Former CEO of AI Recruitment Startup Joonko Faces Fraud Charges Worth $27M

Ilit Raz, the former CEO of Joonko, an AI recruitment startup now defunct, has been indicted by a grand jury in New York on charges of defrauding investors of over $27 million. Raz, an Israeli citizen, allegedly misled investors about Joonko's performance and clientele.

Joonko, which Raz founded, purportedly used AI to aid Fortune 500 companies in diversity, equity, and inclusion hiring. However, between 2021 and 2022, Raz allegedly fabricated claims that Joonko had secured contracts with major corporations including a large credit card company, a sports apparel company, an online travel business, and a major fashion brand. The Southern District of New York revealed that none of these companies were actual clients, contrary to Raz's representations.

Raz faces charges of securities fraud and wire fraud. The Securities and Exchange Commission (SEC) accused her of inflating Joonko's customer base, claiming over 100 clients, and falsifying testimonials to mislead investors into believing the company's success. The SEC also alleged that Raz falsely reported Joonko's revenue to be over $1 million and exaggerated its engagement with more than 100,000 job candidates.

According to the SDNY, Joonko raised approximately $27 million from investors during the period in question before filing for bankruptcy in May. U.S. Attorney Damian Williams emphasized the impact of Raz's actions on investors, stating, "Raz’s now-bankrupt company allegedly left victim investors with millions of dollars in losses."

Gurbir Grewal, director of the SEC’s Division of Enforcement, warned against such misconduct in the burgeoning AI investment sector, stating, "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."

Ilit Raz was not available for comment following the indictment.

By fLEXI tEAM