The founder of the diversity, equity, and inclusion (DEI) hiring startup Joonko is facing federal charges for allegedly defrauding investors out of $27 million.

Ilit Raz, the 38-year-old Israeli entrepreneur who founded Joonko, has been accused of using lies and fabricated documents to secure substantial investments. Among the alleged lies, she claimed her company worked with major corporations such as American Express and Nike, The New York Post reported.

According to the Department of Justice (DOJ), Raz falsely represented that Joonko’s customers included some of the world’s largest companies, including a credit card company, a sports apparel brand, an online travel company, and a luxury fashion brand. These companies were never Joonko customers.

The now-bankrupt Joonko had claimed that its platform used artificial intelligence (AI) to connect companies with diverse job candidates. It falsely listed corporate giants such as American Express, PayPal, Accenture, and Atlassian as its clients. And she said, Nike, Adidas, and Intuit were as partners.

Raz faces one count of securities fraud and one count of wire fraud, with each charge carrying a maximum sentence of 20 years in prison.

“To garner fiscal interest in the company’s innovative concept for diverse hiring practices, the defendant’s alleged recruitment methods relied on deception and mistruths rather than transparency and honesty,” said James Smith, FBI assistant director in charge, in a press release.

The Securities and Exchange Commission (SEC) has also charged Raz with fraud following a parallel investigation. The SEC alleges that Raz falsely claimed Joonko had over 100 customers, including Fortune 500 companies, and fabricated testimonials from these firms. In one instance, to convince an investor who grew suspicious, Raz presented falsified bank statements and forged contracts.

“We allege that Raz engaged in an old-school fraud using new-school buzzwords like ‘artificial intelligence’ and ‘automation,’” said Gurbir S. Grewal, director of the SEC’s Division of Enforcement in a press statemtn. “As more and more people seek out AI-related investment opportunities, we will continue to police the markets against AI-washing and the type of misconduct alleged in today’s complaint.”

According to the SEC’s complaint, Raz has been charged with violating the antifraud provisions of federal securities laws. The SEC wants a permanent injunction, civil money penalties, and remedy with prejudgment interest.

Ilit Raz, photo via Twitter