Carlos Watson, the CEO of Ozy Media, was arrested and indicted on Thursday morning for securities fraud by federal authorities. The move came after Watson’s former partner in the company, Samir Rao, pleaded guilty to fraud charges, the U.S. Attorney’s office said on Thursday.
Watson was taken into custody and was set to be arraigned Thursday on charges of conspiring to commit securities and wire fraud. Watson also faces charges of aggravated identity theft for his role
in the impersonation of multiple media company executives in emails with Ozy’s lenders and prospective investors in furtherance of the fraud schemes.
If convicted, Watson will face a minimum sentence of two years in prison and a maximum sentence of 37 years.
“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,” United States Attorney Breon Peace said in a statement.
“I’m deeply disappointed. We thought we were having a constructive and good faith dialogue with the government,” Watson’s attorney, Lanny Bruer, told TheWrap. “I do not understand why the government decided to take such a dramatic action today.”
Watson’s Ozy Media collapsed spectacularly in 2021 after the New York Times published an expose that accused the company of inflating its online traffic and video viewership and revealed that COO Samir Rao had impersonated a Google executive on a fundraising call with Goldman Sachs — sparking an FBI investigation.
Rao, who notably never spoke to the media after the expose led to the company’s implosion in less than a week, pleaded guilty Tuesday in Brooklyn federal court to fraud and identity theft charges, leading to Watson’s arrest on Thursday morning.
Ozy Media to Shut Down
Rao admitted to federal authorities that he made misleading statements to investors and inflated the company’s financial performance. He also admitted to using the identity of another person without the authority to do so between February 2020 and February 2021, essentially confirming what was originally reported in the expose.
In a stunning turn of events for a media company, Ozy collapsed in 2021 after the expose despite Watson telling TheWrap and others that the company had made $50 million in revenue in 2020 and turned a profit. He further said that he’d been offered $250 million to be acquired by BuzzFeed in 2019. Ironically Buzzfeed at the time was run by Ben Smith, the reporter who later wrote the Times piece.
Among other statements at the time, Watson claimed that Rao had had a mental breakdown in the moment that he impersonated a Google executive during a fundraising call with Goldman Sachs, trying to vouch for Ozy’s YouTube audience numbers as the company sought to close a $40 million fundraising round.
Within a few days, key staffers and board members resigned from the company. Among them was former BBC anchor Katty Kay, who resigned as an executive producer and senior editor, citing the Times’ “serious and deeply troubling” report. Silicon Valley venture capitalist Ron Conway surrendered all his shares in the company, an extraordinary gesture of no-confidence. Billionaire investor Marc Lasry resigned from the board just weeks after he was named chairman, saying he was ill-equipped to deal with the crisis. Investor and longtime Watson friend Laurene Powell Jobs let it be known she was barely involved anymore. And Axel Springer — another top investor — said it had already stepped off the board.
The Wall Street Journal reported Thursday that another former Ozy executive pleaded guilty on Feb. 14 to fraud conspiracy charges: “Suzee Han, the company’s former chief of staff, told a magistrate judge that she falsified financial information about the company at the direction of two executives. She didn’t identify the executives. Ms. Han was also allowed to enter her plea as a Jane Doe.”
