Artificial Intelligence & Machine Learning , Next-Generation Technologies & Secure Development

AI Edtech Startup Founder Indicted in U.S. Fraud Case

U.S. law enforcement arrested and indicted the founder of an artificial intelligence edtech startup AllHere over fraud charges.

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Federal prosecutors accused 33-year-old Joanna Smith-Griffin of defrauding investors, charging her with securities fraud, wire fraud and aggravated identity theft.

The former CEO of the Boston-based company created Ed, an AI chatbot for the Los Angeles Unified School District. The chatbot launched with much fanfare in March was expected to help answer student and parent queries accurately, but Los Angeles school officials quietly disconnected it months later. The school district is the second largest in the nation, with an annual budget of $18.4 billion. The financial impact of the Ed fiasco was limited, with school district officials reportedly spending about half of the $6 million committed to AllHere.

Federal agents arrested Smith-Griffin Tuesday in North Carolina. If convicted, she faces a maximum prison sentence of 20 years for the securities and wire fraud counts and a minimum of two years for aggravated identity theft.

AllHere filed for Chapter 7 bankruptcy and is under the control of a court-appointed bankruptcy trustee, with all its employees laid off. Although its website is still active, its contact page says that "due to our current financial position, the Board furloughed the majority of the company's employees on June 14, 2024."

Prosecutors said that Smith-Griffin orchestrated a "deliberate and calculated scheme to deceive investors in AllHere Education, Inc., inflating the Time top edtech company's financials to secure millions of dollars under false pretenses."

She allegedly misrepresented AllHere's revenue, customer base and cash to investors from November 2020 to June 2024. She allegedly told potential investors that AllHere had generated $3.7 million in revenue in 2020 with $2.5 million in cash on hand. In reality, the company only generated $11,000 in revenue and had $494,000 in cash. It also did not have contracts with many of the organizations it claimed were customers, including the New York City Department of Education and Atlanta Public Schools.

Smith-Griffin allegedly continued to misrepresent the company until its collapse, even raising $10 million from investors. Prosecutors said that she used some of the fraudulently obtained funds to put a down payment on a house in North Carolina and pay for her wedding.

When the company's investors and outside accountant found the discrepancies, she allegedly created a fake email account for the company's outside financial consultant and sent fraudulent documents to her investors.