Ilit Raz, the 38-year-old founder of Joonko, a hiring startup centered on diversity, equity, and inclusion (DEI), is under federal indictment for defrauding investors out of tens of millions of dollars. This development follows revelations over a year ago that Joonko had misled clients about its partnerships with major corporations.

The Department of Justice (DOJ) has accused Raz of using deceptive tactics and fabricated documents to secure $27 million in investments. According to the DOJ’s complaint, Raz falsely claimed that Joonko’s clientele included prominent companies such as a credit card giant, a sports apparel brand, an online travel company, and a luxury fashion label. In reality, none of these companies were ever Joonko customers. The SEC put out a statement with their X account:

Today we charged Ilit Raz, CEO and founder of the now-shuttered AI recruitment startup Joonko, with defrauding investors of at least $21 million by making false and misleading statements. https://t.co/TuQ3zDLDLP pic.twitter.com/e31OAUcBwg

— U.S. Securities and Exchange Commission (@SECGov) June 11, 2024

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Raz now faces securities fraud and wire fraud charges, each carrying a potential 20-year prison sentence. FBI Assistant Director James Smith criticized Raz’s dishonest recruitment methods, emphasizing the reliance on “deception and mistruths” over transparency. The Securities and Exchange Commission (SEC) has also charged Raz with fraud, asserting she falsely boasted about Joonko having over 100 customers, including numerous Fortune 500 companies, and submitted fake testimonials. The complaint details how Raz admitted to an investor that she falsified documents and lied about Joonko’s client base.

 

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Raz’s alleged deceit included claims of Joonko generating over $1 million in revenue and having a base of more than 100,000 active job seekers. She also made false statements about Joonko’s AI capabilities, including a “proprietary algorithm” and advanced “machine learning” techniques, which the SEC asserts were grossly exaggerated. SEC enforcement director Gurbir Grewal remarked, “We allege that Raz engaged in an old school fraud using new school buzzwords like ‘artificial intelligence’ and ‘automation.’”

 

The fraudulent scheme was uncovered shortly after Joonko completed a $25 million funding round, with venture firms Insight Partners, Target Global, Kapor Capital, and Vertex Ventures participating. A press release in September 2022 celebrated Joonko’s “remarkable growth” under Raz’s leadership, citing a purported 500% increase in sales over two consecutive years.

 

A source familiar with the situation revealed that Raz had submitted fake invoices and wire transfers and even created fake bank accounts to substantiate her claims. Joonko’s board of directors ultimately lost confidence in Raz, citing her “egregious, unethical, and fraudulent conduct,” which harmed the company and its shareholders. Confronted with the investigation’s findings, Raz resigned.

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