US authorities file charges against Joonko founder Ilit Raz

A year after the Junco startup fraud scandal, the U.S. Securities and Exchange Commission (SEC) filed a civil complaint against Israeli businessman Ayelet Raz, the founder and former CEO of the company, alleging that he defrauded investors of up to at least $21. million dollars “by making false and misleading statements about the quantity and quality of Junco’s clients, the number of candidates on its platform, and the company’s revenue.”

The United States Attorney's Office for the Southern District of New York filed criminal charges against Raz, following a joint investigation with the Securities and Exchange Commission and the FBI.

According to the SEC announcement, Junco claimed to “use artificial intelligence to help clients find diverse and underrepresented candidates to achieve their diversity, equity, and inclusion hiring goals.”

In order to raise money, Raz claimed that the company had 100 customers, and presented investors with false stories of satisfied customers. “Raz also allegedly lied to investors that Junko had revenues in excess of $1 million and was working with over 100,000 active job candidates. When an investor became suspicious of Raz's claims, Raz allegedly provided the investor with false bank statements and forged contracts in an attempt to hide the fraud.” , according to the Securities and Exchange Commission.

The SEC does not stop at accusations of financial misconduct, but also criticizes the exaggerated use of artificial intelligence terms to lure and defraud investors. “We allege that Raz is involved in an old school scam using new school buzzwords like ‘artificial intelligence’ and ‘automation,'” said Gurbir S. Grewal, director of the SEC's Enforcement Division. “As more and more people look for AI-related investment opportunities, we will continue to monitor the markets against AI laundering and the type of misconduct alleged in today’s complaint. But at the same time, it is critical that investors be wary of companies exploiting the hype around AI to raise money.” “

The SEC seeks a permanent injunction, civil money penalties, default on prejudgment interest, and an officer and director ban against Raz.

The Southern District Attorney's Office charged Raz with securities fraud and wire fraud for defrauding and misleading investors about fundamental aspects of the company she founded, including the identity and quantity of Junco's clients and Junco's revenues.

Two weeks ago, Junco filed for bankruptcy. The document was signed by the company's directors, Israeli investors Liad Agmon from Insight Partners, Udi Netzer, and Yanai Oron from Vertex Ventures.

Ayelet Raz has not been convicted of a crime and is entitled to the presumption of innocence.

Published by Globes, Israel Business News – en.globes.co.il – on June 13, 2024.

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