SEC sues Joonko's CEO Ilit Raz for defrauding investors of $21M by misrepresenting company metrics and financials.
SEC Charges AI Startup Founder Ilit Raz
The regulator noted that Raz stated that Joonko had signed up more than 100 corporate clients, including enterprises from the list of the Fortune 500 companies, to get funding for the startup. The company that positioned itself as an AI-powered solution for helping companies find diverse and underrepresented workers was also accused of showing fake investors’ reviews and fake contracts.
Today we charged Ilit Raz, CEO and founder of the now-shuttered AI recruitment startup Joonko, with defrauding investors of at least $21 million by making false and misleading statements. https://t.co/TuQ3zDLDLP pic.twitter.com/e31OAUcBwg— U.S. Securities and Exchange Commission (@SECGov) June 11, 2024
These fraudulent activities went as far as inflating the company’s revenue and the number of active candidates on the platform, which Raz put at over $1 million and 100,000, respectively.
From the SEC’s documentation, Raz is alleged to have once presented forged bank statements to calm an investor. The plan fell through when the investor asked Raz a question that he could not dodge, and Raz confessed to the use of forged documents and exaggeration of the company’s statistics.
U.S. Attorney’s Office Take Action
The charges addressed against Raz are the violation of federal securities laws. The SEC is asking for a variety of remedies including civil penalties, the return of funds garnarred with interest, and permanent injunctions
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, pointed out the use of AI-centric terms to orchestrate what he called “old-school fraud.” He also raised concerns that AI-related jargon may create confusion among investors.
Concurrently, the U. S. Attorney’s Office for the Southern District of New York has opened a criminal case against Ilit Raz, which testifies to the serious approach to the accusations.
Enforcement on the AI Technology Market
The events that followed the Joonko case suggest that there is a rising trend of regulatory actions in the AI technology sector.
Moreover, as reported by Coingape, FTC and the Department of Justice, announcements indicate forthcoming antitrust probes into major players like Microsoft, OpenAI, and Nvidia. These investigations are not only directed towards mergers and acquisitions but also towards competitive practices that may hinder innovation or abuse market power.
This regulatory focus is not limited to the United States only. Around the world, the technology companies continue to feel the heat from the regulatory authorities as the governments seek to enforce fair competition and consumer protection in the new digital economy. The current probes into AI and tech companies show a deliberate attempt to deal with the social and moral impact of technological developments.