LEGAL ALERT: Mexico's New AI Law at a Crossroads: Risk-Based Regulation vs. Innovation.

Victor Aguirre - Founder BLACKBOX

Frank founder, Charlie Javice, was convicted in March 2025 for orchestrating a massive fraud during JPMorgan Chase's acquisition of her startup. The basis of the fraud was the manipulation of essential valuation metrics:

The Deception of the Numbers: Javice claimed to have over 4.25 million users on her student aid platform. The reality, proven in court, was approximately 300,000 real customers. A difference of more than 93% achieved by hiring a data scientist to create 4.2 million synthetic profiles.

Where Did JPM's Due Diligence Fail?
Gigantic institutions like JPM are also vulnerable when it comes to digital assets. Investigations revealed critical process failures:

Speed Over Substance: Pressure to close the deal quickly (partially due to fear of competition) led the M&A team to sacrifice the depth of forensic analysis.

Insufficient Verification: Instead of demanding direct, supervised access to the core database, JPM accepted a third-party company to count data fields. The fake, but well-formatted, data passed this superficial test.

Ignored Red Flag: Javice initially denied access to the real data, citing concerns about user privacy and terms of service. This is a fundamental red flag that should have halted the DD process.

The New Standard for FinTech Due Diligence: Zero Data Risk
The Frank case proves that trust in the founder (Javice was a Forbes 30 Under 30) must be replaced by uncompromising technical verification.

To protect capital and reputation in FinTech M&A, the new DD protocol must be:

Direct Access to the Source (DADA): Demand secure, supervised access to the core database to audit the authenticity and provenance of the data, not accepting third-party verifications.

Forensic Pattern Analysis: The DD team must include data science experts to analyze timestamps, IP distribution, and, crucially, engagement rates to detect statistical anomalies typical of synthetic data.

Engagement-Based Earn-Out: Structure the acquisition payment based on post-acquisition performance metrics (like customer retention and LTV), rather than solely on pre-acquisition user volume.

The lesson is clear: in the digital economy, transparency is not a courtesy; it is a mandate. Rigorous Due Diligence is the only effective insurance against corporate fraud.

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