SEC charges Joonko founder Ilit Raz with $21 million fraud
SEC charges Joonko founder Ilit Raz with $21 million fraud
Raz allegedly used fabricated customer testimonials, forged contracts, and falsified bank statements to secure funding.
Ilit Raz, the CEO and founder of recruitment startup Joonko, has been charged by the Securities and Exchange Commission (SEC) with defrauding investors out of at least $21 million. The complaint, filed in the U.S. District Court for the Southern District of New York on Tuesday, alleges that Raz misled investors with inflated claims about Joonko’s customer base, candidate pool, and revenue.
Joonko, which aimed to leverage AI technology to help companies meet diversity, equity, and inclusion (DEI) hiring goals, reportedly boasted more than 100 clients, including prominent Fortune 500 companies. However, according to the SEC, these claims were fabricated, along with testimonials praising the platform's effectiveness. Investors were further deceived with falsified statements of over $1 million in revenue and a purported database of more than 100,000 job candidates.
The SEC’s complaint highlights a series of deceptive practices by Raz, including the provision of forged bank statements and contracts to an investor who had begun to question the validity of Joonko’s claims. The fraud came to light in mid-2023 when the investor confronted Raz, who subsequently admitted to the fabrications.
“We allege that Raz engaged in an old school fraud using new school buzzwords like ‘artificial intelligence’ and ‘automation,’” remarked Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. Grewal emphasized the need for vigilance as more investors are drawn to AI-related ventures, warning against the exploitation of AI’s popularity for fraudulent purposes.
The SEC's action seeks a permanent injunction against Raz, along with civil penalties, disgorgement of ill-gotten gains with prejudgment interest, and a ban on serving as an officer or director of a public company. In a parallel action, the U.S. Attorney's Office for the Southern District of New York has announced criminal charges against Raz.
Last month, Joonko filed for Chapter 11 protection in the District of Delaware bankruptcy court. Joonko’s operations effectively came to an end last summer after Raz left the company amid allegations from the board that she “engaged in egregious, unethical, and fraudulent conduct.”
After leading the investigation on behalf of the investors and the management, COO Ilan Band is now seeking to complete the closure of the company, which laid off all its employees in the aftermath of the scandal.
According to Joonko’s filings with the Delaware court, the company raised a total of $29.5 million from investors between 2019 and 2022. It has $4.25 million remaining in its account and no significant outstanding debts. However, the company still faces legal action from some investors, as well as from Raz herself, who is suing the company for $300,000 to cover her legal expenses.
