Israeli Tech CEO Pleads Guilty to Multi-Million Dollar Securities Fraud in US

Israeli entrepreneur Ilit Raz, the founder and former CEO of the startup Joonko Diversity, has pleaded guilty in the United States to securities fraud. According to the U.S. Attorney's Office for the Southern District of New York, Raz admitted to defrauding investors who collectively invested approximately $27 million in her company between 2021 and 2022. Raz faces a potential sentence of up to 20 years in prison.

Joonko offered an AI-powered service designed to identify and recruit employees from underrepresented groups. Prosecutors allege that Raz provided false information to potential investors regarding the company's client base, their identities, and its current and projected revenues. Specifically, she claimed that major global corporations, including a credit card issuer, a sportswear manufacturer, a large online travel service, and a luxury fashion brand, were clients of Joonko, when in reality, they were not.

Based on Raz's representations, investors contributed about $10 million in a Series A funding round in June 2021, followed by an additional $17 million in a Series B round a year later. In 2023, an investor, suspecting issues, requested the company's bank statements. Raz submitted a statement indicating Joonko's account balance exceeded $5 million, a document investigators determined was falsified, with the actual balance being millions lower.

Shortly thereafter, Raz sent the investor purported orders from Joonko clients, many of which were found to be fictitious and bore forged signatures. In the summer of 2023, following an internal review, Raz resigned as CEO, and most of the company's employees were terminated. Joonko filed for bankruptcy in May 2024.

In June 2024, federal prosecutors charged Raz with securities fraud and wire fraud, while the U.S. Securities and Exchange Commission (SEC) filed a parallel civil lawsuit against her. The 40-year-old Raz holds Israeli citizenship. The case is being handled by federal judge Alvin Hellerstein in Manhattan, with no sentencing date yet announced.