Founder And Former CEO Of Artificial Intelligence Company Pleads Guilty To Securities Fraud

 

Ilit Raz Pleads Guilty in Connection With Scheme to Obtain $27 Million in Investments by Misrepresenting Her Company’s Customers and Revenue

United States Attorney for the Southern District of New York, Jamie McDonald, and Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), James C. Barnacle, Jr., announced that ILIT RAZ, the founder and former Chief Executive Officer of Joonko Diversity, Inc. (“Joonko”), pled guilty to securities fraud for her role in a scheme to defraud investors and mislead them about core aspects of the company she founded, including the identity and quantity of Joonko’s customers and Joonko’s revenue. The case has been assigned to U.S. District Judge Alvin K. Hellerstein. 

“Fraud in the startup space hurts investors and makes it more difficult for other enterprising businesses to raise money,” said U.S. Attorney Jamie McDonald. “Ilit Raz lied to investors about key aspects of her startup company, Joonko Diversity, Inc., and fabricated documents to support those lies, to obtain $27 million in investments. Her now-bankrupt company left victim investors with millions of dollars in losses.”

“The guilty plea makes clear that defrauding investors and misrepresenting essential facts about a company will not be tolerated,” said FBI Assistant Director in Charge James C. Barnacle, Jr. “By admitting to her role in the scheme, Ilit Raz has acknowledged the seriousness of her actions and the harm caused to investors. Victims deserve justice, and the FBI will continue to work to ensure they receive it.” 

According to the allegations in the Superseding Indictment and other public filings in this case:

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 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, 40, an Israeli citizen, pled guilty to securities fraud, which carries a maximum sentence of 20 years in prison.

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

Mr. McDonald praised the outstanding work of the FBI. Mr. McDonald also expressed appreciation for the assistance of the U.S. Securities and Exchange Commission. 

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.