AI Education Startup Founder Charged with Fraud: Allegations of Misused Funds and False Claims

AI Founder Promised Amazing Chatbot to Public Schools, Then Allegedly Spent the Money on a Lavish Wedding and Mansion

"A disturbing and disappointing house of cards that deceived and victimized many across the country." AllFake After duping the Los Angeles school system into giving her gobs of money, the founder of an AI ed tech firm allegedly spent a lot of it on herself. As the LA Times reports, 33-year-old Joanna Smith-Griffin, the founder of an AI startup called AllHere, has been charged by federal prosecutors with identity theft and multiple counts of fraud after her alleged web of lies regarding her company's sketchy wares came tumbling down. Earlier this year, the same newspaper reported that after being contracted to build out a chatbot connecting families with information from the Los Angeles Unified School District, AllHere filed for bankruptcy despite tens of millions of dollars in public and private investment. Now, the reason why seems to be emerging, per the allegations: that the founder's repeated lies about the company's worth, and dips into its investments for her own personal gain, led it to ruin. Double Dipping Prosecutors maintain in their indictment against Smith-Griffin that the founder of the Boston-based company inflated AllHere's worth to attract investors, claiming that she had raised millions for its bespoke educational chatbot tech when in reality the firm had far less in its coffers. According to the indictment, the founder also allegedly used some of the tens of millions she raised from private and public investors to put a down payment on a house in North Carolina and fund her own lavish wedding. Aside from outside investments, the firm was contracted with the LAUSD, the nation's second largest-school system, for $6 million. According to school officials who spoke to the LA Times, the district only paid out about half -- or $3 million -- of that contract to AllHere ahead of its collapse. Ed Tech Launched in March, AllHere's chatbot for the LAUSD, named "Ed," was meant to be a part of students' individualized toolkits. Just a few months after its splashy rollout, however, the school district quietly took Ed offline -- and soon, the company that made it was sinking as well. "We can obviously point the finger at companies, especially startups, that are pressured to overpromise and... generally underdeliver," University of Southern California AI expert Stephen Aguilar told the LA Times after Ed went dark. "Ultimately, the responsibility rests with the school district." Now, the superintendent of the LAUSD is condemning Smith-Griffin and what prosecutors called a "deliberate and calculated scheme." "The indictment and the allegations represent, if true, a disturbing and disappointing house of cards that deceived and victimized many across the country," superintendent Alberto Carvalho told the LA Times following the recent charges. "We will continue to assert and protect our rights." Those rights, it seems, include the ability to revive the Ed chatbot at will -- and as Carvalho told the newspaper, the LAUSD hasn't given up hope that it will be able to do so.

Founder of AI education chatbot charged with defrauding investors of $10 million

The founder of an artificial intelligence startup, promoted to strengthen communication between school districts and families, has been arrested on charges of defrauding investors. Joanna Smith-Griffin, the founder and CEO of AllHere Education, Inc., was arrested in North Carolina on Tuesday on charges of securities fraud, wire fraud and identity theft, according to a news release from the Southern District of New York U.S. Attorney's Office. An indictment unsealed on Tuesday alleges that Smith-Griffin lied to potential investors about the revenue that AllHere Education generated and the number of school districts the startup had contracts with over the last few years. In total, prosecutors allege in the indictment, Smith-Griffin fraudulently obtained nearly $10 million from AllHere Education investors, transferring at least $600,000 to her personal bank account, and using some of the money to pay for a home down payment and to finance her wedding. No attorney was listed for Smith-Griffin in court records. USA TODAY emailed AllHere Education but had not heard back by Wednesday evening. All of AllHere Education's employees had been laid off and the company was under control of a court-appointed bankruptcy trustee as of Tuesday, according to the office of Southern District of New York U.S. Attorney Damian Williams. Prosecutors say lies abounded In November 2020, prosecutors allege that AllHere told investors that the company generated $3.7 million in revenue that year, when in fact the real figure was more like $11,000, the indictment says. During a fundraising campaign to raise $8 million from investors, Smith-Griffin told them that AllHere Education worked with eight educational institutions: the New York City Department of Education, Atlantic Public Schools, Boston Public Schools, Baltimore County Public Schools, Prince George's County Public Schools, Durham Public Schools, Grand Rapids Public Schools and the Bureau of Indian Education, according to the indictment. In reality, only Boston Public Schools and Prince George's County Public Schools had contractual relationships with AllHere Education, the indictment says. Prosecutors detail how alleged fraud scheme worked Prosecutors say that Smith-Griffin used the name of an external consultant to communicate with investors and AllHere Education's board of directors about a financial report discrepancy. According to the indictment, Smith-Griffin used an AllHere Education email account with an external consultant's name to inform investors and the board of directors about the company's revenue, number of contracts with school districts and payments made by customers. It was all false and the real external consultant was unaware Smith-Griffin used her likeness until a board member mentioned it, the indictment says. In the days following Smith-Griffin's allegedly fake emails, the company's board of directors removed her from access to the AllHere Education bank and corporate accounts, the indictment says. Smith-Griffin was also terminated as CEO. Furloughs and bankruptcy In June of this year, AllHere Education furloughed the majority of its employees and in August, the company filed for Chapter 7 bankruptcy, which permits the liquidation of assets. What was AllHere Education? Smith-Griffin founded AllHere Education, Inc. in 2016. The company was known for its use of an artificial intelligence chatbot to interact with students and families. Around 2023, AllHere entered in a multi-million dollar contract with the Los Angeles Unified School District in California to develop an artificial chatbot named "Ed," according to the indictment. Ed used generative artificial intelligence to direct students to resources and assignments and provide encouraging feedback. "The indictment and the allegations represent, if true, a disturbing and disappointing house of cards that deceived and victimized many across the country," a Los Angeles Unified School District spokesperson told USA TODAY via email. "We will continue to assert and protect our rights." In 2021, Smith-Griffin was named a Forbes 30 Under 30 Award recipient in Education and this year, she was included in Inc.'s Female Founders 250 list.

Start-Up Founder Who Sold A.I. Chatbot to Schools Is Charged With Fraud

Joanna Smith-Griffin was charged with lying to investors about revenue and her customer base, which she claimed included some of the nation's largest school districts, including New York City's. The founder of an artificial intelligence start-up focused on education was arrested and charged with defrauding her investors, lying about the company's profits and falsely claiming that some of the largest school districts in the country, including New York City's, were her customers. The founder, Joanna Smith-Griffin, started the company, AllHere Education, in 2016, with the goal of using artificial intelligence to increase student and parent engagement and curb absenteeism. In the years that followed, Ms. Smith-Griffin, 33, misrepresented AllHere's revenue and customer base to fraudulently raise almost $10 million in funds, according to the indictment. Once the company's valuation had climbed, she sold some of her stake in it and spent hundreds of thousands of dollars on a down payment for a new home and on her wedding. Ms. Smith-Griffin was arrested Tuesday in North Carolina, where she lives, and charged with wire fraud, securities fraud and aggravated identity theft. She faces more than 40 years in prison. AllHere is now in bankruptcy proceedings, prosectors said, and all of its employees have been laid off. "Her alleged actions impacted the potential for improved learning environments across major school districts by selfishly prioritizing personal expenses," said James E. Dennehy, the F.B.I. assistant director in New York leading the investigation into Ms. Smith-Griffin. "The F.B.I. will ensure that any individual exploiting the promise of educational opportunities for our city's children will be taught a lesson." Among AllHere's offerings were "Ed," an A.I. chatbot that the company said used "student data to create individual learning plans for each student." Ms. Smith-Griffin claimed to investors in 2021 that eight public school systems, including those in New York, Atlanta and Baltimore, were using AllHere's technology. But according to prosecutors, only two of the eight districts -- those in Boston and Prince George's County, Md. -- actually had contracts with the company. Two years later, AllHere signed "a multi-million-dollar contract" with the Los Angeles Unified School District to help develop the chatbot, according to the indictment. A spokeswoman for the New York City Department of Education declined to comment on the case. A spokesman for Atlanta Public Schools said that it was reviewing all of its contracts to confirm that none were with AllHere. "The indictment and the allegations represent, if true, a disturbing and disappointing house of cards that deceived and victimized many across the country," a spokeswoman for the Los Angeles Unified School District said in a statement. In a September speech, David C. Banks, who was then the New York City schools chancellor, lauded the benefits that he said artificial intelligence could have in the classroom. He said the city's schools planned to use A.I. "to provide teachers and families with personalized learning plans for every child and then offering supplemental instruction which is aligned to those plans" -- language that closely resembled AllHere's description of its Ed chatbot. "To all the technology companies and the research institutions who are investing in A.I., I say to you, start here with New York City public schools," Mr. Banks said. Mr. Banks resigned from his position in October, and it is unclear whether any of his stated plans for A.I. were realized. Ms. Smith-Griffin first conceived of AllHere at a start-up incubator in 2016, pitching an education service that would send automated text messages to parents to check in on their children and make sure they attend school. By November 2020, Ms. Smith-Griffin had begun formally raising money as part of a Series A seed round, but she lied during the process about her company's financial outlook and client roster, according to the indictment. The company generated $11,000 in revenue in 2020, but Ms. Smith-Griffin told investors that it had brought in $3.7 million, the indictment said. Ms. Smith-Griffin went on to use the inflated success of her company to "raise her public profile," prosecutors said. In 2021, she was prominently featured in Forbes magazine's "30 Under 30" list of leaders in the education field. Ms. Smith-Griffin said in the accompanying profile that school closures during the Covid-19 pandemic had put pressure on her business model and forced her to change her strategy. Then the company came up with Ed, which she said schools paid an annual subscription fee of $2 per student to use. "My goal over the next 12 months is a land grab," she said. "We want to help students get to school every day and put them on the track to success." By June 2024, two major investors and the company's accountant had uncovered a disparity between AllHere's purported financial outlook, as Ms. Smith-Griffin was presenting it to investors, and its actual finances. When confronted, Ms. Smith-Griffin created an email address that she used to pose as an AllHere financial consultant and send fake documents to investors. Later that month, she was fired by the company's board of directors.

Founder of artificial intelligence company used by schools in Los Angeles, NYC, Atlanta is arrested

NEW YORK (AP) -- The founder of an artificial intelligence company that supplied school districts in Los Angeles, New York and Atlanta with a chatbot to create learning plans for students was arrested on fraud charges Tuesday, accused of spending investor money on herself as her company spiraled into bankruptcy. Joanna Smith-Griffin, 33, of Raleigh, North Carolina, was arrested in her home state and charged with securities and wire fraud, along with identity theft. She founded ALLHere Education Inc., an artificial intelligence technology company that created "Ed" the chatbot. The Los Angeles Unified School District was among those that used the product for a time before shutting it down, citing the financial collapse of Smith-Griffin's company. Authorities say the company's products were also used in other major school districts including New York City and Atlanta. An indictment unsealed Tuesday in Manhattan federal court accused Smith-Griffin of making misrepresentations to investors that enabled her to collect millions of dollars illegally from them since 2020. It says she used some of the fraudulently obtained money from investors to put a down payment on her home in North Carolina and to pay for her wedding. After the company collapsed and employees were laid off, it entered bankruptcy proceedings and a trustee took over its finances, authorities said. U.S. Attorney Damian Williams said in a release that she "orchestrated a deliberate and calculated scheme to deceive investors in AllHere Education, Inc., inflating the company's financials to secure millions of dollars under false pretenses." It was not immediately clear who would represent her in an afternoon court appearance in North Carolina. James E. Dennehy, head of New York's FBI office, said she misrepresented the composition of her startup company and "masqueraded as a financial consultant to perpetuate the scheme once discrepancies were discovered." He said her "selfishly prioritizing personal expenses" over the company's needs damaged the potential for improved learning environments across major school districts, according to the release.

Founder of artificial intelligence company used by schools in Los Angeles, NYC, Atlanta is arrested

NEW YORK (AP) -- The founder of an artificial intelligence company that supplied school districts in Los Angeles, New York and Atlanta with a chatbot to create learning plans for students was arrested on fraud charges Tuesday, accused of spending investor money on herself as her company spiraled into bankruptcy. Joanna Smith-Griffin, 33, of Raleigh, North Carolina, was arrested in her home state and charged with securities and wire fraud, along with identity theft. She founded ALLHere Education Inc., an artificial intelligence technology company that created "Ed" the chatbot. The Los Angeles Unified School District was among those that used the product for a time before shutting it down, citing the financial collapse of Smith-Griffin's company. Authorities say the company's products were also used in other major school districts including New York City and Atlanta. An indictment unsealed Tuesday in Manhattan federal court accused Smith-Griffin of making misrepresentations to investors that enabled her to collect millions of dollars illegally from them since 2020. It says she used some of the fraudulently obtained money from investors to put a down payment on her home in North Carolina and to pay for her wedding. After the company collapsed and employees were laid off, it entered bankruptcy proceedings and a trustee took over its finances, authorities said. U.S. Attorney Damian Williams said in a release that she "orchestrated a deliberate and calculated scheme to deceive investors in AllHere Education, Inc., inflating the company's financials to secure millions of dollars under false pretenses." It was not immediately clear who would represent her in an afternoon court appearance in North Carolina. James E. Dennehy, head of New York's FBI office, said she misrepresented the composition of her startup company and "masqueraded as a financial consultant to perpetuate the scheme once discrepancies were discovered." He said her "selfishly prioritizing personal expenses" over the company's needs damaged the potential for improved learning environments across major school districts, according to the release.

Founder of artificial intelligence company used by schools in Los Angeles, NYC, Atlanta is arrested

NEW YORK -- The founder of an artificial intelligence company that supplied school districts in Los Angeles, New York and Atlanta with a chatbot to create learning plans for students was arrested on fraud charges Tuesday, accused of spending investor money on herself as her company spiraled into bankruptcy. Joanna Smith-Griffin, 33, of Raleigh, North Carolina, was arrested in her home state and charged with securities and wire fraud, along with identity theft. She founded ALLHere Education Inc., an artificial intelligence technology company that created "Ed" the chatbot. The Los Angeles Unified School District was among those that used the product for a time before shutting it down, citing the financial collapse of Smith-Griffin's company. Authorities say the company's products were also used in other major school districts including New York City and Atlanta. An indictment unsealed Tuesday in Manhattan federal court accused Smith-Griffin of making misrepresentations to investors that enabled her to collect millions of dollars illegally from them since 2020. It says she used some of the fraudulently obtained money from investors to put a down payment on her home in North Carolina and to pay for her wedding. After the company collapsed and employees were laid off, it entered bankruptcy proceedings and a trustee took over its finances, authorities said. U.S. Attorney Damian Williams said in a release that she "orchestrated a deliberate and calculated scheme to deceive investors in AllHere Education, Inc., inflating the company's financials to secure millions of dollars under false pretenses." It was not immediately clear who would represent her in an afternoon court appearance in North Carolina. James E. Dennehy, head of New York's FBI office, said she misrepresented the composition of her startup company and "masqueraded as a financial consultant to perpetuate the scheme once discrepancies were discovered." He said her "selfishly prioritizing personal expenses" over the company's needs damaged the potential for improved learning environments across major school districts, according to the release.

An AI CEO was just arrested for defrauding investors -- and allegedly using company funds to pay for her wedding

The founder of an AI startup once featured on Forbes's "30 Under 30" list was charged Tuesday with defrauding investors. Joanna Smith-Griffin, 33, who founded AllHere Education, was arrested in North Carolina and charged with securities fraud, wire fraud, and identity theft. U.S. Attorney Damian Williams of the Southern District of New York claimed that "Smith-Griffin orchestrated a deliberate and calculated scheme to deceive investors in AllHere Education, Inc., inflating the company's financials to secure millions of dollars under false pretenses. The law does not turn a blind eye to those who allegedly distort financial realities for personal gain." Prosecutors claimed that Smith-Griffin lied to investors, telling them she had millions in revenue that didn't exist and claimed to have contracts with major school districts like the New York City Department of Education that didn't exist. AllHere created the "Ed" chatbot, which was eventually used by big school districts, including the Los Angeles Unified School District. On its website, LA schools said "Ed" is an "educational friend designed to help students reach their limitless potential," and used student data to create individual learning plans for students. Prosecutors also allege that Smith-Griffin "embezzled corporate funds for her own benefit," including putting a downpayment on her house and paying for her wedding. AllHere collapsed before the charges were filed, filing Chapter 7 bankruptcy and laying off workers. It is currently being controlled by a court-appointed bankruptcy trustee. Her combined charges carry more than 40 years of potential incarceration. The aggravated identity theft charge has a mandatory two-year sentence. FBI Assistant Director in Charge James E. Dennehy said in a statement that Smith-Griffin's alleged actions "impacted the potential for improved learning environments across major school districts by selfishly prioritizing personal expenses." "The FBI will ensure that any individual exploiting the promise of educational opportunities for our city's children will be taught a lesson," Dennehy added.