Founder And Former CEO Of Artificial Intelligence Company Charged With Securities Fraud

Ilit Raz is Charged with Misrepresenting Central Aspects of the Company’s Business to Obtain $27 Million in Investments 

Damian Williams, the United States Attorney for the Southern District of New York, and James Smith, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the unsealing of an Indictment charging ILIT RAZ, the founder and former Chief Executive Officer of Joonko Diversity, Inc. (“Joonko”), with securities fraud and wire fraud for defrauding investors and misleading them about core aspects of the company she founded, including the identity and quantity of Joonko’s customers and Joonko’s revenue.  On May 24, 2024, Joonko filed for bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware.  The case has been assigned to U.S. District Judge Alvin K. Hellerstein. 

U.S. Attorney Damian Williams said: “As alleged, Ilit Raz falsely represented key aspects of her company, Joonko Diversity, Inc., and fabricated documents to support those lies in order to obtain $27 million in investments.  Raz’s now-bankrupt company allegedly left victim investors with millions of dollars in losses.  Entrepreneurs tempted to artificially inflate revenues to solicit investments should be warned that this Office keeps a watchful eye of funding rounds and will continue to protect market investors.” 

FBI Assistant Director in Charge James Smith said: “Ilit Raz, the founder and former CEO of Joonko, allegedly defrauded her investors of more than $27 million by misrepresenting the esteem and scope of her clientele as well as grossly inflating the company’s revenue in forged financial statements.  To garner fiscal interest in the company's innovative concept for diverse hiring practices, the defendant’s alleged recruitment methods relied on deception and mistruths rather than transparency and honesty.  The FBI is dedicated to protecting our nation’s economic framework, especially from fraudulent schemes designed to ensnare stakeholders and pilfer their pockets.”

According to the allegations in the Indictment unsealed in Manhattan federal court:[1]

Joonko was a company that purported to offer an artificial intelligence-based product designed to help prospective employers identify and hire job candidates from diverse backgrounds.  To induce prospective and existing Joonko investors to invest approximately $27 million in funding rounds in 2021 and 2022, RAZ made false claims regarding central aspects of Joonko’s business, including by falsely representing how many customers Joonko had at the time and falsely representing the identity of those customers.  For example, RAZ falsely represented that Joonko’s customers included some of the world’s largest companies, including a credit card company, sports apparel brand, online travel company, and luxury fashion brand.  In truth and in fact, and as RAZ knew, these companies were never Joonko customers.  In addition to overstating the number of customers that Joonko had and the identity of those customers, RAZ also made false representations about Joonko’s actual and anticipated revenues.

After RAZ made false and misleading statements regarding Joonko’s customers and revenue, several investors who received those statements invested in a series of funding rounds with Joonko.  Specifically, on or about June 1, 2021, several investors, including venture capital firms, invested a total of approximately $10 million in a Series A round with Joonko.  On or about June 2, 2022, several investors, including venture capital firms, invested a total of approximately $17 million in a Series B round with Joonko.

In or about 2023, a Joonko investor (“Investor-1”) became suspicious about Joonko’s performance and requested certain information from Joonko, including bank statements.  In response, on or about April 3, 2023, RAZ emailed Investor-1 a purported Joonko bank statement, which depicted that the company had an average balance of over $5,000,000.  In truth and in fact, and as RAZ well knew, the bank records that RAZ emailed to Investor-1 were forged, and the actual bank records showed that Joonko’s true account balance was millions of dollars lower.  Less than a week later, on or about April 8, 2023, RAZ emailed Investor-1 a set of purported purchase orders for Joonko customers.  RAZ knew that many of the purchase orders she emailed to Investor-1 were fictitious, contained forged signatures, and were executed on behalf of purported customers that had no business relationship with Joonko.

RAZ, 38, an Israeli citizen, is charged with one count of securities fraud and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison.

The maximum potential sentences in this case are prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Mr. Williams praised the outstanding work of the FBI.  Mr. Williams further thanked the U.S. Securities and Exchange Commission, which today filed a parallel civil action against RAZ.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Thomas Burnett, Peter J. Davis, and Nicholas Folly are in charge of the prosecution.

The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth herein constitute only allegations, and every fact described should be treated as an allegation.