US authorities set to probe alleged Joonko fraud

Two weeks after fraud allegations surfaced against an Israeli startup Come hereAmerican and Israeli investors have been informed that US authorities are interested in investigating the company’s management, as documents were allegedly forged, such as approvals for money transfers, and information about bank accounts and contracts.

This examination is also likely to focus on CEO and founder Elite Raz who admitted to investors, quit her venture and returned the money for the shares she sold personally.

While Joonko is seen as an Israeli startup, it is in fact organized as part of a US-based parent company in Delaware, which has a subsidiary in Israel that serves as a development hub. The subsidiary employs most of the company’s employees in Israel and pays taxes according to “Cost Plus” rules. Although Joonko’s management is based in Tel Aviv, revenue and earnings are reported as a US company.

In fact, most of the investors in the startup especially those who invested in its early years are Americans, so bailing out their money from the company and legal scrutiny makes sense.

In a seed funding round in 2019, after Joonko shifted the focus of its business and relaunched, US funds such as Alabama Futures, Bronze Valley, Kapor Capital and Right Side Capital, according to PitchBook. In the company’s most recent funding round, which closed in June 2022, additional Alabama investors such as Redhawk Advisory and several other private investors from the state participated. The tour was led by Insight Partners from the US and Israeli partner Liad Agmon joined the board.

Contracts, money transfers, and receipts recorded in Delaware

Since the alleged fraud concerns a company incorporated in the state of Delaware, in which contracts and printouts of money transfers and fake receipts were recorded, on the basis of which false representations were made to investors about the success of the company, the US authorities may be interested in such an investigation, including the Department of Justice through the Office Attorney for the Southern District of Manhattan – Securities Commission, US Securities Commission (SEC), and Federal Bureau of Investigation (FBI).

Verifiable allegations in such an investigation include Joonko’s recent funding round, during which it raised $17 million led by Insight Partners, based on the submission of an incorrect number of clients. As far as is known, the board of directors is currently designating the funds available to the company, and it is estimated that most of the funds invested in the company cannot be returned. In the past two weeks, most of Joonko’s employees have been fired and an internal investigation team including investors and some management members has been appointed.

Elite Raz refused to respond.

Presumption of innocence: No formal complaints have been filed against Ailit Raz at this point, so she has not been charged or convicted of anything and has the right to be presumed innocent.

Published by Globes, Israel business news – en.globes.co.il – on July 9, 2023.

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