The U.S. Securities and Exchange Commission (SEC) has charged Ilit Raz, the CEO and founder of the now-defunct AI startup Joonko, with making false and misleading statements regarding Joonko's number and quality of clients, the number of job seekers on its platform, and the company's revenue, defrauding investors of at least $21 million.

According to the SEC's allegations, Joonko claimed it could use artificial intelligence to help clients find diverse and underrepresented candidates to meet their diversity, equity, and inclusion recruitment goals.

The complaint states that to raise funds for Joonko, Raz falsely told investors that Joonko had over 100 clients, including Fortune 500 companies, and provided investors with fake testimonials from several companies praising Joonko's effectiveness.

Raz allegedly also misled investors by claiming that Joonko's revenue had exceeded $1 million and that it was working with over 100,000 active job seekers.

When an investor grew suspicious of Raz's claims, Raz allegedly provided the investor with forged bank statements and fake contracts to conceal the fraud.

According to the complaint, when confronted by the investor in mid-2023, Raz admitted to forging the bank statements and contracts and to misrepresenting Joonko's revenue and client numbers, thus exposing the scheme.

The SEC has filed a lawsuit in the U.S. District Court for the Southern District of New York, charging Raz with violations of the anti-fraud provisions of the federal securities laws. The SEC is seeking a permanent injunction, civil penalties, disgorgement with prejudgment interest, and a ban on Raz serving as an officer or director.

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York has announced criminal charges against Raz today.