Israeli AI Entrepreneur Admits to $27 Million Investor Fraud

Israeli tech entrepreneur Elite Raz, 40, a former CEO of the AI startup Joonko and a graduate of Unit 8200, has pleaded guilty to securities fraud in a case involving $27 million raised from investors through false representations. The U.S. Attorney's Office for the Southern District of New York announced the plea on Friday. Raz admitted in Manhattan federal court to misleading investors about Joonko's business activities. The company developed an AI-powered platform designed to help corporations recruit from underrepresented populations.

According to the prosecution, Raz provided investors with fabricated information regarding the company's client base, customer numbers, and reported revenues. Assistant FBI Director James C. Burbridge Jr. stated that Raz's guilty plea underscores that investor fraud and the presentation of false essential facts about a company are unacceptable. He added that the FBI will continue to work to ensure victims receive justice.

Founded in 2016, Joonko was promoted as a promising recruitment technology firm, with claims to investors that it worked with major corporations and experienced rapid revenue growth. However, U.S. authorities allege that some presented clients were not paying customers and that the company's operational data and revenues were significantly inflated. Raz allegedly misrepresented that Joonko's clients included major global companies, such as a credit card firm, a sportswear brand, an online travel company, and a luxury fashion brand, when in reality, these entities were never clients.

The case came to light in 2023 after investors raised suspicions about the data presented to them. This led to Raz's ouster from her position, a crisis in the company's operations, and a U.S. investigation. In June 2024, criminal and civil proceedings were initiated against her, including charges from the federal prosecutor and a lawsuit by the U.S. Securities and Exchange Commission (SEC).

Raz allegedly fabricated documents and invoices, presenting Joonko as having dozens of clients and generating over $1 million in annual revenue. The indictment states that these false figures contributed to the company securing approximately $21 million of the total funds raised. Raz's guilty plea is expected to lead to a conviction, with the final sentence to be determined by Judge Alvin Hellerstein. The plea does not necessarily conclude the civil proceedings initiated by the SEC.