Founder of Shark Tank-backed startup Scolly sues acquirer Sallie Mae

Chris Gray thought he had it all when he sold his Shark Tank-backed scholarship search startup Skolly to Sallie Mae in 2023. He is currently suing the student loan giant for wrongful termination, alleging that the app sells data it collects, including the personal information of minors, without properly notifying users.

Gray co-founded the company 10 years ago with the hope of making it easier for students to find underutilized college scholarships. Within two years, his appearance on the show led to him acquiring the Sharks’ Daymond John and Lori Greiner as investors.

The acquisition makes Gray one of the few black venture-backed fintech founders to leave the company despite backlash that he was “selling himself out.” “I think being one of the first Black technology companies to be acquired by a bank is a really big accomplishment,” he said at the time.

In an exclusive interview with TechCrunch, he plans to take on the role of vice president at Sallie Mae and settle into his new role while helping Scolly scale and make it free.

What happened next is detailed in Mr. Gray’s lawsuit against Sallie Mae in Delaware Superior Court and in a whistleblower complaint he filed with the Securities and Exchange Commission earlier this month.

He alleges that Sallie Mae fired employees, including his co-founder, and then broke a promise not to sell users’ data, according to a review of both filings by TechCrunch. He claims the company fired him a year after the acquisition after he tried to raise concerns about data privacy issues. Gray is seeking back pay and punitive damages, as well as legal costs.

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

Now, his acquirers claim they have circumvented such regulations by placing Sholly in a subsidiary that sells the data, including age, gender, race, and other indicators of a person’s financial need, to third parties such as universities and advertisers, perhaps without students being fully aware of the data.

“I sold Scolly to a regulated bank because I believed it would protect the students who trusted us,” Gray told TechCrunch. “Instead, I saw the company do something it legally couldn’t do: set up a non-bank subsidiary to sell student data. That wasn’t the company I wanted to join.”

Sallie Mae has denied Gray’s claims as “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 has made false accusations about our company after leaving the company nearly two years ago,” Rick Castellano, the company’s vice president of corporate communications, said in an email. “We intend to vigorously defend against these allegations, which are baseless and baseless.”

Asked specifically which accusations were “false,” Castellano declined to comment.

From Alabama to Shark Tank

Gray grew up in a low-income neighborhood in Birmingham, Alabama, with a single mother and two brothers. He felt that the barriers to higher education were “real and pressing” for people like him.

He felt that not only were prices high, but he also lacked access to information to make good decisions about where to go and how to pay. That pressure increased after her mother lost her job during the 2008 recession.

“That experience shaped the way I thought about the scholarship system for the rest of my life,” he recalls, saying he began to think of education and scholarships as “an issue of access rather than an issue of ability.”

When it came time to apply for scholarships as a teenager, he said he found the process fragmented and inefficient. There was no centralized search for him to find opportunities, and even when he did find a website with 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 remained on some sites.

Still, using the library’s public computers and the Internet, he applied to about 75 scholarships in seven months and won about $1.3 million in scholarships from the Bill and Melinda Gates Foundation, the Coca-Cola Scholars Foundation, and others.

He studied economics and entrepreneurship at Drexel University and met students facing familiar obstacles. “Students kept asking for help finding scholarships,” he told TechCrunch. “Hundreds of millions of dollars in this fund existed unclaimed each year, but the search process was suspended.”

He began mapping out the eight main criteria that would determine scholarship eligibility: age, location, major, GPA, race, gender, field of study, and financial need.

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

Gray officially launched Scholly in 2013 with Nick Pirolo and Bryson Aref, whom he met as a Coca-Cola Scholar during his senior year of college. For just $0.99 per month, students could use the platform and filter by eligibility criteria. “That price made the business sustainable without having to sell data or advertise,” he said.

Scholly switched to a freemium model after Gray pitched the idea on Shark Tank. One of the sponsors said the sharks clashed violently over his idea, resulting in “the worst fight in the history of Shark Tank.” Scholly has grown to 5 million users and more than $30 million in cumulative revenue, Gray said.

In March 2023, Sallie Mae’s corporate development team reached out to Scholly. The bank had just acquired scholarship organization Nitro College a year earlier and was looking to expand further into scholarship and college planning. “It was a natural thing to do,” Gray said of why the student loan agency wanted Shorey.

Sallie Mae acquired Scoley in July 2023, bringing Gray and his co-founders on board and naming Gray vice president of product management.

In addition to pledging to “make Scholly free for all students, families, and other users,” Sallie Mae CEO John Witter said in 2023 that the acquisition will “allow us to leverage and build on Scholly’s innovative technology to unlock future strategic growth opportunities.”

Sallie Mae vs. “Sally”

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

In his complaint, he alleges that Sallie Mae fired Scholly’s founding team, including its co-founders, in July 2024. Around the same time, Gray claims he heard Sholly Mae executives discussing plans to sell Scholly user data in a meeting.

Gray claims he was told by executives that his position was safe and that the company was simply being restructured. But when he continued to raise further concerns about Shorey’s potential data sale, he claims in the lawsuit that he was fired before a scheduled meeting with CEO Witter to discuss those issues.

After Sallie Mae retired, she launched “Sallie.com” around December 2024. The website describes itself as an “educational solutions company” and is home to the Scholly platform. This is separate from the Sallie Mae website, which has banks offering student loans.

The Sallie.com website states that it is owned by an entity called SLM Education Services, LLC. Mr. Gray alleges in his lawsuit and whistleblower that he uses SLM Education Services to sell the personal data that Shorey collects because Shorey is not a highly regulated financial services company like Sallie Mae’s banking division.

Sallie.com discloses in its Privacy Policy that it sells customer data of name, phone number, email address, age, race, gender, education, and geolocation data to third parties. Third parties selling this information include advertising networks, educational institutions, brands, and companies that specialize in reselling consumer data.

According to Sallie.com’s About page, Sallie Mae also pays Sallie for “referrals to student loan customers.”

Gray alleges in his complaint that the Sallie.com website could be easily confused with Sallie Mae’s official website due to its similar layout and “sallie” logo, increasing the risk of students handing over their personal data to what appears to be a bank.

Gray’s complaint further alleges that Sallie Mae used Scolly’s user data in March to create something called Backpack Media. According to Sallie’s press release, it is “the first educational media network on the market” that will “give brands efficient and scalable access to highly desirable and hard-to-reach audiences: Gen Z, Gen Alpha, and those involved in purchasing decisions.”

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

This is not the first time Salmay-related companies have been accused of deceptive or misleading practices.

Navient, a company that spun off from Sallie Mae in 2014, has been ordered to pay damages by the Federal Deposit Insurance Corporation, the Department of Justice, and the Department of Education for overcharging. The company was sued by the Consumer Financial Protection Bureau and reached a $1.85 billion settlement with 39 attorneys general over what the attorneys general called predatory student loans.

Gray said that although he was aware of these past legal issues, he did not regret selling Scholly because it helped make the platform free for all students. In fact, he said he would make the same decision to sell again if he could.

“But I would also raise the same concerns,” he said. “Because we believe we should live in a system where management can use their voice to change the direction of the company, consistent with the law and fair business practices.”