The founder of an AI-driven job recruitment startup that misled investors about the company’s business has pleaded guilty to securities fraud in New York.
The founder and former CEO of Joonko Diversity Inc., Ilit Raz, pleaded guilty in federal court over her role in misleading venture investors about the company’s client base and revenue prospects, among other things, in the course of raising US$27 million in venture capital.
According to court filings, in 2021 and 2022, Raz made false claims to investors participating in the company’s series A and B funding rounds — overstating how many customers it had, and falsely claiming that some of the world’s largest companies were customers for its service, which promised to use AI to screen and hire workers from diverse backgrounds.
And, in 2023, after an investor raised questions about the company’s performance, it’s alleged that she provided them with falsified bank statements and fictitious purchase orders.
Ultimately, in 2024, the company declared bankruptcy, and Raz was charged with securities fraud.
In a parallel proceeding, the U.S. Securities and Exchange Commission (SEC) also charged Raz with violating securities rules. In that case, the SEC is seeking a permanent injunction, civil penalties, disgorgement and an officer-and-director bar against Raz.
“Fraud in the startup space hurts investors and makes it more difficult for other enterprising businesses to raise money,” said Jamie McDonald, U.S. attorney for the Southern District of New York (SDNY), in a release.
“Her now-bankrupt company left victim investors with millions of dollars in losses,” he added.