Chris Gray, founder of the scholarship search startup Scholly, has filed a lawsuit against his former acquirer Sallie Mae, alleging wrongful termination and unauthorized selling of student data through a subsidiary, despite his initial expectations of user privacy protections under Sallie Mae's status as a regulated financial institution.
- Chris Gray alleges wrongful termination and data misuse by Sallie Mae
- Claims Sallie Mae subsidiary sells sensitive student data without consent
- Sallie Mae denies allegations and plans to fight the lawsuit
What happened
Chris Gray sold Scholly, a scholarship search app he co-founded and later appeared on Shark Tank to secure investment, to Sallie Mae in 2023. Following the acquisition, Gray took a vice president role and expected to help scale the app while maintaining its mission of free access to scholarship information. However, disputes quickly emerged when Gray alleges Sallie Mae laid off his team and violated assurances that user data would remain protected.
Gray claims that after raising concerns about data privacy issues, he was terminated a year after the acquisition. He further alleges that Sallie Mae circumvented federal regulations by transferring Scholly’s data handling to a subsidiary that sells detailed personal and demographic data of students to third parties, including advertisers and educational institutions, without fully informing users.
Why it matters
The case highlights growing tensions between fintech startups focused on education access and larger financial institutions that acquire them. Gray’s lawsuit raises important questions about how student information—especially data of minors—should be safeguarded after acquisition, particularly when a regulated bank’s subsidiary conducts potentially unregulated activities.
This lawsuit also draws attention to the challenges faced by minority founders in fintech, with Gray being among the few Black founders with a venture-backed exit. The dispute underscores the stakes involved when mission-driven companies are absorbed by larger entities with different priorities, especially in sensitive markets like student finance.
What to watch next
Legal proceedings will clarify whether Sallie Mae violated data privacy laws and breached agreements with Gray and Scholly’s users. The case may set precedents regarding how financial institutions handle personal data in acquisitions and the limits on data sharing by subsidiaries, especially involving minors and vulnerable populations.
Industry observers will also watch for reactions from regulators and impacts on startup acquisitions in the education technology sector. Sallie Mae’s response and defense strategy, along with any regulatory scrutiny, could influence future deals where consumer trust and data protection are at risk.