The head of an education technology startup that created a popular chatbot for the Los Angeles school system has been arrested and charged with fraud.
Federal prosecutors, in an indictment unsealed Tuesday, accused Joanna Smith-Griffin of defrauding investors and charged her with securities fraud, wire fraud and aggravated identity theft.
Smith-Griffin, 33, is the founder and former chief executive of AllHere, the Boston-based company that created “Ed,” an artificial intelligence tool touted as revolutionary for student education and student interaction. the Los Angeles Unified School District and the families it serves.
After unveiling the chatbot with great fanfare in March, Los Angeles school officials quietly disconnected, a few months later, the tool – which was supposed to answer any questions from students or parents in a precise, useful way. and private.
Although the episode was embarrassing for LA Unified, schools Supt. Alberto Carvalho had stood alongside Smith-Griffin in promotional appearances — the financial damage to the nation’s second-largest school system, which this year has a budget of $18.4 billion, appears limited.
School district officials say they have spent about $3 million of a $6 million commitment to the company — and received services and technology for that investment. Carvalho recently told the Times that he was optimistic that the technology would be recovered for further use.
On Tuesday, Carvalho provided a brief comment on the developing criminal case.
“The indictment and allegations represent, if true, a disturbing and disappointing house of cards that has deceived and victimized many people across the country,” Carvalho said. “We will continue to assert and protect our rights. »
According to prosecutors, Smith-Griffin orchestrated “a deliberate and calculated plan to deceive AllHere Education, Inc.’s investors, by inflating the company’s finances to obtain millions of dollars under false pretenses.”
She could not be reached for comment Tuesday.
In July, Carvalho said he would appoint a task force to examine what was wrong with the LA Unified project and chart a path forward. At the time, he anticipated that the task force, once formed, would complete its work over approximately three months. No information on a working group or its progress has been provided since.
AllHere’s website was active Tuesday evening, but the contact page states that “due to our current financial situation, the Board of Directors terminated the majority of the company’s employees on June 14, 2024.” The most recent update on the company blog was in mid-April.
AllHere is now in Chapter 7 bankruptcy, its employees have been laid off and the company is under the control of a court-appointed bankruptcy trustee, according to the U.S. Attorney’s Office.
Authorities said Smith-Griffin was arrested Tuesday in North Carolina and was scheduled to appear before a magistrate judge.
According to the indictment, between approximately November 2020 and June 2024, Smith-Griffin misrepresented AllHere’s revenue, customer base and liquidity to investors.
For example, in spring 2021, she reportedly told potential investors that AllHere had generated approximately $3.7 million in revenue in 2020, had approximately $2.5 million in liquidity, and had significant customers from school district such as the New York City Department of Education and Atlanta Public Schools.
In reality, AllHere had generated about $11,000 in revenue in 2020, had about $494,000 in cash and did not have contracts with many of the clients it claimed to have, including the city’s Department of Education of New York and Atlanta Public Schools, the indictment states.
These false statements allegedly continued until the collapse of AllHere; As the company was going under, she was able to raise nearly $10 million from investors and sought an additional $35 million from a private equity investor – who ultimately decided to do not invest.
Smith-Griffin used some of the fraudulently obtained funds to put a down payment on a house in North Carolina and pay for her wedding, prosecutors said.
When AllHere’s investors and outside accountant discovered the discrepancy between the company’s actual financials and what Smith-Griffin was telling investors, she allegedly attempted to conceal her actions, going so far as to create a fake account email address for AllHere’s external financial consultant, which she used to send additional fraudulent financial documents to her largest investor.
“Joanna Smith-Griffin allegedly misrepresented the makeup of her start-up to defraud millions of investors and posed as a financial consultant to perpetuate the scheme once discrepancies were discovered,” the deputy director said in FBI charge, James E. Dennehy. “His alleged actions impacted the potential to improve learning environments in major school districts by selfishly prioritizing out-of-pocket spending.”
Carvalho had pitched Ed as an AI-enhanced student advisor who was to be part of an Individual Acceleration Plan, or IAP, unique to each student.
Full IAP deployment is on hold. And it’s hard to find students, teachers or other staff who have used any part of the system since its official launch. This is not available in most schools.
Nonetheless, LAUSD officials said, parents and students currently have online access to a wide range of information related to grades, test scores, assignments and general school district information about programs, courses and schools.
