The founder of Shark Tank-backed startup Scholly is filing a lawsuit against his acquiring company, Sallie Mae

When Chris Gray sold his Shark Tank-backed 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 alleges that it is selling data collected by its app, which includes personal information about minors, without properly informing users.

Gray co-founded the company a decade ago in hopes of helping students more easily find college scholarships that had not yet been tapped. Within two years, he nabbed sharks Diamond John and Lori Greiner as investors after they appeared on the show.

With the acquisition, Gray became one of the few Black-backed fintech founders to exit their company, though he received some 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 at the time.

He took over as vice president at Sallie Mae and expected to settle in well into his new job, while helping to scale Scholly and make it free to use, he said in an exclusive interview with TechCrunch.

What happened next is detailed in the lawsuit Gray filed against Sallie Mae in Delaware Supreme Court, and in the whistleblower complaint he filed with the Securities and Exchange Commission, both of which he filed earlier this month.

Sallie Mae allegedly laid off his employees, including his co-founders, and then reneged on promises that it would not sell user 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 back pay and punitive damages in the lawsuit, as well as 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 is a federally regulated financial institution.

He now claims that the acquiring company circumvented any such regulations by placing Scholey in a subsidiary that sells data — including age, gender, race and other indicators of an individual’s financial need — to third parties such as universities and advertisers, perhaps without the students’ full awareness.

“I sold Scholly to a regulated bank because I thought it would protect the students who trust us,” Gray told TechCrunch. “Instead, I watched the company build a non-bank subsidiary to do things that a bank itself couldn’t legally do: sell student data. This is not the company I thought I would join.”

Sallie Mae denied Gray’s allegations as “baseless” and declined to answer TechCrunch’s questions about her data privacy practices.

“Although we do not comment on pending litigation, it is unfortunate that 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 allegations that have no merit or substance,” Rick Castellano, the company’s vice president of corporate communications, said in an email.

Asked what specific accusations were considered “false,” Castellano declined to comment.

From Alabama to Shark Tank

Gray grew up on a low income in Birmingham, Alabama, with a single mother and two brothers. He felt that 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 appropriate decisions about where to go and how to afford it, a pressure that only worsened after his mother lost her job in the 2008 recession.

“That experience shaped the way I thought about the scholarship system later,” he recalls, saying that he began to view education and scholarships as “an access problem rather than a merit problem.”

He said that as a teenager, when it came time to apply for scholarships, he found the process fragmented and inefficient. There was no central search for him to find opportunities, and when he found 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 persist on some sites.

However, he applied for about 75 scholarships over the course of seven months using public computers and the library’s Internet, and won about $1.3 million in scholarship funding, including from the Bill & Melinda Gates Foundation and the Coca-Cola Scholars Foundation.

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

He began outlining the eight basic criteria that determine scholarship eligibility – age, location, major, GPA, race, gender, field of study, and financial need.

“This became the basis of Scholey’s matching algorithm,” he said.

During his senior year, Gray, along with Nick Pirolo and Bryson Alf, whom he met as researchers at Coca-Cola, officially launched the Scholly platform in 2013. For just $0.99 per month, students can use the platform and filter by eligibility criteria. “This price has kept the business sustainable without having to sell data or run ads,” he said.

Shuli switched to a freemium model after Gray pitched the idea on Shark Tank. The Sharks rallied over his idea in what became “the worst fight in Shark Tank history,” according to one of the hosts who was invested. Scholly has grown to 5 million users and generated more than $30 million in cumulative revenue, Gray said.

In March of 2023, Scholly was approached by Sallie Mae’s development team. The bank had just purchased the Nitro College Scholarship Organization a year earlier and was trying to move more into the scholarship and college planning business. “It was a natural fit,” Gray said, of why the student loan organization wanted Shuli.

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

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

Sallie Mae vs. “Sally”

For Gray, the canary in the coal mine came one year after the Shuli acquisition.

The suit alleges that Sallie Mae laid off 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 user data in meetings.

Gray claims executives told him his position was secure, and that the company was merely restructuring. But when he continued to raise further concerns about the possible sale of Sholi’s data, he claimed in his lawsuit that he was fired before a scheduled meeting with Whitter, the CEO, where he planned to discuss the issues.

After his passing, in approximately December 2024, Sallie Mae launched “Sallie.com”. This site describes itself as an “educational solutions company,” and has become home to the Scholly platform. It is separate from Sallie Mae’s website, which is home to the bank that offers student loans.

Sallie.com says it is owned by an entity called SLM Education Services, LLC. Gray asserts 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, phone number, email addresses, age, race, gender, education records, and geolocation data. It says the third parties it sells this information to 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 the About page on Sallie.com.

Sallie.com could easily be confused with the official Sallie Mae website due to similar designs and “sallie” logos, increasing the risk of students handing over personal data to what they believe is a bank, Gray says in his complaint.

Gray’s lawsuit alleges that Sallie Mae used Sholly’s user data to create something called Backpack Media in March, which it described as “the first educational media network on the market” that “provides brands with effective, scalable access to highly desirable, hard-to-reach audiences — Generation Z, Generation Alpha, and those who are engaged in their own 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 a Salle Mae subsidiary has been accused of deceptive or misleading conduct.

A company called Navient, which spun off from Sallie Mae in 2014, has faced clawback orders from the Federal Deposit Insurance Corporation, the Department of Justice, and the Department of Education over excessive fees. It was sued by the Consumer Financial Protection Bureau and reached a $1.85 billion settlement with 39 state attorneys general over what prosecutors called predatory student loans.

Gray said he was aware of these previous legal issues, but he does not regret selling 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 again.

“But I would also like to 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.”