The founders of DEI-focused staffing startup Joonko are facing federal charges for allegedly defrauding investors out of tens of millions of dollars, nearly a year after The Washington Post exclusively reported that the company lied to clients about working with multiple large corporations.
Irit Raz, a 38-year-old Israeli entrepreneur, used lies and false documents to secure $27 million in investments. According to the Justice Department’s complaint:.
“Raz falsely represented that Junco’s clients included some of the world’s largest companies, including credit card companies, sports apparel brands, online travel companies and luxury fashion brands,” the Justice Department said in a statement. “Truly and factually, and as Raz knew, these companies were not Junco’s clients.”
As reported by The Washington Post, the now-bankrupt Junco falsely claimed that several major companies, including American Express, PayPal, Accenture and Atlassian, were customers of its platform, which it claims uses AI to automatically connect companies with diverse job seekers.
These companies were listed as “partners” on Joonko’s website but never actually signed up or did business with the recruiting platform. Other companies that were listed as partners at various points included Nike, Adidas and Intuit.
Raz is charged with one count each of securities fraud and wire fraud, each of which carries a maximum sentence of 20 years in prison, the Department of Justice said in a statement.
“The defendants’ recruiting tactics relied on deception and deception rather than transparency and honesty to attract financial interest in the company’s innovative recruiting practices,” FBI Assistant Director James Smith said in a statement.
The SEC also charged Raz. Following a parallel investigation, she was charged with fraud for falsely claiming that Junco had more than 100 clients, including Fortune 500 companies, and for providing fake testimonials from companies promoting the recruiting platform.
According to the complaint, Raz later admitted to investors that he had falsified documents and lied about Junco’s client list.
Junco filed for Chapter 11 bankruptcy protection last month and its website is unavailable.
Raz did not immediately respond to a request for comment, and Junco’s lawyer declined to comment.
The former CEO allegedly lied to investors by claiming that Joonko was generating more than $1 million in revenue while building a base of more than 100,000 job seekers.
Raz also made false claims about the Joonko platform’s AI capabilities, for example, claiming that the platform uses a “proprietary algorithm” to find high-quality candidates and that it uses “machine learning” to improve the matching process.
“Junco lacked the aforementioned capabilities to connect clients with diverse candidates and its technology was not as advanced as Mr. Raz asserted,” the SEC’s complaint states.
“We allege that Raz used new buzzwords like ‘artificial intelligence’ and ‘automation’ to perpetrate an old-fashioned fraud,” the SEC’s Enforcement Director Gurbir Grewal added in a statement.
Raz’s plans emerged last June, just months after the company closed a $25 million funding round with participation from venture firms Insight Partners, Target Global, Kapoa Capital and Vertex Ventures.
A September 2022 press release announcing the round claimed that under Raz’s leadership, Junco has “demonstrated impressive growth, with revenue increasing 500% for two consecutive years.”
To support his claims, Raz submitted fake invoices written by real people at real companies, fake wire transfers and even opened fake bank accounts, according to sources familiar with the matter.
At the time, Junco’s board said it had “lost confidence in the CEO’s ability to meet repeated requests to develop and support an internal finance function as part of the maturation of the company and business.”
“The CEO was found to have engaged in grossly unethical and fraudulent conduct that has harmed the company and its shareholders,” the board’s statement added. “The CEO has acknowledged the findings of the investigation and has accordingly voluntarily resigned.”
