Israeli AI Startup Founder Pleads Guilty to $27 Million Fraud Scheme in New York

Israeli citizen Eilit Raz has pleaded guilty to securities fraud charges in the United States, admitting to defrauding investors of approximately $27 million by misrepresenting her company's core aspects. The announcement was made by the U.S. Attorney for the Southern District of New York, as reported by The Jerusalem Post on Saturday.

Raz, the founder and former CEO of Joonko Diversity, Inc., allegedly used artificial intelligence-based services as a front to help employers identify and hire potential candidates. Between 2021 and 2022, she made false claims about the company's clients and revenue to secure roughly $27 million in funding. She falsely told investors that Joonko's client list included major global brands in fashion, a credit company, and a travel company.

According to a complaint filed by the U.S. Securities and Exchange Commission (SEC) in 2024, Raz claimed Joonko had over 100 clients and processed more than 100,000 job candidates. The SEC complaint also stated she provided fabricated testimonials from supposed clients praising Joonko's services. The U.S. Attorney's office confirmed Raz intentionally misled investors, and these companies were never clients.

Many victims of Raz's scheme suffered millions of dollars in losses after Joonko went bankrupt, according to U.S. Attorney Damian Williams. The fraud was uncovered around 2023 when an investor became suspicious of Raz's claims and requested information about the company's performance. Raz then allegedly faked a bank statement showing a balance of over $5 million, when the company's actual balance was millions less. She also sent the investor fake purchase orders with forged signatures from supposed clients who had no business relationship with Joonko.

Raz faces a maximum prison sentence of 20 years after pleading guilty.