AI Startup Founder Arrested for Fraud Involving LA Schools

Federal authorities have charged Joanna Smith-Griffin, the former CEO of an education technology startup involved with the Los Angeles Unified School District (LAUSD), with securities fraud and other offenses. The charges were unsealed on Tuesday following Smith-Griffin’s arrest in North Carolina.

Smith-Griffin, aged 33, is accused of orchestrating a scheme to deceive investors in AllHere Education, Inc., the Boston-based company she founded. The federal indictment alleges she inflated the company’s financial figures and fabricated customer relationships to secure millions in investment.

AllHere developed «Ed,» an AI-powered chatbot intended to provide tailored educational plans for students in collaboration with LAUSD. Despite initial enthusiasm, including promotional appearances by LAUSD Superintendent Alberto Carvalho alongside Smith-Griffin, the chatbot was later quietly deactivated.

In July, following the project’s challenges, Carvalho announced plans to convene a task force to investigate the issues concerning the implementation of Ed. There has been no update on the task force’s progress since its announcement.

The financial repercussions for LAUSD appear contained. The district’s only spent a portion of its $6 million commitment to AllHere, according to Carvalho. The school system’s budget for the current year stands at $18.4 billion.

Prosecutors allege Smith-Griffin misrepresented AllHere’s financial status to potential investors from November 2020 to June 2024, claiming a $3.7 million revenue for 2020 when it was approximately $11,000. She is also said to have falsely claimed contractual relationships with significant education bodies such as the New York City Department of Education.

AllHere’s website indicates a financial crisis led to workforce reductions as of June 2024, and the company remains in Chapter 7 bankruptcy. It is now under the watch of a bankruptcy trustee.

Smith-Griffin’s charges include securities fraud, wire fraud, and aggravated identity theft, potentially leading to over 40 years of imprisonment if convicted. The FBI’s James E. Dennehy stated her actions had disrupted potential improvements in educational environments for large school systems.

The legal actions taken against Smith-Griffin emphasize the crackdown on fraudulent activities affecting public educational resources. US Attorney Damian Williams remarked that the law maintains vigilance against such financial misrepresentations.