Israeli Tech Entrepreneur Admits to Multi-Million Dollar Securities Fraud

Israeli tech entrepreneur Elite Raz, the founder and CEO of AI company Joonko, pleaded guilty in a Manhattan court on Friday to securities fraud, admitting to a scheme that defrauded investors of approximately $27 million between 2021 and 2022. The U.S. Department of Justice stated that Raz, 40, has accepted responsibility for the elaborate deception. The charge carries a maximum sentence of 20 years, though the final sentence will be determined by a federal judge.

Joonko, founded in 2016 with offices in Tel Aviv and New York, marketed an AI-powered platform designed to help companies identify diverse candidates, including women, minorities, and veterans in the U.S. The company claimed to have a database of "silver medalists", candidates who reached final stages at one company but were not hired, potentially finding opportunities elsewhere. The startup's narrative aligned with prevailing trends, emphasizing AI, diversity, and rapid growth.

In September 2022, Joonko announced a $25 million funding round led by Insight Partners, with participation from Target Global, Kapor Capital, and Vertex Ventures Israel, stating it had raised over $38 million in total. The company also reported a 500% sales growth over two consecutive years and listed major brands like Adidas, Accenture, and American Express as clients. However, authorities allege that the number of actual clients was closer to 30, with at least half not paying Joonko. The company's candidate database and technological capabilities were also allegedly exaggerated.

Financial discrepancies were significant. Raz reported 2021 revenues of $1.84 million and a $2.2 million annual recurring revenue, while the SEC claims actual revenues did not exceed $100,000 that year. Similar overstatements were made for 2022. When an investor became suspicious, Raz allegedly provided a falsified bank statement showing over $5 million in the Joonko account, when the true balance was significantly lower. The fraud was uncovered in early 2023 when the board struggled to access financial documents. By June 2023, Raz reportedly admitted to forging documents and lying about clients, revenue, and finances after a confrontation with an investment fund representative.

Joonko filed for bankruptcy protection in Delaware in May 2024, with insufficient assets to repay investors. Federal prosecutor Jamie McDonald stated that startup fraud harms investors and makes it harder for legitimate companies to raise capital, leaving victims with millions in losses. Raz was originally charged with wire fraud as well, but her plea agreement only addresses the securities fraud charge.