SEC charges Joonko founder Ilit Raz with defrauding investors

The Securities and Exchange Commission charged an AI-powered recruitment startup founder with defrauding investors of at least $21 million by making false and misleading statements about her company.

The federal agency charged Ilit Raz, CEO and founder of the now-shuttered Joonko, with fraud on Tuesday. Joonko claimed to use artificial intelligence to help clients find diverse and underrepresented job candidates to meet their diversity, equity and inclusion goals, according to the SEC’s complaint. 

“We allege that Raz engaged in an old school fraud using new school buzzwords like ‘artificial intelligence’ and ‘automation,'” Gurbir Grewal, director of the SEC’s Division of Enforcement, said in a statement. “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.”

Joonko was founded in 2016. To raise funds, Raz allegedly falsely told investors that the platform had more than 100 customers, including Fortune 500 companies, and gave investors fabricated testimonials from companies praising the startup. Raz also allegedly lied to investors that Joonko had more than $1 million in revenue and was working with over 100,000 active job candidates. Joonko’s revenue never exceeded $100,000, according to the complaint.

When one investor questioned these claims, Raz allegedly provided them with falsified bank statements and forged contracts. The scheme unraveled in mid-2023 when the investor confronted Raz, who admitted to forging bank statements and contracts and lying about the startup’s revenue and customers, according to the complaint. 

Raz did not immediately respond to a request for comment. 

The SEC charged Raz, age 39, with violating the antifraud provisions of the federal securities laws and is seeking a permanent injunction, civil money penalties, disgorgement with prejudgment interest and a permanent officer-and-director bar against her. The complaint was filed in the U.S. District Court for the Southern District of New York.