When Chris Gray sold his Shark Tank-backed scholarship search startup Scholly to Sallie Mae in 2023, he thought he had it all. Now he’s suing the student loan giant for wrongful termination and alleging that it’s selling the data his app collected, which includes personal info on minors, without properly informing users.
Gray co-founded the company a decade prior with the hope of helping students more easily find college scholarships that were going untapped. Within two years, he nabbed sharks Daymond John and Lori Greiner as investors after an appearance on the show.
With the acquisition, Gray became one of the few Black venture-backed fintech founders to exit their company, despite receiving some blowback that he was “selling out.” “I think being one of the first Black tech companies to get acquired by a bank, that’s really a big achievement,” he said at the time.
He took a vice president role at Sallie Mae and expected to settle in nicely at his new gig, while helping scale Scholly and making it free to use, he said in an exclusive interview with TechCrunch.
What happened next is detailed in Gray’s lawsuit against Sallie Mae in Delaware Superior Court, and in a whistleblower complaint he submitted to the Securities and Exchange Commission, both of which he filed earlier this month.
He alleges Sallie Mae laid off his employees, including his co-founders, and then went back on promises that it wouldn’t sell the users’ data, according to a TechCrunch review of both 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 backpay and punitive damages in the suit, plus legal costs.
Gray told TechCrunch that before he agreed to the sale, he believed Sallie Mae would be prohibited from disclosing or selling non-public personal information about Scholly customers to third parties because it was a federally regulated financial institution.
Now he alleges that his acquirer got around any such regulations by putting Scholly into a subsidiary that is selling the data — including age, gender, race, and other indicators of an individual’s financial need — to third parties like universities and advertisers, possibly without students’ full awareness.
“I sold Scholly to a regulated bank because I believed it would protect the students who trusted us,” Gray told TechCrunch. “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.”
Sallie Mae denied Gray’s allegations, calling them “without merit” and declined to answer TechCrunch’s questions about its data privacy practices.
“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. We plan to vigorously defend ourselves against these claims which are without merit or substance,” Rick Castellano, the company’s vice president of corporate communications, said in an email.
Asked which specific accusations were “false,” Castellano declined to comment.
From Alabama to Shark Tank
Gray grew up low-income 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.
Aside from being expensive, he felt he lacked access to information to help him make proper decisions about where to go and how to afford it, a pressure that only compounded after his mother lost her job in the 2008 recession.
“That experience shaped how I thought about the scholarship system later,” he recalled, saying 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 scholarships, he found the process fragmented and inefficient, he said. There was no centralized search for him to find opportunities, and 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 persisted on some sites.
Still, he applied to about 75 scholarships over the course of seven months using public computers and the internet at the library, and won around $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 met students facing a familiar roadblock. “Students kept asking for help finding scholarships,” he told TechCrunch. “The funding existed with hundreds of millions of dollars unclaimed each year, but the search process was broken.”
He started mapping out the eight core criteria that determined scholarship eligibility — age, location, major, GPA, race, gender, field of study, and financial need.
“That became the foundation of Scholly’s 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 a month, students could use the platform and filter by eligibility criteria. “That price kept the business sustainable without having to sell data or run ads,” he said.
Scholly switched to a freemium model after Gray pitched the idea on Shark Tank. The sharks clamored over his idea in what became the “worst fight in Shark Tank history,” according 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 of 2023, Sallie Mae’s corporate development team reached out to Scholly. The bank had just bought the scholarship organization Nitro College a year prior and was trying to move more into the scholarship and college-planning space. “It was a natural fit,” Gray said, of why the student loan institution wanted Scholly.
Sallie Mae bought Scholly in July 2023, brought Gray and his co-founders on board as employees, and made Gray a vice president of product management.
In addition to promising that it would “make Scholly free for all students, families, and other users,” Sallie Mae CEO Jon Witter said in 2023 that the acquisition “allows us to harness and build on Scholly’s innovative technology to unlock future strategic growth opportunities.”
Sallie Mae vs. “Sallie”
For Gray, the canary in the coal mine came one year after Scholly’s acquisition.
He alleges in the suit that Sallie Mae laid off the Scholly founding team, including his co-founders, in July 2024. Around this same time, Gray claims he heard Sallie Mae executives discuss plans for selling Scholly user data in meetings.
Gray alleges executives told him his position was safe, and that the company was just restructuring. But when he went on to raise further concerns about the possible selling of Scholly data, he claims in his suit he was fired before a scheduled meeting with Witter, the CEO, where he planned to discuss those issues.
After his departure, around December 2024, Sallie Mae launched “Sallie.com.” This website describes itself as an “education solutions company,” and became home to the Scholly platform. It is separate from the website for Sallie Mae, which is home to the bank that makes student loans.
The Sallie.com website says it’s owned by an entity called SLM Education Services, LLC. Gray contends in his lawsuit and whistleblower complaint that Sallie Mae is using SLM Education Services in order to sell the personal data collected by Scholly, since it is not a closely regulated financial services company like the Sallie Mae banking arm.
Sallie.com discloses that it sells the following customer data in its privacy policy to third parties: name, phone number, email addresses, age, race, gender, education 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 the referrral of student loan customers,” according to the Sallie.com “About” page.
Gray argues in his complaints that the Sallie.com website may be easily confused with the official Sallie Mae website because of similar layouts and “sallie” logos, increasing the risk that students may hand over personal data to what they believe to be a bank.
Gray’s suit goes on to allege that Sallie Mae used Scholly user data to create something called Backpack Media in March, which it bills as a “first-to-market education media network” that “offers brands efficient, scalable access to highly desirable, hard to reach audiences – Gen Z, Gen Alpha, and those involved in their purchasing decisions,” according to a Sallie press release.
Castellano declined to comment on Backpack Media’s sources for data.
This would not be the first time a Salle Mae-affiliated company has been accused of deceptive or misleading behavior.
A company called Navient, which split from Sallie Mae in 2014, has faced restitution orders from the Federal Deposit Insurance Corporation, Department of Justice, and the Department of Education for overcharges. It was sued by the Consumer Financial Protection Bureau and reached a $1.85 billion settlement with 39 attorneys general for over what the attorneys general described as predatory student loans.
Gray said he knew of these past legal issues, but that he doesn’t regret the sale of Scholly as it helped make the platform free for every student. In fact, he said if he could, he would make the same decision to sell all over again.
“But I’d also raise the same concerns again,” he said. “Because I believe we should live in a system where an executive can speak up and change the course of a company in line with the law and fair business practices.”