Founder Of Shark Tank-backed startup scholly Sues his Acquirer sallie Mae

When Chris Gray sold his Shark Tank-backed scholarship hunt startup Scholly to Sallie Mae successful 2023, he thought he had it all. Now he’s suing nan student indebtedness elephantine for wrongful termination and alleging that it’s trading nan information his app collected, which includes individual info connected minors, without decently informing users. 

Gray co-founded nan institution a decade anterior pinch nan dream of helping students much easy find assemblage scholarships that were going untapped. Within 2 years, he nabbed Sharks Daymond John and Lori Greiner arsenic investors aft an appearance connected nan show. 

With nan acquisition, Gray became 1 of nan fewer Black venture-backed fintech founders to exit their company, contempt receiving immoderate blowback that he was “selling out.” “I deliberation being 1 of nan first Black tech companies to get acquired by a bank, that’s really a large achievement,” he said astatine nan time. 

He took a vice president domiciled astatine Sallie Mae and expected to settee successful nicely astatine his caller gig, while helping standard Scholly and making it free to use, he said successful an exclusive question and reply pinch TechCrunch.

What happened adjacent is elaborate successful Gray’s lawsuit against Sallie Mae successful Delaware Superior Court, and successful a whistleblower title he submitted to nan Securities and Exchange Commission, some of which he revenge earlier this month. 

He alleges Sallie Mae laid disconnected his employees, including his co-founders, and past went backmost connected promises that it wouldn’t waste nan users’ data, according to a TechCrunch reappraisal of some filings. He claims nan institution fired him a twelvemonth aft nan acquisition erstwhile he tried to raise concerns astir information privateness issues. In nan lawsuit, Gray is seeking backpay and punitive damages successful nan suit, positive ineligible costs. 

Gray told TechCrunch that earlier he agreed to nan sale, he believed Sallie Mae would beryllium prohibited from disclosing aliases trading non-public individual accusation astir Scholly customers to 3rd parties because it was a federally regulated financial institution.  

Now he alleges that his acquirer sewage astir immoderate specified regulations by putting Scholly into a subsidiary that is trading nan information — including age, gender, race, and different indicators of an individual’s financial request — to 3rd parties for illustration universities and advertisers, perchance without students’ afloat awareness.  

“I sold Scholly to a regulated slope because I believed it would protect nan students who trusted us,” Gray told TechCrunch. “Instead, I watched nan institution build a non-bank subsidiary to do things nan slope itself can’t legally do: waste student data. That’s not nan institution I thought I was joining.”  

Sallie Mae denied Gray’s allegations, calling them “without merit” and declined to reply TechCrunch’s questions astir its information privateness practices. 

“While we don’t remark connected pending litigation, it’s unfortunate a erstwhile worker is making mendacious accusations astir our institution pursuing his departure astir 2 years ago. We scheme to vigorously take sides ourselves against these claims which are without merit aliases substance,” Rick Castellano, nan company’s vice president of firm communications, said successful an email.  

Asked which circumstantial accusations were “false,” Castellano declined to comment. 

From Alabama to Shark Tank

Gray grew up low-income successful Birmingham, Alabama, pinch a azygous mother and 2 siblings. He felt nan barriers to higher acquisition were “real and immediate” for personification for illustration him.  

Aside from being expensive, he felt he lacked entree to accusation to thief him make due decisions astir wherever to spell and really to spend it, a unit that only compounded aft his mother mislaid her occupation successful nan 2008 recession.  

“That acquisition shaped really I thought astir nan danasiwa strategy later,” he recalled, saying he began to position acquisition and danasiwa arsenic “a problem of entree alternatively than a problem of merit.”  

As a teenager, erstwhile nan clip came for him to use for scholarships, he recovered nan process fragmented and inefficient, he said. There was nary centralized hunt for him to find opportunities, and erstwhile he did find a website pinch danasiwa options, location were thousands of listings, but nary reliable measurement to select to spot what he was really eligible for. Not to mention nan scams and outdated listings that persisted connected immoderate sites.  

Still, he applied to astir 75 scholarships complete nan people of 7 months utilizing nationalist computers and nan net astatine nan library, and won around $1.3 million successful danasiwa funding, including from nan Bill and Melinda Gates Foundation and nan Coca-Cola Scholars Foundation.  

He studied economics and entrepreneurship astatine Drexel University and met students facing a acquainted roadblock. “Students kept asking for thief uncovering scholarships,” he told TechCrunch. “The backing existed pinch hundreds of millions of dollars unclaimed each year, but nan hunt process was broken.”  

He started mapping retired nan 8 halfway criteria that wished danasiwa eligibility — age, location, major, GPA, race, gender, section of study, and financial need. 

“That became nan instauration of Scholly’s matching algorithm,” he said.  

During his elder year, Gray, alongside Nick Pirollo and Bryson Alef, whom he met arsenic Coca-Cola Scholars, officially launched Scholly successful 2013. For conscionable $0.99 a month, students could usage nan level and select by eligibility criteria. “That value kept nan business sustainable without having to waste information aliases tally ads,” he said.  

Scholly switched to a freemium exemplary aft Gray sounded nan thought connected Shark Tank. The Sharks clamored complete his thought successful what became nan “worst conflict successful Shark Tank history,” according to 1 of nan hosts who invested. Scholly grew to 5 cardinal users and made much than $30 cardinal successful cumulative revenue, Gray said. 

In March of 2023, Sallie Mae’s firm improvement squad reached retired to Scholly. The slope had conscionable bought nan danasiwa statement Nitro College a twelvemonth anterior and was trying to move much into nan danasiwa and college-planning space. “It was a earthy fit,” Gray said, of why nan student indebtedness institution wanted Scholly.  

Sallie Mae bought Scholly successful July 2023, brought Gray and his co-founders connected committee arsenic employees, and made Gray a vice president of merchandise management. 

In summation to promising that it would “make Scholly free for each students, families, and different users,” Sallie Mae CEO Jon Witter said successful 2023 that nan acquisition “allows america to harness and build connected Scholly’s innovative exertion to unlock early strategical maturation opportunities.” 

Sallie Mae vs. “Sallie” 

For Gray, nan canary successful nan ember excavation came 1 twelvemonth aft Scholly’s acquisition.  

He alleges successful nan suit that Sallie Mae laid disconnected nan Scholly founding team, including his co-founders, successful July 2024. Around this aforesaid time, Gray claims he heard Sallie Mae executives talk plans for trading Scholly personification information successful meetings.  

Gray alleges executives told him his position was safe, and that nan institution was conscionable restructuring. But erstwhile he went connected to raise further concerns astir nan imaginable trading of Scholly data, he claims successful his suit he was fired earlier a scheduled gathering pinch Witter, nan CEO, wherever he planned to talk those issues.  

After his departure, astir December 2024, Sallie Mae launched “Sallie.com.” This website describes itself arsenic an “education solutions company,” and became location to nan Scholly platform. It is abstracted from nan website for Sallie Mae, which is location to nan slope that makes student loans. 

The Sallie.com website says it’s owned by an entity called SLM Education Services, LLC. Gray contends successful his suit and whistleblower title that Sallie Mae is utilizing SLM Education Services successful bid to waste nan individual information collected by Scholly, since it is not a closely-regulated financial services institution for illustration nan Sallie Mae banking arm. 

Sallie.com discloses that it sells nan pursuing customer information successful its privateness argumentation to 3rd parties: name, telephone number, email addresses, age, race, gender, acquisition records, and geolocation data. The 3rd parties it sells this accusation to, it says, see advertisement networks, acquisition institutions, brands, and companies dedicated to reselling user data.  

Sallie Mae besides pays Sallie “for nan referrral of student indebtedness customers,” according to nan Sallie.com “About” page. 

Gray argues successful his complaints that nan Sallie.com website whitethorn beryllium easy confused pinch nan charismatic Sallie Mae website because of akin layouts and “sallie” logos, expanding nan consequence that students whitethorn manus complete individual information to what they judge to beryllium a bank.  

Gray’s suit goes connected to allege that Sallie Mae utilized Scholly personification information to create thing called Backpack Media successful March, which it bills arsenic a “first-to-market acquisition media network” that “offers brands efficient, scalable entree to highly desirable, difficult to scope audiences – Gen Z, Gen Alpha, and those progressive successful their purchasing decisions,” according to a Sallie property release.  

Castellano declined to remark connected Backpack Media’s sources for data.

This would not beryllium nan first clip a Salle Mae-affiliated institution has been accused of deceptive aliases misleading behavior.  

A institution called Navient, which divided from Sallie Mae successful 2014, has faced restitution orders from nan Federal Deposit Insurance Corporation, Department of Justice, and nan Department of Education for overcharges. It was sued by nan Consumer Financial Protection Bureau and reached a $1.85 cardinal settlement pinch 39 attorneys wide for complete what nan attorneys wide described arsenic predatory student loans.  

Gray said he knew of these past ineligible issues, but that he doesn’t regret nan waste of Scholly arsenic it helped make nan level free for each student. In fact, if he said if he could, he would make nan aforesaid determination to waste each complete again. 

“But I’d also raise nan aforesaid concerns again,” he said. “Because I judge we should unrecorded successful a strategy wherever an executive tin speak up and alteration nan people of a institution successful statement pinch nan rule and adjacent business practices.”