Shark Tank-backed startup Scholly is suing its financier Sallie Mae

When Chris Gray sold Shark Tank-backed search for first courses Scholly to Sallie Mae in 2023, she thinks she has it all. Now he’s suing the student loan giant for wrongful wrongdoing, alleging that it’s selling the data its app collects, which includes children’s information, without properly informing users.

Gray founded the company ten years ago with the hope of helping students find unused college scholarships. Less than two years later, he hired Sharks Daymond John and Lori Greiner as investors after appearance on the show.

I find, Gray became one of the few Black fintech founders to exit their company, although he also received some of his “sales.” “I think being one of the first black tech companies to be bought by a bank, that’s a huge achievement,” he said. he said at that time.

He became a vice president at Sallie Mae and is expected to settle into his new game, helping Scholly and making it free to use, he said in an interview with TechCrunch.

What happened next is detailed in Gray’s a case against Sallie Mae in Delaware Supreme Court, and in whistleblower complaints filed with the Securities and Exchange Commission, both filed earlier this month.

Sallie Mae reportedly fired its employees, including its co-founders, then went back on promises not to sell user data, according to TechCrunch’s review of both filters. He is said to have been fired by the company a year after he was contacted when he tried to raise data privacy concerns. In the lawsuit, Gray is seeking restitution and punitive damages in the suit, including legal fees.

Gray told TechCrunch that before agreeing to the sale, he believed Sallie Mae would be prohibited from disclosing or selling Scholly’s customer information to third parties because it is a publicly traded financial institution.

Now it is said that the victim followed these rules by placing Scholly in a company that is selling information – including age, gender, race, and other indicators of a person’s economic needs – to third parties such as universities and advertisers, possibly without the students’ full knowledge.

“I sold Scholly to a regulated bank because I believed it would protect the students who put their trust in us,” Gray told TechCrunch. “In fact, I saw the company building a non-bank company to do something that the bank could not legally do: sell student data.

Sallie Mae denied Gray’s claims, calling them “baseless” and declined to respond to TechCrunch’s questions about its privacy practices.

“While we do not comment on pending litigation, it is unfortunate that a former employee is making false statements about our company after leaving nearly two years ago. We plan to vigorously defend ourselves against claims that are unfounded or frivolous,” Rick Castellano, the company’s vice president of corporate communications, said in an email.

When asked which ones were “false,” Castellano declined to comment.

From Alabama to Shark Tank

Gray grew up on a low income in Birmingham, Alabama, with a single mother and two older brothers. He felt that the obstacles to higher education were “real and present” for someone like him.

In addition to being expensive, she felt she did not have access to information to help her make informed decisions about where to go and how to shop, a pressure that only intensified after her mother lost her job in 2008.

“That experience changed the way I thought about the education system later,” he recalls, saying that he began to see education and training as “a problem of access rather than a problem of eligibility.”

As a teenager, when it came time to apply for scholarships, she found the field fragmented and ineffective, she said. There was no centralized search for opportunities, and when he found a website with scholarship options, there were thousands of listings, but no reliable way to filter to see what he was eligible for. Not to mention scams and old listings that have continued on other sites.

However, he applied for about 75 courses in seven months using public computers and the Internet at the library, and was successful. about $1.3 million in scholarship funding, including from the Bill and Melinda Gates Foundation and the Coca-Cola Scholars Foundation.

He studied economics and business at Drexel University and met students facing a familiar path. “Students continued to ask for help to get scholarships,” he told TechCrunch. “The funds were there with hundreds of millions of dollars unaccounted for every year, but this job was broken.”

He began mapping out eight factors that determine eligibility for scholarships – age, location, major, GPA, race, gender, field of study, and financial need.

“This became the basis of Scholly’s matching algorithm,” he said.

In his senior years, Gray, together with Nick Pirollo and Bryson Alef, who met as Coca-Cola Scholars, founded Scholly in 2013. For only $ 0.99 per month, students can use the platform with a filter and appropriate methods. “That cost made the business sustainable without selling data or advertising,” he said.

Scholly switched to freemium Gray after pitching the idea on Shark Tank. Shark complained about his idea in what turned out to be “the worst fight in Shark Tank history,” according to reports to one of the occupants who invested in it. Scholly grew to 5 million users and generated more than $30 million in revenue, Gray said.

In March 2023, Sallie Mae’s development team reached out to Scholly. The bank had just bought the Nitro College educational institution last year and was trying to move more into the college education and training space. “It was a natural fit,” Gray said, of why the student loan agency wanted Scholly.

Sallie Mae bought Scholly in July 2023, brought Gray and his co-founders on board as employees, and made Gray vice president of marketing.

In addition to promising to “make Scholly free for all students, families, and other users,” Sallie Mae CEO Jon Witter said. he said in 2023 that the acquisition “allows us to use Scholly’s technology to open up even greater opportunities for the future.”

Sallie Mae vs. “Sallie”

For Gray, the canary in the coal mine came a year after Scholly’s purchase.

It is said in the suit that Sallie Mae left the founding team of Scholly, including the co-founders, in July 2024. At the same time, Gray said that he heard Sallie Mae executives discussing plans to sell Scholly’s data in meetings.

Gray says officials told him his position was secure, and that the company was just restructuring. But after he continued to talk about the sale of Scholly’s data, he claims in his suit that he was kicked out before a meeting with Witter, the CEO, where he had planned to discuss the matter.

After he left, around December 2024, Sallie Mae launched “Sallie.com.” The website describes itself as a “learning solutions company,” and is home to the Scholly platform. It is separate from the Sallie Mae website, which is a bank that makes student loans.

The Sallie.com website claims to be owned by an organization called SLM Education Services, LLC. Gray contends in his lawsuit and complaint that Sallie Mae is using SLM Education Services to sell its collection of Scholly, as it is not a well-managed financial institution like Sallie Mae Bank.

Sallie.com they reveal that it sells the following personal information about its customers to third parties: name, phone number, email address, age, race, gender, educational background, and location data. Third parties that sell this information, he says, include ad networks, educational institutions, brands, and companies dedicated to reselling consumer data.

Sallie Mae also pays Sallie “for referring student loan clients,” according to to the Sallie.com “About” page.

Gray argued in his complaint that the Sallie.com website could easily be confused with the official Sallie Mae website due to the similar layout and the “sallie” logo, increasing the risk that students could provide their data to what they believed to be a bank.

Gray goes on to say that Sallie Mae used Scholly’s data to create a product called Backpack Media in March, which it calls a “first-in-market education system” that “gives access to key, hard-to-reach audiences — Gen Z, Gen Alpha, and those who are engaged in their purchasing decisions,” according to a Sallie press release.

Castellano declined to comment on Backpack Media’s sources for the data.

This would not be the first time that a company affiliated with Salle Mae has been accused of fraud or misrepresentation.

Navient, which split from Sallie Mae in 2014, has faced demands for restitution from the Federal Deposit Insurance Corporation, the Department of Justice, and the Department of Education over large amounts of money. He was sued by the Consumer Financial Protection Bureau and reached a settlement of $1.85 billion and 39 attorney generals for what the attorney general described as student loans.

Gray said he was aware of the previous rules, but he doesn’t regret selling Scholly as it helped make the platform free for every student. In fact, if they could, they would make the same decision to sell again.

He said: “But I also have the same concern. “Because I believe that we should be in a system where the CEO can speak up and change what the company is doing in accordance with the law and fair business practices.”