Jonko Founder Admits to Defrauding Investors of Millions

Elite Raz, the founder and former CEO of the startup Jonko, has pleaded guilty in a New York federal court to securities fraud. Jonko purported to offer an artificial intelligence platform for employee recruitment, boasting significant clients and growing revenues. However, Raz admitted to using false data and forged documents to secure approximately $27 million in investments.

Raz, 40, entered her guilty plea as part of a criminal case in the Southern District of New York. The charge carries a maximum sentence of 20 years in prison, with the final sentence to be determined by Judge Alvin Hellerstein. Jonko, founded in 2016, aimed to help employers diversify their workforce by matching candidates to jobs. The company raised about $38 million in total from investors including Insight Partners and Vertex, and at its peak employed around 50 people, most in Israel.

The scheme unraveled in 2023 when a board and investor review led to Raz's departure and the company's cessation of operations. The criminal proceedings focus on investments of around $10 million in June 2021 and $17 million in June 2022, which were allegedly obtained through misrepresentations about clients and revenue.

Federal prosecutors stated that companies like a credit card firm, a sports brand, an online travel company, and a luxury fashion brand were falsely presented as clients. In April 2023, when an investor requested bank statements, Raz allegedly submitted a forged document showing an average balance of over $5 million, while the actual balance was significantly lower. Subsequently, purchase orders, including fictitious ones with forged signatures, were also sent.

The U.S. Securities and Exchange Commission's civil lawsuit, filed in June 2024, further details these allegations. It claims Raz presented $1.84 million in 2021 revenue to an investor, while actual revenue was as low as $100,000. Another presentation allegedly inflated recurring annual revenue to $2.2 million, a key metric for assessing growth and company value. The SEC also reported that Raz admitted in June 2023 to lying about having over a hundred clients, stating the actual number was closer to 30.

Concerns were also raised about Jonko's AI and automation capabilities, which the SEC claimed were overstated compared to the company's actual system performance. Jonko filed for bankruptcy in May 2024. The criminal case involves approximately $27 million, while the civil case addresses at least $21 million in fundraising. Raz's sentencing is pending.