questioned if traders were moving to Robinhood. Mizuho reiterated its underperform rating on the crypto platform in a note to clients.
Patterson-UTI Energy, NexTier Oilfield Solutions — The two companies agreed to merge in an all-stock deal with an enterprise value of $5.4 billion. Shares of Patterson-UTI Energy rallied 12.13% while NexTier Oilfield Solutions gained 6.73%
T-Mobile — T-Mobile popped 3.68%. Morgan Stanley reinstated the telecommunications stock as a top pick, saying T-Mobile is well-positioned to take advantage of market volatility with a strong buyback program.
— CNBC’s Yun Li, Alex Harring, Jesse Pound and Sarah Min contributed reporting. More

FA Playbook

The human brain is wired for financial self-sabotage, experts said at the CNBC Financial Advisor Summit.
Examples include a tendency to buy high and sell low, make a purchase due to the “fear of missing out” or engage in herd mentality.
There are ways to overcome these financial habits, however.

D3sign | Moment | Getty Images

Human psychology and money don’t mix well. Left unchecked, our psyches can easily sabotage financial decision-making, behavioral experts said during a panel discussion at CNBC’s Financial Advisor Summit.  
“We’re all crazy when it comes to money,” said Brad Klontz, managing principal of YMW Advisors in Boulder, Colorado, and a founder of the Financial Psychology Institute.

“The miracle is that anyone is doing it right,” he added.
The human brain is hard-wired to make choices that are long-term money losers, such as buying high and selling low, making a purchase due to the “fear of missing out” or engaging in herd mentality, for example, said Klontz, a certified financial planner and member of the CNBC Financial Advisor Council.

More from FA Playbook:

Here’s a look at other stories impacting the financial advisor business.

These shortcomings actually do make some sense. Many date to evolutionary processes that played out thousands of years ago species-wide or more recently, on an individual level in early childhood, experts said. Parents, culture and socioeconomic status are powerful forces that shape money beliefs from a young age, they said.
Additionally, feelings of shame, such as thinking we have too much or too little money, are pervasive, experts added.
This tendency traces its roots to comparing oneself to others in the “tribe,” feeding into a sense of needing to “keep up with the Joneses,” Klontz said. Households may therefore place outsized importance on amassing an arbitrary amount of wealth — perhaps $1 million or $5 million — when these figures don’t mean much for overall happiness, he said.

“The number itself needs to be very personal,” Preston Cherry, founder and president of Concurrent Financial Planning in Green Bay, Wisconsin, said of a financial target.
“It’s different for everyone. It’s kind of like a thumbprint, so it’s very unique,” added Cherry, a CFP and member of the CNBC Financial Advisor Council.

Well-being is a leading measure of ‘wealth’

Financial well-being is about more than one’s investments, experts said. It’s about a person’s goals and how money can help achieve those desires, experts said.
In fact, a new Charles Schwab survey suggests most American adults today think overall well-being, not money, is the leading measure of wealth.
Cherry advised putting a “focus on FOMO over FOMO,” meaning, “focus on moving on” with your vision and plan rather than a “fear of missing out.”
“Keep your blinders on and look straight,” he said. “Don’t compare yourself with others.”

Social media, which is full of misinformation and bad financial advice, has made this a challenge, experts said.
Further, money has become increasingly abstract in a digital world of cashless payments. That may make it tough for children to learn good money habits, since our brains better comprehend concrete examples, Klontz said.
When buying an expensive item, such as a vacation, parents can be good role models for their children by setting up a savings plan and demonstrating how it works. For example, they can set aside a certain amount of their paycheck over six months to achieve the goal, teaching important financial concepts such as delayed gratification and saving for the future, Klontz said.
More broadly, money is still a “somewhat taboo” topic when it comes to both conversations with others —whether a spouse, kids, friends or parents — and when thinking about our own lives, Cherry said.
“The more often we can have healthy conversations [about it] … I think we can have better outcomes with money and what we do with our money,” Cherry said. More

Federal prosecutors asked a judge on Thursday to remove five charges against alleged crypto fraudster Sam Bankman-Fried.
A Bahamas court ruling had cast doubt on whether the U.S. government had followed the correct procedure for bringing the charges against the former billionaire.
The charges, however, have merely been “severed,” or punted to 2024.

FTX founder Sam Bankman-Fried leaves US Federal Court in New York City on March 30, 2023.
Kyle Mazza | Anadolu Agency | Getty Images

Federal prosecutors asked a judge on Thursday to remove five charges against alleged crypto fraudster Sam Bankman-Fried, including bribery of a foreign government official, after a Bahamas court ruling cast doubt on whether the U.S. government had followed the correct procedure for bringing the charges against the former billionaire.
Bankman-Fried’s legal team had previously argued before both U.S. and Bahamanian judges that the charges were not part of the FTX founder’s original indictment under which he had been extradited from the Bahamas months earlier. A Bahamian judge said they would review Bankman-Fried’s arguments earlier this week, prompting the request from federal prosecutors.

The charges, however, have merely been “severed,” or punted to 2024, giving the federal government ample time to ensure the conditions of the U.S.-Bahamas extradition treaty have been met, and to satisfy concerns from the Bahamas government.
The severance means that Bankman-Fried’s legal team will likely now have to gird for two legal fights: one to try the original eight-count indictment later this year, and another in 2024, for the five counts that federal prosecutors have asked to sever.
U.S. Attorney Damian Williams’ office is prosecuting Bankman-Fried. He was originally indicted on eight counts, including conspiracy to commit mail and wire fraud, over his role in allegedly orchestrating the theft of billions of dollars of customer assets and the collapse of crypto exchange FTX in late 2022.
Bankman-Fried has entered a plea of not guilty and is expected to be tried later this year. More

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European Central Bank  President Christine Lagarde is due to give a press conference following the bank’s latest monetary policy decision.

The bank announced that it was taking its main rate up by 25 basis points to 3.5%, diverging from a U.S. Federal Reserve decision to pause its own hikes on Wednesday.
Subscribe to CNBC on YouTube.  More

Dado Ruvic | Reuters

Check out the companies making headlines in premarket trading.
Target — The retailer gained 0.6% after announcing it would increase its dividend by 1.9%, or 2 cents, to $1.10 per share.

Cognyte Software — Shares rose 5.6% in the premarket following the software company’s quarterly report. Cognyte posted a loss of 23 cents per share excluding items, slightly larger than the 22 cent consensus estimate of analysts polled by FactSet. But revenue came in stronger than expected, with Cognyte reporting $73.4 million against Wall Street’s $71.5 million forecast.
Aldeyra Therapeutics — The biotech stock added 10% after Aldeyra announced it say statistical significance in the primary and all secondary endpoints for a drug that could be used for a type of eye inflammation.
American Express — Shares of the credit card company dipped 2% in premarket trading after Citi warned that credit card spending trends have slowed. Citi opened a negative catalyst watch for American Express, warning that travel and entertainment categories are slowing more sharply than other categories.
Coinbase — The crypto platform dropped 4.5% after Mizuho questioned if traders were moving to Robinhood, which was down 2.1% before the bell. Mizuho reiterated its underperform rating in a note to clients.
Domino’s Pizza — The pizza chain rose 2.1% following an upgrade to buy from hold by Stifel. The firm noted delivery sales will continue to stabilize while carry-out sales grow in the next 12 months.

SoFi — Shares slid 4% after Oppenheimer downgraded the financial technology stock to perform from outperform. Despite staying bullish long term, Oppenheimer said the downgrade came following a period of the stock price seeing appreciation much stronger than experienced in the broader market.
Corning — Shares added 1.7% after being upgraded by Citi to buy from neutral. The Wall Street firm said it has “greater conviction” in the glass maker’s margin recovery potential and boosted its price target to $40 from $36, suggesting upside of more than 20% from Wednesday’s close.
Zions Bancorp — The bank stock slid 1.4% in the premarket. Janney downgraded Zions Bancorp to neutral from buy, and lowered its fair value estimate, saying it sees weaker spread income and margin on rising funding costs.
— CNBC’s Sarah Min, Michelle Fox and Jesse Pound contributed reporting. More

A wage-price spiral is the stuff of inflationary nightmares. It refers to a situation when prices gallop higher—perhaps because of a sudden shock or policy missteps, or both—and wages race upward to keep pace with them, in turn feeding through to yet more price rises and yet more wage increases, and so on in a vicious circle. It can seem as if the world’s economies have been living this horror: in America hourly earnings rose by about 6% last year, the biggest annual increase in four decades. In Britain wages excluding bonuses are rising at an annual clip of about 7%. On June 14th, when the Federal Reserve elected to leave interest rates unchanged after ten consecutive increases, Jerome Powell, its chairman, warned that he was watching wage trends as one test of whether the central bank might resume raising rates in July. But the dangers that appear in nightmares usually bear little resemblance to the threats worth worrying about in reality. The world’s uncomfortable ride with inflation over the past two years seems to point to a similar conclusion about wage-price spirals: they are a caricature of what happens to an economy with an inflation problem.The historical parallel often trotted out in discussing wage-price spirals is the 1970s. Price and wage inflation seemed to interact throughout that decade, much as the spiral framework suggests. Each surge in general price inflation was followed by a surge in wage inflation, which was followed by more price inflation—and on it went. But the 1970s are flawed as evidence for the existence of spirals. The repeated waves of inflation stemmed more from successive oil-price shocks (in 1973 and 1978) than from prior wage gains. To the extent that wages and prices moved in lockstep, this reflected trade unions’ practice back then of pegging salaries to the cost of living, guaranteeing a ratchet effect. Spirals were a feature of contracts rather than proof of an economic concept.Late last year a group of economists at the IMF interrogated the historical record, creating a database of wage-price spirals in advanced economies dating back to the 1960s. Applying a fairly low bar—they looked for accelerating consumer prices and rising nominal wages in at least three out of four consecutive quarters—they identified 79 such episodes. But a few quarters of high inflation is not all that scary. A few years is far more frightening. Judged by this longer standard, the IMF economists offered a more upbeat conclusion: the “great majority” (they omitted the exact percentage) of short-term spirals were not followed by a sustained acceleration in wages and prices.In a note in March, Gadi Barlevy and Luojia Hu, economists with the Fed’s Chicago branch, took a closer look at the role of wages in the current episode of inflation. They focused on “non-housing services”, a category that covers everything from car washes to medical check-ups and which Mr Powell regularly cites as a useful indicator because of its tight association with wages. Mr Barlevy and Ms Hu concluded that wages do help to explain this segment of inflation: nominal wage gains have outstripped productivity growth by a sizeable margin over the past year. Facing that cost squeeze, service providers would naturally want to raise prices.However, the spiral thesis claims not merely that wages matter, but that they predict future inflationary trends. On this count, the Chicago Fed economists found the relationship unidirectional: inflation helps to forecast changes in labour costs, but changes in labour costs fail to predict inflation. Service providers, in other words, raised prices before rising wage costs hit their bottom line. Mr Barlevy and Ms Hu posit that employers may have been ahead of the curve in anticipating the effects of a tight labour market. That makes wages a lagging, not a leading, indicator for inflation. Adam Shapiro, an economist with the San Francisco Fed, has been even more critical of the wage worries. In a note in May, he isolated unexpected changes in wages to argue that rising labour costs were only a small driver of non-housing service inflation and a negligible one in broader inflation. Like his Chicago colleagues, he concluded that wage growth was following inflation. None of this means that wage-price spirals are a total myth, which some overeager commentators have written. As the IMF‘s study noted, serious spirals can occur; it is just that they are extremely unusual. Were inflation to stay very high for a long time, people might start to view fast-rising prices as a basic fact of life and incorporate that assumption into their wage demands. It is possible that this process has begun in Britain.But in America what is striking about the past two years is how relatively moderate inflation expectations have remained, despite price pressures. In a paper last month for the Brookings Institution, a think-tank, Ben Bernanke, a former chairman of the Fed, and Olivier Blanchard, a former chief economist of the IMF, decomposed the drivers of pandemic-era inflation. They concluded that a triumvirate of shocks (commodity-price spikes, strong demand for goods and supply shortages) accounted for most of the inflation overshoot since 2020. There was scant evidence that inflation itself had triggered higher wage demands. Wages shot up simply because demand for workers outstripped supply.Dreaming spiralsWages and prices can be driven up by the same force: excessive spending in the economy compounded by shortages of both products and the workers to produce them. Overheated economies are worth worrying about regardless of whether prices and wages are feeding on each other.For their part, Messrs Bernanke and Blanchard argue that as pandemic shocks fade away, overheated labour markets are likely to contribute more to inflation. To stop that, central bankers need to make sure that the demand for workers cools off. Only if inflation persists once the labour market is back in balance will fear of a self-sustaining spiral be worth losing sleep over. ■We’re hiring (June 12th 2023). The Economist is looking for a Britain economics writer, based in London. For details and how to apply, click here.Read more from Free exchange, our column on economics:A flawed argument for central-bank digital currencies (Jun 8th)What does the perfect carbon price look like? (Jun 1st)What performance-enhancing stimulants mean for economic growth (May 25th)Also: How the Free Exchange column got its nameFor more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More