The founder of Scholly, a scholarship search startup, has sued its acquirer Sallie Mae, over what he deems an unlawful sharing of user data.
Chris Gray sold the online resource to the banking corporation in 2023, but the transition has seemingly shut Gray out the C-suite, leading him to take legal action.
Gray catapulted Scholly to millions of users by helping students discover scholarship opportunities. The company gained exposure through his appearance on Shark Tank in 2015, where sharks Daymond John and Lori Greiner offered him an investment deal.
He sold the startup to the student loan giant for an undisclosed sum, hoping the acquisition
would propel Scholly’s expansion. While some saw the deal as Gray “selling out,” especially as a Black founder, he countered the backlash by noting the rarity for Black-owned entities to reach a level of success for private acquisition.The terms of the buyout placed Gray into a vice presidential role at Sallie Mae, where he offered creative input into Scholly’s scaling of operations.
Now, he has a filed a lawsuit against the corporation as well as a whistleblower complaint to the Securities and Exchange Commission. According to a review of the filings by TechCrunch, Gray claims Sallie Mae not only laid him off, but also his co-founders, while reneging on promises to safeguard users’ personal information.
“I sold Scholly to a regulated bank because I believed it would protect the students who trusted us,” Gray told the publication. “Instead, I watched the company build a non-bank subsidiary to do things the bank itself can’t legally do: sell student data. That’s not the company I thought I was joining.”
Gray alleges that when he spoke out about the data privacy concerns, leadership at Sallie Mae eliminated his role. He said the corporation bypassed federal restrictions on financial institutions selling customer data by placing Scholly into a subsidiary called “Sallie.”
Gray created Scholly to help students source programs where they fit the criteria to apply. Gray claimed the business, even with its “freemium” approach adopted post-Shark Tank
, grew to five million users with $30 million in cumulative revenue.On its website, Sallie publicly states the selling of user data to third parties, including users’ education records, geolocation data, age, race and contact information. The subsidiary also receives a payout from Sallie Mae “for the referral of student loan customers.” Gray alleges that Sallie Mae used this data to create Backpack media, a resource that offers access to “highly desirable, hard to reach audiences,” particularly younger generation, to impact their buying choices.
“While we don’t comment on pending litigation, it’s unfortunate a former employee is making false accusations about our company following his departure nearly two years ago,” Rick Castellano, Sallie Mae’s vice president of corporate communications, wrote in a statement to TechCrunch. “We plan to vigorously defend ourselves against these claims which are without merit or substance.”RELATED CONTENT: Brooklyn Student Marks First Ivy League Acceptance At Success Academy High School