Federal Investigation Initiates into Bankruptcy of Educational Tech Startup AllHere
New York, NY, October 2023—Federal prosecutors have issued a grand jury subpoena for documents related to the bankruptcy of the failed education technology firm AllHere. This company, which previously garnered $12 million in venture capital, was renowned for securing a substantial $6 million contract with Los Angeles schools for developing an AI-powered chatbot named "Ed."
The U.S. Attorney's Office for the Southern District of New York served the subpoena in early September to the court-appointed trustee tasked with managing AllHere's asset liquidation, as per records filed in a Delaware federal court. The action indicates that the company, or an individual associated with AllHere, is the focus of a federal criminal investigation by the Department of Justice. Attorney Stephanie Wickouski, a bankruptcy expert with the New York law firm Locke Lord, noted that such a subpoena suggests federal prosecutors have plausible grounds to initiate a criminal investigation, marking an exceptional situation.
At the core of this scrutinised entity is Joanna Smith-Griffin, founder and former CEO, who was featured in Forbes' 30 Under 30 list in 2021 for educational leaders. Despite the company's celebrated rise, it faced abrupt financial collapse earlier this year, leading to the current bankruptcy proceedings.
On September 11, trustee George Miller revealed during a bankruptcy hearing that new assets had been uncovered at AllHere, transforming its Chapter 7 bankruptcy case from having no monetary value to potentially allowing creditors to recover some amounts owed. The court has given AllHere creditors a 90-day period to submit claims for these newly discovered assets.
Contrary to Miller's asset discovery, AllHere's former Chief Technology Officer, Toby Jackson, claimed during the hearing that the company was effectively stripped of value, with one of its remaining assets being a $500 laptop belonging to Smith-Griffin, the contents of which were inaccessible due to a withheld password.
A significant aspect of the ongoing investigation relates to AllHere's financial transactions prior to its collapse. The bankruptcy trustee is best positioned to provide insights into the company's assets, financial dealings, and business activities. Documents will be handed over to federal prosecutors, provided certain sensitive details remain confidential to protect the company's value.
Trustee Miller has questioned substantial payments made to Smith-Griffin, including $243,000 over the past year, and the company’s outstanding $630,000 debt to its largest creditor, education technology salesperson Debra Kerr. Kerr’s relationship with Los Angeles Schools Superintendent Alberto Carvalho, including her son Richard Kerr’s involvement in pitching AllHere to the district, adds further complexity to the case. Debra Kerr claims she never received commission for securing the agreement with LA schools.
LA Unified School District, which had an agreement with AllHere for the AI chatbot "Ed," is itself conducting an internal investigation into data security breaches involving the chatbot. Superintendent Carvalho has also set up a task force to review the district's engagement with AllHere and future AI integration strategies.
AllHere's bankruptcy case has revealed ties to several other creditors connected to Carvalho. These include a communications firm managed by his former spokesperson in Miami and the Foundation for New Education Initiatives, a non-profit that Carvalho established.
The legal proceedings and discoveries indicate that federal prosecutors are in the early stages of their investigation. Potential indictments, should they materialise, are not expected for several months.
While several key individuals and entities related to AllHere’s operations have not publicly commented, it remains clear that the unfolding investigation could have significant implications for those involved. The outcomes of this investigation will be closely monitored by stakeholders in the educational technology sector and beyond.
Source: Noah Wire Services