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Watson was arrested and indicted by federal authorities on Thursday on charges of securities and wire fraud. The detention document asks that Watson be held without bail as “the facts and circumstances of this case demonstrate that that Watson presents a serious risk of both flight and of obstruction.” Watson faces a minimum sentence of two years and a maximum of 37 years in prison if convicted.

Here are the most jaw-dropping details in the indictment obtained by TheWrap.

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Inside Ozy Media’s Meltdown: Carlos Watson’s ‘Fake Crying’ and 5 Days to Sudden Collapse (Exclusive)

Numbers don’t lie, but people do

According to the charging document, Watson told potential investors that Ozy had doubled its revenues from 2016 to 2017, from approximately $6 million in 2016 to approximately $12 million in 2017.

In reality, Ozy’s revenue had been almost flat in 2017 and totaled less than $7 million. Additionally, Watson further allegedly represented to investors and potential investors that the company would approximately double its revenue again in 2018 and achieve revenue of $22 million. This forecast was repeated to investors and potential investors in emails over the course of 2018, even after it became clear that Ozy couldn’t achieve that result, and knowingly provided false representations on progress towards meeting that result. 

At the end of 2018 and in early 2019, Watson and others allegedly sent numerous emails falsely representing that Ozy made $22 million in revenue in 2018. To make this claim appear more impressive, Watson also allegedly said that OZY’s revenue target for 2018 had been $18 million (as opposed to the $22 million figure he had earlier claimed) and that Ozy had exceeded its revenue target. Watson knew from internal revenue emails he received in December 2018 that Ozy’s final revenue for 2018 was less than $11 million.

Ozy Media officially launched in 2013. From its inception to the end of 2014, the company raised about $35 million dollars from a group of private investors and venture capital. But by 2016, the company’s fortunes changed as it began rapidly spending its available cash and borrowing several million dollars. The financial challenges worsened a year later as it began to run out of cash, and those problems never went away.

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Ozy Media CEO Carlos Watson Indicted by Feds for Securities Fraud

Robbing Peter to pay Paul

Beginning in 2018, the company took on increasing debt in order to survive, much of which was high-interest loans secured by Ozy’s accounts receivable. At times, Ozy was paying tens of thousands of dollars a day in interest on these debts, according to the indictment.

To service that debt and to continue its operations, OZY took on even more debt and sought additional money from investors and potential investors.

Multiple impersonations!

We already knew from the New York Times expose that Watson instructed his co-founder, Samir Rao, to impersonate a YouTube executive in a meeting with potential investors Goldman Sachs. He later said that Rao was suffering from mental illness and tried to shame the Times for outing someone who was ill.

It turns out that Watson was on the call, as many have suspected, and that this was not the only impersonation – it was a pattern.

When Watson and Rao needed a loan to stop the bleeding of cash from the company in December 2019, they created a fake cable TV contract for the second season of an Ozy television to secure the loan.

The bank asked to speak to a representative of the cable network. That’s when forgery and impersonation stepped in.

“To conceal the lies about Ozy’s relationship with the cable network and the status and terms of their agreement, Rao, with Watson’s approval, created a fake email address in the name of an actual executive of the cable network, which Rao used to impersonate the executive and communicate with the bank about the potential loan,” according to the detention document.

The document does not name the show, but Watson hosted a talk show on OWN in 2019 called “OWN Spotlight: Black Women OWN the Conversation.”

The impersonation of the YouTube executive came between in February 2021 when Watson was trying to raise another $45 million to float Ozy. “As part of its due diligence process, the financial institution asked Watson and Rao to arrange a meeting with someone from a well-known online video service that Watson and his co-conspirators had claimed had paid Ozy nearly $6 million in licensing revenue for “The Carlos Watson Show,” the detention document reads.

In fact, as previously reported, Watson had no licensing deal with YouTube.

The details of the call – reported in 2021 – are still stunning to read. Rao used a voice impersonation technology, while Watson texted instructions on what to say:

“On or about February 2, 2021, Rao had a call with employees of the financial institution during which he impersonated a media executive from the online video service using a voice alteration application that he downloaded onto his cellular telephone to mask his voice during the call. During the call, Watson was in the same room as Rao, and texted Rao instructions about what to say and what not to say on the call.”

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Ozy Media CEO Carlos Watson Indicted by Feds for Securities Fraud

Watson knew it was fraud

In 2019 a CFO clearly told Watson and Rao that what they were doing was illegal.

She refused to forge the falsified TV contract to send to a potential lender, a bank.

“This… is illegal. This is fraud,” the then-CFO, who was not named, wrote in an email. “To be crystal clear, what you see as a measured risk – I see as a felony. Did either of you (Carlos when you asked me to put together a contract and/or Samir when you sent the email) have any idea (or did it even occur to you to care) that I could go to jail for forgery and bank fraud?”

Said the detention document: “Had the full $45 million investment occurred as intended, $6 million of the $45 million would have been paid to Watson personally.”

Fake shares, fast money

In an effort to bring in funding quickly over 2018-2019, Watson and Rao allegedly made up a Series C financing round. According to the indictment, they told investors that the Ozy board had approved the round and offered preferred shares to investors and potential investors via email as early as February 2019. But actually, the board hadn’t approved the issuing of new shares until September 2019.

How were they able to convince people that the preferred stock shares could be issued? In several cases, investors said they received documents proving that the round had closed and ended up buying a combined millions of dollars in fake shares. Those documents were falsified.

The show must go on

Watson, a former CNN host and MSNBC contributor, made good use of his previous broadcast career to gain investors. At one point, a media company was looking to acquire Ozy for $225 million in the company’s stock and $35 million in cash. To sweeten the offering, Watson and Rao greatly misrepresented the TV arm of the company by allegedly producing fake contracts for its TV shows that gave more favorable terms to Ozy.

Also Read:
Inside Ozy Media’s Meltdown: Carlos Watson’s ‘Fake Crying’ and 5 Days to Sudden Collapse (Exclusive)