The head of an education technology startup that created a popular chatbot for a Los Angeles school system has been arrested and charged with fraud.
Federal prosecutors, in a lawsuit unsealed Tuesday, accused Joanna Smith-Griffin of defrauding investors and charged her with fraud, embezzlement and aggravated identity theft.
Smith-Griffin, 33, is the founder and CEO of AllHere, a Boston-based company that develops “Ed,” an artificial intelligence tool billed as a revolution in student education and collaboration between the LA Unified School District and schools. families help.
After unveiling the chatbot with much fanfare in March, LA school officials, months later, quietly discontinued the tool — which was supposed to respond to any question from students or parents in an accurate, helpful and confidential manner.
Although the episode was embarrassing for LA Unified – schools Supt. Alberto Carvalho was standing next to Smith-Griffin in advertising – the financial damage to the second largest school system in the country, this year with a budget of 18.4 billion, seems to be limited.
School district officials say they have used about $3 million of what was a $6-million commitment to the company — and are getting resources and technology for that investment. Carvalho recently told The Times that he hoped to salvage the technology for later use.
On Tuesday, Carvalho gave brief comments about the growing criminal case.
“The charges and allegations represent, if true, a disturbing and disappointing house of cards that deceived and victimized many across the country,” Carvalho said. “We will continue to assert and protect our rights.”
According to prosecutors, Smith-Griffin orchestrated “a deliberate and calculated scheme to defraud investors in AllHere Education, Inc., raising the company's capital to obtain millions of dollars under false pretenses.”
He could not be reached Tuesday for comment.
In July, Carvalho said he would appoint a task force to examine what went wrong with the LA Unified project and plan a way forward. At that time, he expected that the task force, once assembled, would complete its work in about three months. No information on the task force or its progress has been provided since then.
AllHere's website was down as of Tuesday night, but the contact page notes that “due to our current financial situation, the Board has laid off most of the company's employees on June 14, 2024.” The latest update on the company's blog is from mid-April.
AllHere is now in Chapter 7 bankruptcy, its employees have been laid off, and the company is under a bankruptcy court-appointed receiver, according to the U.S. attorney's office.
Authorities say Smith-Griffin was arrested Tuesday in North Carolina and will appear before a magistrate judge.
According to the indictment, from approximately November 2020 to approximately June 2024, Smith-Griffin misrepresented AllHere's finances, customer base and money to investors.
For example, in the spring of 2021, he reportedly told potential investors that AllHere had made an estimated $3.7 million in revenue in 2020, had approximately $2.5 million in cash on hand and had major school district clients such as the New York City Department of Education and Atlanta Public Schools. .
In fact, AllHere made about $11,000 in revenue in 2020, had about $494,000 in revenue and had no contracts with many of the customers it claimed, including the New York City Department of Education and Atlanta Public Schools, the lawsuit said.
This misrepresentation allegedly continued with the collapse of AllHere; as the company was sinking, he was able to get about $10 million from investors and sought another $35 million from a private equity investor – who ultimately decided not to invest.
Smith-Griffin used some of the proceeds of the fraud to pay for a house in North Carolina and pay for her wedding, prosecutors said.
When AllHere's investors and an outside accountant discovered discrepancies between the company's actual finances and what Smith-Griffin was telling investors, he allegedly tried to cover up his actions, even creating a fake account for AllHere's outside financial consultant. used to send some fake financial documents to his big investor.
“Joanna Smith-Griffin allegedly misrepresented the creation of a company she created to defraud investors of millions and posed as a financial advisor to further the scheme once a conflict was discovered,” said FBI Acting Assistant Director James E. Dennehy. “His alleged actions have contributed to improving learning environments in large school districts by selfishly prioritizing personal expenses.”
Carvalho had proposed Ed as an advanced AI student mentor who would be part of the Individual Acceleration Program, or IAP, for every student.
The full release of IAP is still pending. And it is difficult to find students, teachers or other staff who have used any part of the system since it was officially launched. Not available in most schools.
Still, LAUSD officials said, parents and students have current online access to more information related to grades, test scores, assignments and general school district information about programs, courses and schools.
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