On February 17, 2022, federal authorities arrested Carlos Watson, the founder of Ozy Media, on fraud charges. Watson’s arrest followed the guilty pleas of two Ozy executives, including the then-chief operating officer, Samir Rao, who allegedly impersonated a YouTube executive during a pitch to Goldman Sachs. The federal indictment accuses Watson of conspiring to commit securities fraud and wire fraud, as well as identity theft for his role in the impersonation of several media executives.
Ozy Media was a digital media company that advertised itself as a progressive digital platform for “the New and the Next.” However, the company was troubled and shut down amidst revelations of possibly deceptive business practices. In a parallel civil case, the Securities and Exchange Commission (SEC) also charged Watson and the company with defrauding investors of about $50 million “through repeated misrepresentations concerning the company’s basic financial condition, business relationships, and fundraising efforts.”
Guilty Pleas and Civil Complaint
The guilty pleas and arrest were first reported by the Wall Street Journal. Rao pleaded guilty in federal court the week of February 7, 2022, while Suzee Han, Ozy’s former chief of staff, pleaded guilty the week prior. In the civil case, the SEC accused Watson and the company of violating anti-fraud provisions of federal securities laws. The agency accused Ozy officials of “routinely and purposely” presenting potential investors with dubious financial information, including falsely claiming that the company’s revenues were at least twice what they actually were. Watson and Rao also sought investments by allegedly telling prospective investors that they were securing money from high-profile companies and investors.
The indictment against Watson details how he and his business partners attempted to defraud investors and lenders of “tens of millions of dollars through fraudulent misrepresentations and omissions” about the company’s debts and other key financial information. On multiple occasions, Watson and his colleagues pretended to be other media executives to cover up earlier misrepresentations. Watson faces at least two years in prison if convicted, with a maximum of 37 years, according to the U.S. attorney’s office.
Reaction to the Arrest
Following Watson’s arrest, his attorney, Lanny Breuer, said he was “deeply disappointed” and claimed that they were engaged in a “good faith and constructive dialogue with the government.” However, the U.S. Attorney for the Brooklyn-based Eastern District of New York, Breon Peace, said, “As alleged, Carlos Watson is a con man whose business strategy was based on outright deceit and fraud. He ran Ozy as a criminal organization rather than as a reputable media company.” Michael J. Driscoll, the assistant director-in-charge of the FBI’s New York field office, stated that Watson “repeatedly attempted to entice both investors and lenders through a series of deliberate deceptions and fabrications.”
The arrest of Carlos Watson, the founder of Ozy Media, follows the guilty pleas of two executives and allegations of fraudulent misrepresentations and omissions that cost investors millions of dollars. The case highlights the need for companies to provide truthful and accurate information to investors and the consequences of not doing so.