The founder of an artificial intelligence company used in schools all over the U.S. is being accused of misusing millions of dollars in investor funds for personal expenses, including a lavish wedding and a mansion, leaving her company to collapse into bankruptcy.
On Tuesday, 33-year-old Joanna Smith-Griffin of Raleigh, North Carolina, was arrested on Tuesday and charged with securities fraud, wire fraud, and identity theft, according to an indictment unsealed in Manhattan federal court.
Reports indicate that Smith-Griffin, a former Forbes 30 Under 30 honoree, founded AllHere Education Inc., an AI company that provided a “learning acceleration web-based platform” designed to improve student outcomes and personalize K-12 education.
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The company was launched in 2016 and also created “Ed,” a chatbot once used by the Los Angeles Unified School District. However, AllHere eventually collapsed financially, leading to its closure.
Prosecutors allege that the tech start-up founder arrested secured nearly $10 million from investors by inflating the company’s financial health and sought an additional $35 million from a private equity investor who ultimately declined to invest.
She is also accused of using some of the fraudulently obtained funds as a down payment on her home and to pay for a three-day wedding spectacle in Florida.
The wedding reportedly included a welcome party, a black-tie ceremony at an exclusive members-only hotel, and also a post-wedding barbecue.
Smith-Griffin is also accused of creating a fake email account to conceal discrepancies between the company’s actual finances and the false information she provided to investors.
When discrepancies were discovered by investors and outside accountants, she allegedly used the fake email account to pose as AllHere’s external financial consultant, and shared fraudulent financial documents with her largest investor.
In the indictment, prosecutors allege Smith-Griffin misrepresented AllHere’s financial performance to investors and claimed her company generated $3.7 million in revenue in 2020, had $2.5 million in cash reserves, and had major school district customers such as the New York City Department of Education and Atlanta Public Schools.
However, authorities found out that the company generated just $11,000 in revenue in 2020, had only $494,000 in cash, and did not hold contracts with many of the school districts it claimed as clients.
AllHere filed for Chapter 7 bankruptcy liquidation in June, went on to lay off all employees, and is now under the control of a court-appointed bankruptcy trustee.
U.S. Attorney Damian Williams said 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.”
Head of the FBI’s New York office, James E. Dennehy also stated that Smith-Griffin “masqueraded as a financial consultant to perpetuate the scheme once discrepancies were discovered.”
He added that her “selfishly prioritizing personal expenses” over the company’s needs undermined the potential for improved learning environments in school districts nationwide.
Smith-Griffin faces up to 20 years in prison for each count of securities fraud and wire fraud, as well as a mandatory two-year sentence for aggravated identity theft.
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The tech start-up founder arrested for fraud appeared in court in North Carolina on Tuesday but it is unclear for now as to who is representing her in the case.
