The Securities and Exchange Commission today charged Ilit Raz, CEO and founder of the now-shuttered artificial intelligence recruitment startup Joonko, with defrauding investors of at least $21 million by making false and misleading statements about the quantity and quality of Joonko’s customers, the number of candidates on its platform, and the company’s revenue. Here is a copy of the complaint: https://www.sec.gov/files/litigation/complaints/2024/comp-pr2024-70.pdf
According to the SEC’s complaint, Joonko claimed to use artificial intelligence to help clients find diverse and underrepresented candidates to fulfill their diversity, equity, and inclusion hiring goals. To raise money for Joonko, the complaint alleges that Raz falsely told investors that Joonko had more than 100 customers, including Fortune 500 companies, and provided investors with fabricated testimonials from several companies expressing their appreciation for Joonko and praising its effectiveness. Raz also allegedly lied to investors that Joonko had earned more than $1 million in revenue and was working with more than 100,000 active job candidates. When an investor grew suspicious of Raz’s claims, Raz allegedly provided the investor with falsified bank statements and forged contracts in an effort to conceal the fraud. According to the complaint, the scheme unraveled in mid-2023 when the investor confronted Raz, who admitted to forging bank statements and contracts and lying about Joonko’s revenue and number of customers.
“We allege that Raz engaged in an old school fraud using new school buzzwords like ‘artificial intelligence’ and ‘automation,’” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “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.”
The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, charges Raz with violating the antifraud provisions of the federal securities laws and seeks a permanent injunction, civil money penalties, disgorgement with prejudgment interest, and an officer-and-director bar against Raz.
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Raz.
Jeffrey Newman is a whistleblower lawyer, whose firm represents whistleblowers in healthcare fraud cases under the False Claims Act (FCA) and also under the Securities and Exchange, FINCEN and CFTC whistleblower programs. He can be reached at Jeff@JeffNewmanLaw.com or at 617-823-3217
