Joonko to pay $500,000 to ex-CEO Ilit Raz as part of court-approved settlement

The implosion of Israeli startup Joonko, a once-celebrated AI startup that promised to revolutionize diversity hiring, is finally nearing its end. In a Delaware bankruptcy court this month, a judge approved a $500,000 settlement between the company and its ousted founder and former CEO, Ilit Raz. The agreement brings to a close nearly a year of litigation, scandal, and recrimination that exposed how a tech-driven vision for equity turned into one of the most audacious fraud cases of the AI startup era.

Under the terms of the deal, Joonko will pay Raz half a million dollars, settling all outstanding disputes between the parties, including a $1.77 million claim she filed seeking coverage for legal fees. In return, Raz agreed to abandon any claim to the company’s directors and officers insurance policies. The company must also drop its lawsuit against her and hand over non-privileged documents and emails.

This legal closure, however, does little to erase the extraordinary allegations that have defined Joonko’s fall. In June 2024, the U.S. Securities and Exchange Commission charged Raz with defrauding investors out of at least $21 million. The complaint alleged a breathtaking pattern of deception - inflated revenue figures, fake customer testimonials, forged bank statements, and claims of a vast database of job seekers that never existed. Behind the scenes, what was marketed as an AI-powered solution for DEI goals turned out to be smoke and mirrors.

Raz, a once-rising figure in tech circles, had built Joonko on promises of impact and innovation, claiming over 100 corporate clients and a million-dollar revenue run rate. But by the summer of 2023, those claims began to unravel after an investor confronted her about inconsistencies. Raz ultimately admitted to fabricating data, triggering her ouster and a wave of resignations. Joonko, which raised nearly $30 million between 2019 and 2022, filed for Chapter 11 bankruptcy in May 2024. By then, the company had shut down operations and laid off all employees.

The latest court-approved settlement with Raz does not impact the separate and ongoing federal civil and criminal cases against her. The SEC is seeking a permanent injunction, financial penalties, and a ban on her serving as a director or officer of any public company. The U.S. Attorney’s Office has also filed criminal charges in parallel.

For Joonko, the settlement marks the end of a painful process led by its former COO, Ilan Band, who spearheaded the post-scandal investigation and is now overseeing the company’s closure.