Ozy Media CEO Carlos Watson Arrested On Fraud Charges

Topline

Authorities arrested Ozy Media CEO Carlos Watson on Thursday, the Wall Street Journal and New York Times reported, nearly two years after his media startup burst into flames amid fraud accusations.

Key Facts

Watson faces three federal criminal counts—conspiracy to commit securities fraud, conspiracy to commit wire fraud and aggravated identity theft— according to the indictment unsealed Thursday in New York federal court.

Watson repeatedly lied to investors about Ozy Media’s financials, prosecutors allege.

Examples of Watson’s alleged “scheme to defraud investors in and lenders to Ozy of tens of millions of dollars” include drastically lying about annual revenues, falsely claiming there were celebrity investments, boasting about a $600 million acquisition offer that didn’t exist and directing the company’s chief operating officer Samir Rao to impersonate an executive at another company during an investor call, prosecutors said.

On Tuesday, Rao pleaded guilty to the same three charges facing Watson.

Lanny Breuer, Watson’s attorney, told the Wall Street Journal he was “shocked” at his client’s arrest, saying Watson had been cooperating with authorities.

Key Background

Ozy raised more than $70 million between 2012 and 2019, according to Crunchbase, scoring investments from Politico and Insider parent company Axel Springer and billionaire Marc Lasry. Ozy’s dramatic collapse in late 2021 followed a New York Times piece that revealed Rao pretended to be a YouTube executive in a call with Goldman Sachs for the bank to invest $40 million in the media firm. The company said in October 2021 it would shut as allegations of its suspect business practices mounted, though it ultimately remained in limited operation under Watson’s direction. The Times reported in November 2021 that the Justice Department and Securities and Exchange Commission launched probes into Ozy.

Surprising Fact

The company’s heavily promoted 2019 Ozy Fest event, described by Watson as “TED meets Coachella,” was slated to lose millions of dollars until a heat wave-induced cancellation allowed Ozy to claim insurance losses, according to a Forbes investigation.

Further Reading

How Ozy Fest Was About To Become The Next Fyre Festival — Until A Heat Wave (And Insurance Claim) Bailed Them Out (Forbes)

Ozy Media Shutting Down Amid Accusations Of Misrepresentations About Its Business (Forbes)

Ozy Media CEO Says Company No Longer Shutting Down: ‘This Is Our Lazarus Moment’ (Forbes)