Joanna Smith-Griffin, 33, of Raleigh, North Carolina, who was once named on Forbes' 30 Under 30 list, is charged with defrauding investors out of millions of dollars from 2020 to May 2024 for her Harvard Innovation Labs AI education startup company that she founded in 2016.
Federal prosecutors with the Southern District of New York alleged in the indictment unsealed Tuesday that Smith-Griffin distorted the company's financial state and made misrepresentations about the contracts AllHere had with schools districts in order to fraudulently obtain funds.
The indictment charges her with one count of securities fraud, one count of wire fraud and another count of aggravated identity theft.
AllHere was Smith-Griffin's first business, which she founded to scale up solutions to problems she ran into when she was a teacher, the mother and CEO said in a 2020 Forbes video. AllHere's objective was to bolster student attendance and engagement at K-12 school districts across the country, and later, the company launched its chatbot, "Ed," to help engage with students and families.
AllHere filed for Chapter 7 in Delaware in mid-August.
The company — which was also backed by an AT&T venture fund, an education venture fund of Rethink Capital Partners and other investors — listed $1.75 million of liabilities and $2.9 million of assets in its bankruptcy petition. The company had been in the midst of rolling out a $6 million AI project for "Ed" with the Los Angeles Unified School District, the second-largest school system in the country.
According to the indictment, Smith-Griffin managed to raise, via preseed and seed financing rounds, approximately $4 million from 2017 to 2020.
AllHere's Series A financing kicked off in November 2020, where she successfully acquired $8 million from investors after allegedly making false statements related to the company's cash flow, yearly revenue and client base, the government said.
For example, the defendant told potential Series A investors in early 2020 that the company earned $830,000, $1.76 million and $3.7 million approximately, from 2018 to 2020, respectively, in annual recurring revenue, according to the indictment.
"The revenue figures in the Series A investor decks and Series A financial statements were false," the indictment said. "For example, for 2020, the same year that Joanna Smith-Griffin, the defendant, told investors that AllHere had earned approximately $3.7 million in [annual recurring revenue]/revenue, AllHere had in fact generated only approximately $5,400 in ARR and only approximately $11,000 in total revenue."
Even up to the time AllHere filed for bankruptcy in August, the company never had more than 31 clients total, despite Smith-Griffin claiming to investors in 2020 that AllHere made $3.7 million in ARR from 92 customers, the indictment said.
The government said Smith-Griffin also made false claims about its school district clients, purporting to serve the New York City Department of Education, the Bureau of Indian Education, and public schools in Atlanta; Boston; Baltimore; Durham, North Carolina; Grand Rapids, Michigan; and Maryland's Prince George's County.
"Again, this representation was false," the indictment said. "Six of these school districts had no contractual relationship with AllHere. The two districts that had contracts with AllHere, Boston Public Schools and Prince George's County Public Schools — paid AllHere only approximately $27,000 and $30,000 respectively, over the life of their contracts."
Smith-Griffin also allegedly lied that AllHere had a cash fund of $2.5 million by the end of 2020, despite it having less than $500,000 in cash, prosecutors said. After the company's Series A financing closed in the spring of 2021, she managed to raise the $8 million she sought, the indictment said.
"In or about May 2021, Smith-Griffin used the money she received to, among other things, put a $150,000 down payment on a home in North Carolina and pay for her wedding expenses," the government claimed.
AllHere executed a Series B financing as well, with Smith-Griffin this time soliciting tens of millions of dollars from investors. Again, she allegedly made misrepresentations regarding AllHere's financial position and annual recurring revenue, the indictment said. For the Series B, Smith-Griffin engaged with a private equity firm about potential fundraising, and sent doctored financial records, the government said.
For example, Smith-Griffin wildly inflated AllHere's 2020 revenue from $11,000 to approximately $3.7 million; for 2021, AllHere only made $19,812, but Smith-Griffin claimed the revenue for that year was $10.5 million, according to the indictment.
The unnamed private equity firm proposed to invest a minimum of $35 million, based on the information Smith-Griffin gave, prosecutors said. Eventually, AllHere's investors and an independent accounting somehow noticed the irregularities between the company's true financial state and what Smith-Griffin was telling them, the indictment said.
Prosecutors say Smith-Griffin went so far as to creating a fake email account posing as AllHere's financial consultant to disseminate additional falsified financial records to investors. By May of this year, AllHere collapsed, had to lay off the majority of its workforce, and Smith-Griffin herself was ousted as CEO by the company's board of directors.
Smith-Griffin was arrested on Tuesday in North Carolina and is set to make her initial court appearance in that state, New York prosecutors said. Her case has been assigned to U.S. District Judge John G. Koeltl.
"As alleged, Joanna 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," U.S. Attorney Damian Williams said in a press statement Tuesday.
Attempts to reach the defendant were unsuccessful.
The government is represented by Matthew R. Shahabian of the U.S. Attorney's Office of the Southern District of New York.
Counsel information for Smith-Griffin was not immediately available.
The case is USA v. Joanna Smith-Griffin, case number 1:24-cr-00648, in the U.S. District Court for the Southern District of New York.
--Additional reporting by Hilary Russ. Editing by Jay Jackson Jr.
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