Founder of Shark Tank-backed startup Scholly sues buyer Sallie Mae | TechCrunch

When Chris Gray sold his Shark Tank supported scholarship search startup Scholly to Sallie Mae in 2023, he thought he had it all. He is now suing the student loan giant for wrongful termination and alleging that it sells data collected by his app, which includes personal information about minors, without properly informing users.

Gray co-founded the company ten years ago in hopes of making it easier for students to find untapped college scholarships. Within two years, he nabbed sharks Daymond John and Lori Greiner as investors after a appearance on the show.

With this acquisition, Gray became one of the few black venture-backed fintech founders to exit their companies, despite backlash that he was “selling out.” “I think being one of the first Black tech companies to be acquired by a bank is a really big accomplishment,” he said. said at the time.

He took on the role of vice president at Sallie Mae and hoped to fit in well in his new position, while helping to scale Scholly and make it free, he said in an exclusive interview with TechCrunch.

What happened next is detailed in Gray’s book. trial against Sallie Mae in Delaware Superior Court, and in a whistleblower complaint he filed with the Securities and Exchange Commission, both of which he filed earlier this month.

It alleges that Sallie Mae fired its employees, including its co-founders, then reneged on promises that it would not sell user data, according to a TechCrunch review of the two filings. He claims the company fired him a year after the acquisition when he tried to raise concerns about data privacy issues. Gray is seeking back payments and punitive damages in the suit, as well as court costs.

Gray told TechCrunch that before agreeing to the sale, he believed Sallie Mae would be prohibited from disclosing or selling nonpublic personal information about Scholly’s customers to third parties because it was a federally regulated financial institution.

It now alleges that its acquirer circumvented such regulations by placing Scholly in a subsidiary that sells the data — including age, gender, race and other indicators of an individual’s financial need — to third parties like universities and advertisers, perhaps without students’ knowledge.

“I sold Scholly to a regulated bank because I thought it would protect the students who trusted us,” Gray told TechCrunch. “Instead, I saw the company create a non-bank subsidiary to do things the bank itself cannot legally do: sell student data. This is not the company I thought I would join.”

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

“While we do not comment on pending litigation, it is unfortunate that a former employee made false accusations against our company after leaving nearly two years ago. We plan to vigorously defend against these claims which are without merit or substance,” Rick Castellano, the company’s vice president of corporate communications, said in an email.

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

From Alabama to Shark Tank

Gray grew up in a modest family in Birmingham, Alabama, with a single mother and two siblings. He felt the barriers to higher education were “real and immediate” for someone like him.

In addition to being expensive, he felt he didn’t have access to information to help him make good decisions about where to go and how to afford it, a pressure that only grew after his mother lost her job in the 2008 recession.

“This experience later shaped my view of the scholarship system,” he recalled, saying that he began to view education and scholarship as “a problem of access rather than a problem of merit.”

As a teenager, when the time came for him to apply for a scholarship, he found the process fragmented and inefficient, he said. There was no centralized search to find opportunities, and when he found a website offering scholarship options, there were thousands of listings, but no reliable way to filter to see what he was actually eligible for. Not to mention the scams and outdated listings that persisted on certain sites.

Yet he applied for about 75 scholarships over a seven-month period using public computers and the Internet at the library, and won approximately $1.3 million in scholarship funding, including from the Bill and Melinda Gates Foundation and the Coca-Cola Scholars Foundation.

He studied economics and entrepreneurship at Drexel University and encountered students facing a familiar obstacle. “Students kept asking for help finding scholarships,” he told TechCrunch. “The funding existed with hundreds of millions of dollars going unclaimed each year, but the research process was halted. »

He began defining the eight basic criteria that determined scholarship eligibility: age, location, major, GPA, race, gender, field of study and financial need.

“This became the foundation of the Scholly matching algorithm,” he said.

During his senior year, Gray, alongside Nick Pirollo and Bryson Alef, whom he met as Coca-Cola Scholars, officially launched Scholly in 2013. For just $0.99 per month, students could use the platform and filter by eligibility criteria. “This price allowed the company to remain viable without having to sell data or run ads,” he said.

Scholly moved to a freemium model after Gray pitched the idea on Shark Tank. The sharks called for his idea in what became the “worst fight in Shark Tank history,” according to to one of the hosts who invested. Scholly grew to 5 million users and made more than $30 million in cumulative revenue, Gray said.

In March 2023, Sallie Mae’s corporate development team contacted Scholly. The bank had just purchased the Nitro College scholarship organization a year before and was trying to gain more of a foothold in the scholarship and college planning space. “It was a natural fit,” Gray said, explaining why the student loan company wanted Scholly.

Sallie Mae purchased Scholly in July 2023, brought Gray and his co-founders on board as employees, and named Gray vice president of product management.

Along with promising that it would “make Scholly free for all students, families, and other users,” Sallie Mae CEO Jon Witter said. said in 2023, that the acquisition “enables us to leverage and expand Scholly’s innovative technology to unlock future strategic growth opportunities.”

Sallie Mae vs. “Sallie”

For Gray, the canary in the coal mine came a year after the Scholly acquisition.

He alleges in the lawsuit that Sallie Mae fired Scholly’s founding team, including its co-founders, in July 2024. Around the same time, Gray claims he overheard Sallie Mae executives discussing plans to sell Scholly’s user data in meetings.

Gray alleges that executives told him his position was secure and that the company was restructuring. But when he later expressed further concerns about the possible sale of Scholly data, he claimed in his complaint that he was fired before a scheduled meeting with Witter, the CEO, in which he planned to discuss these issues.

After her departure, around December 2024, Sallie Mae launched “Sallie.com”. This website describes itself as an “education solutions company” and has become the home of the Scholly platform. It is separate from the Sallie Mae website, which hosts the bank that issues student loans.

The Sallie.com website states that it is owned by an entity called SLM Education Services, LLC. Gray claims in his lawsuit and whistleblower complaint that Sallie Mae uses SLM Education Services in order to sell personal data collected by Scholly, since it is not a closely regulated financial services company like Sallie Mae’s banking arm.

Sallie.com discloses that it sells the following customer data in its privacy policy to third parties: name, telephone number, email addresses, age, race, gender, educational records and geolocation data. The third parties it sells this information to, it 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 on the Sallie.com “About” page.

Gray claims in his complaints that the Sallie.com website can easily be confused with the official Sallie Mae website due to similar layouts and “sallie” logos, increasing the risk that students will hand over personal data to what they think is a bank.

Gray’s complaint goes on to allege that Sallie Mae used Scholly user data to create something called Backpack Media in March, which she touts as a “first-to-market educational media network” that “provides brands with efficient, scalable access to highly desirable and hard-to-reach audiences — Gen Z, Gen Alpha and those involved in their purchasing decisions,” according to a press release from Sallie.

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

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

A company called Navient, which split from Sallie Mae in 2014, faced restitution orders from the Federal Deposit Insurance Corporation, the Department of Justice and the Department of Education for excessive fees. He was sued by the Consumer Financial Protection Bureau and reached a $1.85 billion settlement with 39 attorneys general for what the attorneys general described as predatory student loans.

Gray said he was aware of these past legal issues, but did not regret the sale of Scholly because it helped make the platform free for every student. In fact, he said that if he could, he would make the same decision to sell everything.

“But I would also raise the same concerns,” he said. “Because I believe we should live in a system in which a leader can speak out and change the course of a company in accordance with the law and practices fair trade.”