US authorities file charges against Joonko founder Ilit Raz

Ilit Raz  credit: Eyal Izhar
Ilit Raz credit: Eyal Izhar

The SEC and the United States Attorney’s Office for the Southern District of New York allege fraud amounting to at least $21 million.

A year after the affair of fraud at startup company Joonko broke, the US Securities and Exchange Commission (SEC) has filed a civil complaint against Israeli entrepreneur Ilit Raz, founder and former CEO of the company, alleging fraud of investors amounting to at least $21 million "by making false and misleading statements about the quantity and quality of Joonko’s customers, the number of candidates on its platform, and the company’s revenue."

The United States Attorney’s Office for the Southern District of New York has filed criminal charges against Raz, following a joint investigation with the SEC and the FBI.

According to the SEC announcement, Joonko "claimed to use artificial intelligence to help clients find diverse and underrepresented candidates to fulfill their diversity, equity, and inclusion hiring goals."

In order to raise money, Raz claimed that the company had 100 customers, and presented investors with false stories of satisfied customers. "Raz also allegedly lied to investors that Joonko had earned more than $1 million in revenue and was working with more than 100,000 active job candidates. When an investor grew suspicious of Raz’s claims, Raz allegedly provided the investor with falsified bank statements and forged contracts in an effort to conceal the fraud," the SEC states.

The SEC does not stop at accusations of financial misconduct, but also criticizes the exaggerated use of AI terminology to attract investors and defraud them. "We allege that Raz engaged in an old school fraud using new school buzzwords like ‘artificial intelligence’ and ‘automation,’" said Gurbir S. Grewal, director of the SEC’s Division of Enforcement. "As more and more people seek out AI-related investment opportunities, we will continue to police the markets against AI-washing and the type of misconduct alleged in today’s complaint. But at the same time, it is critical for investors to beware of companies exploiting the fanfare around artificial intelligence to raise funds."

The SEC seeks a permanent injunction, civil money penalties, disgorgement with prejudgment interest, and an officer-and-director bar against Raz.

The United States Attorney’s Office for the Southern District has charged Raz with securities fraud and wire fraud for defrauding investors and misleading them about core aspects of the company she founded, including the identity and quantity of Joonko’s customers and Joonko’s revenue.

Two weeks ago, Joonko filed for bankruptcy. The document was signed by the company’s directors, Israeli investors Liad Agmon of Insight Partners, Udi Netzer, and Yanai Oron of Vertex Ventures.

Ilit Raz has not been convicted of committing a crime, and is entitled to the presumption of innocence.

Published by Globes, Israel business news - - on June 13, 2024.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.

Ilit Raz  credit: Eyal Izhar
Ilit Raz credit: Eyal Izhar
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