AI-powered diversity recruiting firm Joonko in chaos as CEO accused of jaw-dropping fraud

Technician

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From Tommaso Barrabi

June 26, 2023 | 3:54 pm

Joonko, a New York City-based startup that built an AI-powered job board to improve diversity in hiring, is on the verge of collapse after its CEO allegedly duped investors with an elaborate plan to go overboard the size of the company’s business.

Joonko founder and CEO Ilit Raz has resigned after an internal investigation found she had engaged in egregious, unethical and fraudulent conduct, which caused harm to the company and its shareholders, the board said of directors of the startup in a statement obtained by The Post.

Raz allegedly deceived investors by claiming Joonko was working with 150 companies when in practice the number was significantly fewer, according to Israeli news outlet CTech, which first reported the allegations against Raz.

News of Raz’s alleged plan, which comes after the company raised $25 million in cash from investors last fall, included filing fake invoices attributed to real people at real companies, fake wire transfers and even fake bank accounts. a source familiar with the situation told The Post.

He’s a really bad actor. He is stunning, the guy [wrongdoing] and the CEO’s level of sophistication, the source said.

Raz and other representatives for Joonko did not immediately respond to The Posts request for comment. Joonko’s email address appeared to be disabled as of Monday morning.

Joonko unveiled her $25 million Series B fundraiser to little fanfare in September, drawing coverage from Insider and TechCrunch. At the time, the startup said it plans to use the funds to boost hiring at its Manhattan headquarters.

A September press release touted remarkable growth for Joonko under Raz’s leadership, with sales growing 500% for two consecutive years.

I learned very early on that it’s important to present Joonko as a company, Raz told Insider last September. Once you can demonstrate that your message can stand on its own in terms of metrics, you can raise from the major players.

The startup claims to have more than 150,000 job applicants within its platform. Partner companies listed on its website include corporate giants such as Adidas, Nike, Intuit, PayPal and American Express.

Financial backers for last fall’s $25 million fundraising round included major venture capital firms Insight Partners, Target Global, Kapor Capital and Vertex Ventures.

Raz’s alleged misdeeds are believed to have escalated after Joonko secured the fundraising round and the company came under pressure to raise revenue. The board is still investigating Joonko’s financial growth metrics over the past year to assess their accuracy, the person added.

Prior to the round, Insight Partners conducted a comprehensive due diligence effort that included financial audits, client calls and background checks and found nothing wrong, a person familiar with the investment told The Post.

In a statement, Insight Partners said it does not tolerate, and our investors expect us to take seriously, any discoveries of misconduct, deception or illegal activity at our firm or any of our portfolio companies.

The private equity firm added that the extent of the situation is still under review and next steps are being considered.

In total, Joonko has raised approximately $38 million in external funding.

Sources told the Israeli outlet Globes that the funding round probably shouldn’t have happened based on what was uncovered during the internal investigation.

Several other top Joonko executives have also reportedly left the company in recent days, sources said.

The Post reached out to several investors and Joonko advisors for comment, but had no response as of publishing.

Founded in 2016, the startup is named after Junko Tabei, the first woman to summit Mount Everest. Joonko has billed itself as a platform that enables companies to boost their diversity, equity, and inclusion (DEI) efforts in the workplace.

Joonkos’ board said it had recently been notified of errors in the company’s financial statements and had lost faith in the CEO’s ability to meet repeated requests to develop and support an internal finance function as part of the company’s maturation and its business.

The chief executive officer was found to have engaged in egregious, unethical and fraudulent conduct, which caused harm to the company and its shareholders, the board’s statement added. The CEO was confronted with the findings of the investigation and in response she voluntarily resigned.

The council said the extent of the situation remains under investigation and that next steps are being considered.