AI Founder Ilit Raz Charged by SEC for Defrauding Investors of $21 Million

Breaking news alert! The Securities and Exchange Commission (SEC) has taken legal action against Ilit Raz, the CEO and mastermind behind the now-defunct AI recruitment company Joonko.

According to the filed complaint in the U. S. District Court for the Southern District of New York, Raz is accused of misleading investors about the financial health and performance metrics of the company, resulting in a staggering fraud of over $21 million.

Allegations Against Ilit Raz

The lawsuit reveals shocking details, alleging that Raz misrepresented Joonko’s standing by falsely claiming to have secured over 100 major corporate clients, including Fortune 500 companies, to secure funding. Moreover, the company, known for its AI-driven platform to promote diversity in hiring, is accused of fabricating investor reviews and contracts.

The deceitful practices extended to inflating revenue figures and the number of active users on the platform, claiming figures exceeding $1 million and 100,000 respectively.

In an astonishing turn of events, Raz allegedly resorted to presenting forged bank documents to reassure an investor. The façade crumbled when the investor probed further, leading Raz to admit to using fake papers and exaggerating the company’s performance metrics.

Action from the U.S. Attorney’s Office

The charges brought against Raz fall under federal securities laws, with the SEC seeking remedies that include monetary penalties, the return of ill-gotten funds with interest, and a permanent ban on misconduct

Gurbir S. Grewal, the head of the SEC’s Enforcement Division, criticized Raz’s deceptive tactics as “old-school fraud” camouflaged with AI terminology. He also voiced concerns that the misuse of AI-related language could confuse investors.

Meanwhile, the U. S. Attorney’s Office for the Southern District of New York has initiated criminal proceedings against Ilit Raz, underscoring the gravity of the allegations.

Impact on the AI Technology Sector

Following the fallout of the Joonko scandal, a noticeable surge in regulatory scrutiny can be observed in the AI technology realm.

Reports suggest that the Federal Trade Commission (FTC) and the Department of Justice are gearing up for antitrust investigations into tech giants like Microsoft, OpenAI, and Nvidia. These probes aim not just at mergers and acquisitions but also at potential anti-competitive behaviors that could stifle innovation or abuse market dominance.

This regulatory push is not unique to the U.S. alone. Globally, tech companies face heightened scrutiny from regulators as governments aim to promote fair competition and safeguard consumer interests in the digital age. The ongoing investigations into AI and tech firms signify a deliberate effort to grapple with the societal and ethical ramifications of technological advancements.

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