Israeli AI Startup Founder Admits to Defrauding Investors in US

Elite Ratz, the Israeli founder and former CEO of AI startup Joonko, has pleaded guilty to securities fraud in a New York court, the U.S. Department of Justice announced. Ratz admitted to defrauding venture capital funds and private investors out of approximately $27 million by submitting fake bank statements, fictitious customer contracts, and false financial reports that inflated revenue figures.

When board members and investors began questioning the company's financial health, Ratz allegedly continued to provide falsified documents to buy time. The maximum sentence for these offenses is 20 years in prison, with sentencing to be determined later by Judge Alvin Hellerstein.

Joonko, founded in 2016, developed AI software aimed at promoting workplace diversity by assessing organizational diversity and identifying suitable candidates for open positions. The company raised a total of $38 million from investors including Insight Partners and Vertex Ventures. At its peak, Joonko employed around 50 people, mostly in Israel.

In June 2023, reports emerged that Ratz and other executives had left Joonko, and most employees were called for hearings. This followed an investigation by the board and investors alleging that the number of actual clients was significantly lower than reported. While the company claimed 150 clients, the actual number was substantially less.

In June 2024, the U.S. Securities and Exchange Commission (SEC) filed charges against Ratz for defrauding investors of at least $21 million, accusing her of presenting fake bank documents to appease an investor. Her scheme reportedly unraveled when the investor pressed for details, leading to her confession of fabricating documents and inflating company figures.

"Such fraud harms investors and makes it harder for other entrepreneurial businesses to raise money," said Jamie McDonald, a New York State prosecutor. "Ratz lied to investors about key aspects of her startup, faked documents to support those lies, all to secure $27 million in investments. Her company, now bankrupt, has left victim investors with millions in losses."

"This guilty plea makes clear that investor fraud and misrepresentation of material facts about a company will not be tolerated," stated James S. Barnacle Jr., acting Assistant FBI Director. "By pleading guilty, Ratz acknowledged the seriousness of her actions and the harm caused to investors. Victims deserve justice, and the FBI will continue to work to ensure they receive it."