The head of an education technology startup that created a highly touted 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 a larger charge of securities fraud, wire fraud and identity theft.
Smith-Griffin, 33, is the founder and former chief executive of AllHere, a Boston-based company that created “Ed,” an artificial intelligence tool that is said to be revolutionary for student education and interactions between the LA Unified School District and the families it serves.
After unveiling the chatbot to great fanfare in March, LA school officials, a few months later, quietly discontinued the tool — which was supposed to respond to questions from students or parents accurately, helpfully and personally.
Although this episode is embarrassing for LA Unified – school Supt. Alberto Carvalho has stood next to 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 to be limited.
School district officials say they have spent about $3 million of their $6 million commitment to the company — and are receiving services and technology for the investment. Carvalho recently told The Times that he is optimistic about saving the technology for later use.
On Tuesday, Carvalho gave brief comments on the developing criminal case.
“These indictments and allegations represent, if true, a disturbing and disappointing house of cards that defrauded 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., extorting the company’s finances to secure 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 chart a path forward. At that time, he expected that the task force, once assembled, would complete its work within three months. No information about the task force or its progress has been provided since then.
AllHere’s website was active as of Tuesday night, but its contact page noted that “due to the current financial position, the Board furloughed the majority of the company’s employees on June 14, 2024.” The latest update on the company blog is from mid-April.
AllHere is currently 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 is set to appear before a magistrate judge.
According to the indictment, from about November 2020 to about June 2024, Smith-Griffin misrepresented AllHere’s revenue, customer base and cash to investors.
For example, in the spring of 2021, he allegedly told potential investors that AllHere generated about $3.7 million in 2020, had $2.5 million in cash and had major school district customers such as the New York Department of Education and Atlanta Public Schools.
In reality, AllHere generated about $11,000 in revenue in 2020, had $494,000 in cash and had no contracts with many of its claimed customers, including the New York Department of Education and Atlanta Public Schools, the indictment said.
These misrepresentations allegedly continued through AllHere’s collapse; as this company was sinking, he was able to take nearly $10 million from investors and seek an additional $35 million from private equity investors – who ultimately decided not to 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 accountants discovered discrepancies between the company’s actual finances and what Smith-Griffin had told investors, she allegedly tried to cover up her actions, going so far as to create fake email accounts for AllHere’s outside financial consultants, which she knew. used to send additional fraudulent financial documents to his biggest investors.
“Joanna Smith-Griffin allegedly misrepresented the composition of the start-up company to deceive investors of millions and masqueraded as a financial consultant to perpetuate the plan after discrepancies were discovered,” said FBI Assistant Director in Charge James E. Dennehy. “His actions lead to the potential to improve the learning environment in major school districts at private expense.”
Carvalho has touted Ed as an AI-enhanced student advisor that is a component of a unique Individual Acceleration Plan, or IAP, for each student.
The full rollout of IAP 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. Not available in most schools.
In addition, LAUSD officials said, parents and students have online access now to a variety of information related to grades, test scores, assignments and general school district information about programs, courses and schools.
