Ozy Media CEO and co-founder Carlos Watson appeared on the Today Show after the New York Times broke a story about an impersonation scandal involving the chief operating officer. (Screenshot via Today Show)
Ozy Media and its co-founder Carlos Watson stand accused of defrauding investors out of “tens of millions” of dollars in a years-long scheme resting on a web of lies, federal prosecutors alleged in an indictment on Thursday.
“Although Watson knew that Ozy was frequently drowning in debt and on the verge of insolvency, Watson falsely presented Ozy to investors and lenders as a successful business with minimal debt,” Assistant U.S. Attorney Jonathan Siegel wrote in a 10-page letter seeking restrictions to keep him from fleeing.
Watson and his company have been under scrutiny since the New York Times reported on a “strange” Zoom call Ozy Media held with Goldman Sachs in October 2021.
The Times reported that the company’s chief operating officer Samir Rao apparently impersonated the voice of YouTube Originals executive Alex Piper. Four people briefed on the meeting anonymously told the Times that the voice appeared to have been “digitally altered.” Watson reportedly blamed Rao’s mental health crisis for the incident. Prosecutors refer to Rao as Watson’s “co-conspirator” and say he pleaded guilty to a securities fraud conspiracy, wire fraud conspiracy, and aggravated identity theft on Monday.
That expose sparked a seemingly expansive federal investigation by the U.S. Attorney’s office for the Eastern District of New York.
“Since the investigation into Watson’s scheme began, Watson and Ozy — which Watson has always controlled and continues to control — have attempted to stymie the investigation,” the letter says. “Watson and Ozy have withheld key incriminating documents from the government and the Securities and Exchange Commission (the ‘SEC’). Watson and Ozy have also attempted to retaliate against witnesses perceived to be cooperating with the government’s investigation, including by cutting off funding for their legal defense.”
Watson’s lawyers, who fielded the federal probe, sued him for alleged non-payment for its assistance in that investigation, which appears to have come to a head on Thursday with accusations of “serious and years-long deceptions.”
“He lied about Ozy’s revenue, frequently inflating the true figures by multiples,” the 10-page letter continues, referring to Watson. “He lied about Ozy’s profits and losses, claiming that Ozy broke even or made millions of dollars in profits in years when it in fact suffered millions in losses. He lied about who was investing in Ozy, claiming that celebrities and high-profile companies were leading investment rounds when those individuals and entities were not investing at all. He lied about acquisition offers for Ozy, claiming to at least one investor that a technology company had offered to buy Ozy for $600 million, when in fact the company had never discussed purchasing Ozy at any price. He lied about the existence and terms of Ozy’s business contracts, directing others to alter real contracts or forge fake contracts to provide to potential sources of financing.”
Though stylized as a “detention memo,” the letter does not seek Watson’s incarceration, only bond and pre-trial restrictions that would ensure his appearance in court.
U.S. Attorney Breon Peace released a blistering statement calling Watson 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.”
Watson and the company have been charged with conspiracy to commit securities fraud and conspiracy to commit wire fraud. The CEO also faces a separate charge aggravated identity theft. Prosecutors say that Watson faces a possible 37-year sentence if convicted.
He is expected to be arraigned in federal court in Brooklyn after 2:30 p.m. ET.
Read the indictment here.
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