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.
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